Do Incentives Really Motivate People? What Han Feizi Knew
The enlightened ruler controls his ministers by means of two handles alone. The two handles are punishment and favor. — Han Feizi, 二柄 (Two Handles), Ch.7; Burton Watson trans., Columbia University Press, 2003
Do Incentives Really Motivate People? What Han Feizi Knew That Modern Management Forgot
Incentives don't motivate people. They reveal what your system actually values — and people respond to that signal, not to the bonus itself. Han Feizi understood this 2,300 years ago. Most modern managers still haven't caught up.
Key Takeaways
- Han Feizi's "two handles" (二柄) — reward and punishment — are tools for signaling standards, not for generating motivation.
- Incentives backfire when they substitute for clear expectations. They work when they reinforce them.
- Wells Fargo's fraud scandal and a 2023 German retail study both show the same failure mode: incentives that reward the wrong behavior get exactly that.
- Fix your standards first. Then rewards and punishments make sense.
- Ask Han Feizi directly at /chat/hanfeizi.
Why Do Managers Keep Using Incentives That Backfire?
The failure stories are everywhere. One salesperson at a wood products company closed $51 million in a single year — the best performance in company history. His bonus? A $100 check. The second-place rep, who sold $12 million, received a Rolex. The CEO joked at the annual conference: "Sometimes it pays to come in second." The top salesperson quit and started a direct competitor.
A different company ran a two-year loyalty program. The first employee to reach 1,000 points redeemed them for a small crocheted cupcake worth less than $10. Two years of effort. A cupcake.
These aren't edge cases. They're symptoms of a category error that runs through most incentive design: the assumption that rewards create motivation, rather than communicate what the organization values.
When the communication misfires — when the reward sends the wrong signal, or a signal no one trusts — no amount of cash fixes it.
What Did Han Feizi Actually Say About Rewards and Punishment?
Han Feizi's most cited chapter is 二柄 — "The Two Handles." The handles are punishment (刑) and reward (賞). His framing is worth reading carefully:
"The enlightened ruler controls his ministers by means of two handles alone. The two handles are punishment and favor. To inflict mutilation and death on men is called punishment; to bestow honor and wealth is called favor." (Han Feizi, Ch.7, Burton Watson trans., Columbia University Press, 2003; ctext.org)
Notice what Han Feizi doesn't say. He doesn't say the ruler should use rewards to make people want to work harder. He says rewards and punishments are how the ruler controls — that is, sets and enforces the behavioral standards of the system.
Citation capsule: Han Feizi's 二柄 (Two Handles, Ch.7) argues that consistent application of reward and punishment is the ruler's primary governing mechanism — not because it generates enthusiasm, but because it makes expectations legible and consequences real. When standards are clear and consequences predictable, rational people align their behavior accordingly. (Watson trans., Columbia UP, 2003)
The ruler who lets ministers apply their own judgment about who gets rewarded — or who changes the rules based on personal relationships — has already lost control. The handles only work if the ruler holds them.
Are Incentives Designed to Motivate — or to Communicate?
Here's the confusion modern management built its incentive culture on: treating rewards as a gas pedal for motivation, rather than as a signal about what the system values.
When a manager says "we need to motivate the team," they usually mean they want people to work harder without changing anything structural. The bonus is supposed to fill the gap between what people feel like doing and what the organization needs them to do.
Han Feizi would call this a misuse of the handles. Rewards aren't fuel. They're a feedback mechanism. They tell people, in the clearest possible terms: this is what success looks like here. That is what failure looks like.
If the standards are wrong, the incentives reinforce the wrong behavior. If the standards are unclear, the incentives teach people to game the measurement — not to do the underlying work.
Research on self-determination theory, developed over four decades by Edward Deci and Richard Ryan, finds that extrinsic rewards can crowd out intrinsic motivation when applied to tasks requiring creativity or judgment. But the mechanism is exactly what Han Feizi described: rewards change what people believe the system values. If the reward signals "hit the number," people hit the number, whatever it takes.
When Incentives Backfire: The Han Feizi Diagnostic
Between 2002 and 2016, Wells Fargo's sales incentive structure encouraged employees to open as many accounts as possible. Over 2 million fake accounts were created in customers' names. The incentive worked perfectly — it motivated exactly the behavior it measured. The problem was the measurement. NPR, 2016
A 2023 study published in Management Science found that a German supermarket chain's monetary attendance bonus increased absenteeism by approximately 50%. Employees who received cash for showing up felt less guilty about calling in sick when they weren't. The bonus reframed absence as a transactional exchange rather than a performance failure. (Fortune, Sept. 2024)
Han Feizi's diagnostic is simple: both cases broke his core rule. The ruler must hold both handles — but only over the right outcomes. Reward the wrong signal and the handles pull in the wrong direction.
| Aspect | Typical Incentive Scheme | Han Feizi's Two Handles |
|---|---|---|
| Purpose | "Motivate" employees | Signal what the system values |
| Basis | Manager discretion | Pre-set, visible standards (法) |
| Consistency | Often arbitrary | Applied without personal favor |
| When standards are unclear | Creates gaming and resentment | Han Feizi: this failure mode is prevented by design |
| Risk | Perverse incentives (Wells Fargo, German study) | Minimized when standards are specific |
| Employee response | Confusion, resentment, or gaming | Rational, predictable alignment |
What Would Han Feizi Tell a Manager Designing an Incentive Plan?
Start with 法 — the law, the standard, the explicit expectation. Not the vision. Not the aspiration. The specific, observable behavior that the system should select for.
Han Feizi's 有度 chapter (Ch.6) makes this sequence explicit: law governs, and rewards and punishments enforce the law. The handles don't work without the law beneath them. Most management incentive design gets this backwards: the reward comes first, and the standard is reverse-engineered from what the reward program can measure.
Citation capsule: Han Feizi's 有度 (Having Standards, Ch.6) holds that law — explicit, impersonal, consistently applied — must precede reward and punishment. Rewards without standards produce gaming. Standards without rewards produce cynicism. Together, in the right order, they make behavioral expectations unavoidable. (Han Feizi, Ch.6; Stanford Encyclopedia of Philosophy: Han Feizi; ctext.org)
Three questions Han Feizi would force you to answer before designing any incentive:
- What behavior, specifically, is the reward for? Not "high performance." What does the person actually do?
- Is the standard applied consistently, regardless of personal relationships? The moment a manager bends the rule for a favorite, the handle cracks.
- What behavior does the punishment target? Not "low performance." What did the person fail to do?
If you can't answer all three precisely, the incentive system isn't ready.
Does This Mean Incentives Are Useless?
Not at all. Han Feizi built a theory of governance around them. The problem isn't incentives — it's using them as a substitute for clarity rather than a reinforcement of it.
When standards are explicit and the same for everyone, rewards and punishments do exactly what Han Feizi said: they make expectations real. People know what success looks like. They know what consequences follow. Rational actors align.
When standards are vague, inconsistent, or set by the person with the most authority in the room, incentives amplify the dysfunction. The salesperson with $51 million didn't need a different bonus structure. They needed an organization where the measurement of "best performer" meant the same thing for everyone.
Han Feizi's insight isn't that rewards and punishments motivate. It's that clarity motivates — and rewards and punishments make clarity impossible to ignore.
Frequently Asked Questions
Do incentives actually work in the workplace? They work when they reinforce clear, consistently applied standards. They fail — and often backfire — when they substitute for those standards. A 2023 Management Science study found cash attendance bonuses increased absenteeism by 50% in a German retail chain because the reward reframed absence as acceptable.
What did Han Feizi say about motivation? Han Feizi didn't frame rewards in terms of motivation. In Chapter 7 (二柄/Two Handles), he described reward and punishment as tools of governance — mechanisms for signaling what the system values and making behavioral expectations real. The assumption that incentives "generate" motivation would have seemed strange to him.
Why do most incentive programs fail? They're designed backwards: the reward comes first, and the standard is built around what's easy to measure. Han Feizi would say this inverts the correct sequence. Standards (法) must come first. Rewards and punishments enforce standards — they don't create them.
What is Han Feizi's "two handles" concept? 二柄 (Two Handles) is Chapter 7 of the Han Feizi. The two handles are punishment (刑) and reward (賞). Han Feizi argues that the ruler must hold both handles personally and apply them consistently — delegating either one to subordinates risks losing control of the system.
How does this apply to modern performance management? Before setting any bonus or consequence, define the exact behavior it targets. Apply the standard the same way regardless of who's being evaluated. If the standard shifts based on relationships or judgment calls, the handles are already broken — no amount of cash will fix what clarity could.
Han Feizi didn't build his theory for modern HR. But the logic of 二柄 maps directly onto the failure modes that show up in every broken incentive program: unclear standards, inconsistent application, and rewards that signal the wrong thing.
If you want to think through a specific incentive structure — or what Han Feizi would actually do in your organization — ask him directly. He's unusually direct about where the handles are being held wrong.
Related reading: New Manager Whose Team Won't Respect Them? Han Feizi on Earned Authority · What Han Feizi Would Tell a CEO Whose Co-Founder Betrayed Him · What Han Feizi Would Tell a Manager Whose Lieutenant Quit · Do You Have to Be Ruthless to Succeed? What Mencius Would Say · Sun Tzu vs Machiavelli: Two Playbooks for Power