Most procurement systems believe behaviour can be controlled through rules.

Write an SOP.

Issue a circular.

Add a warning clause.

And yet, behaviour keeps drifting.

That’s because people don’t respond to rules — they respond to signals.

Incentives and penalties are those signals.

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Incentives reveal what you truly value

Organisations often say they value:

• quality,

• honesty,

• consistency,

• ethics.

But their incentives reward:

• volume,

• speed,

• and cost reduction.

People don’t listen to speeches.

They follow incentives.

If staff are rewarded for volume,

they will accept borderline quality.

If farmers are paid the same regardless of care,

they will optimise for quantity.

This is not corruption.

It is alignment.

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Penalties are blunt instruments

Penalties feel powerful:

• fines,

• rejections,

• blacklisting.

They do stop bad behaviour — temporarily.

But penalties also:

• create fear,

• encourage concealment,

• and destroy learning.

People stop making mistakes openly.

They don’t stop making mistakes.

Governance that relies heavily on penalties

creates fragile compliance, not trust.

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A field example near Tonk

Rafiq, a farmer, once supplied excellent coriander.

One season, quality dipped slightly.

The entire lot was rejected.

No explanation. No gradation.

Next season, Rafiq over-harvested early

and mixed lots to protect himself.

From the system’s view:

“Farmer quality deteriorated.”

From Rafiq’s view:

“System punished honesty.”

Penalties shaped behaviour — just not the behaviour intended.

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Incentives should reward predictability, not perfection

Perfection is rare.

Predictability is achievable.

Good incentives reward:

• consistent supply,

• honest declaration,

• timely delivery,

• and cooperative behaviour.

They do not reward flawless output.

When perfection is rewarded:

• people hide defects,

• delay reporting,

• and game metrics.

Governance designs incentives around truthfulness, not ideal outcomes.

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Milk systems got this mostly right

Milk procurement incentives are subtle:

• quality bonuses,

• volume consistency rewards,

• seasonal loyalty recognition.

Penalties exist — but they are graded, predictable, and explained.

That balance keeps systems stable.

Vegetable and animal systems often jump straight to punishment

and skip behaviour shaping entirely.

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The danger of mixed signals

One of the most damaging patterns is mixed signalling.

For example:

• verbally encouraging quality,

• but paying faster for higher volume.

Or:

• preaching traceability,

• but ignoring documentation during rush periods.

People learn quickly:

“What you say matters less than what you tolerate.”

Governance must remove signal contradictions.

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Incentives must operate at all levels

Many systems focus incentives only on farmers.

They forget:

• field staff,

• supervisors,

• transporters,

• and managers.

If only farmers are penalised for failures

while others face no consequences,

behaviour will skew predictably.

Governance must align incentives across the chain, not at one end.

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Penalties should be rare — and boring

Good penalties are:

• predictable,

• proportionate,

• and uninteresting.

When penalties become dramatic,

they become stories — not corrections.

A boring penalty teaches quietly.

A dramatic one teaches resentment.

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Behaviour shaping is long-term work

Incentives don’t work overnight.

They require:

• consistency,

• patience,

• and iteration.

Systems that change incentives frequently

create confusion and cynicism.

Governance commits to signals long enough

for behaviour to adapt.

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A simple incentive governance test

Ask this:

“If someone wanted to game this system legally, would our incentives help them?”

If the answer is yes,

the incentives are misaligned.

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Why this chapter matters

Most procurement problems are not violations.

They are predictable responses to incentives.

Fix the signals,

and behaviour follows.

Ignore them,

and no rule will save you.

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What comes next

So far, we’ve dealt with:

• money,

• power,

• incentives,

• and behaviour.

Now we enter uncomfortable territory:

failure, conflict, and exit.

Because every system fails —

and how it fails determines whether it survives.