Okay, so that b***h Tammy from sales ate “your slice” of lunchroom cake– but was it her fault or yours?

Well, surprising answer… It’s neither! (it’s not what you wanted to hear but its what you needed to)

Tammy eating the cake had nothing to do with you, the cake, or Tammy…  but it had everything to do with Incentive Alignment. 

Why?

Well, it’s incentives that sew either harmony or discord within an organization. It does the same to the integrative levels of an interconnected system. 

Think about that the next time you fight with Tammy for the last slice of lunchroom cake.

We’re surrounded by systems which formulate the infrastructure of everyday life and pull us in the intended direction sought out by their designers (assuming proper design). 

They’re invisible, but imposing. Many system bugs are actually features embedded from the system’s designer. 

When constructing a system ourselves we must understand which behaviour we’re incentivizing in order to get the desired result. 

Incentivization can align interests or destroy them, and seemingly small misalignment of incentives, though initially aren’t worrisome, can metastasize long-term. 

So… “Rah Rah Rah” (I hear you saying), but how does this relate to decision making, or more importantly… Tammy!

Well. Tammy maybe didn’t have as much agency as either one of you thought. Her free-will might not be so free.

Eating that last slice might be embedded into the system “Harold from upper management” created by buying 7 slices for 8 team members.

Harold wanted to create a more competitive environment so next time you’ll each compete 2x as hard against each other for that bonus, driving 4x revenue for the company.

So make sure you understand the incentives driving behaviour within the system you operate in. When it’s your turn to do the designing, shoot for full alignment within its structure. You probably won’t get there, but it’s important to try.  Doing so will avoid pitfalls of failing systems and get the desired results. 

Alignment with your stakeholders and investment thesis is crucial to a thriving company. This can be done through ESOP, bonuses, or simply a commission system. But in order to do this properly, you need clarity of what you seek as a result– invert, always invert.

Keep things simple since with an increase in complexity external incentives lose their magic.. Yes. incentives can actually work in your DETRIMENT if used in the wrong context (confusing, right?).

Stick to minimal rules and understand the role your agent will play. Also, make sure your agents have as much autonomy as possible in order for complexity to and synergies to emerge. 

With too much top-down force you won’t ever reach the system’s synergistic limits. 

Deviant agents allow happy little accidents to emerge that wouldn’t otherwise… Sign up to the QYP newsletter today to beat the devil out of it!