This paper employs an analytic framework based on organizational incentives to explain the failure of recent welfare reform efforts. The data consists of observations, interviews, and routine inhouse reports collected on a federally funded program, Project STAR. The project was developed with the aim of mobilizing lower-class and minority families of the mentally retarded in support of reform of mental retardation services in five cities in the U.S. A service-inducement strategy was pursued by the reform organization to overcome the difficulties of enticing lower-class families of the retarded to participate in organizational activities. This strategy appears to have had several unintended consequences on the reform project. The concern with identifying and providing social services became a major preoccupation of the reformers. To the extent to which parents did participate because of the receipt of welfare benefits, this diminished the reform organization's autonomy relative to the existing welfare network. A further impact of this serviceinducement strategy was political demoralization of the parents of the retarded. The "service" focus appears to have attracted parents the least predisposed towards community change. Once involved in the organization, the impact of organizational activities was of reinforcement of this predisposition. Analysts of welfare reform organizations need to pay greater attention to the cooptative impact of welfare benefits. The data suggests the failure of community mobilization can be explained by the organizational incentives used. The problem reform organizations face is in finding the proper mix of purposive, material and solidary inducements which both recruit and retain participants, at the same time allowing the pursuit of mobilization goals.