Often, companies observe that they have difficulty driving new initiatives or long-standing company objectives, missions, or cultures. It seems like the company is going in one direction and the employees—or at least a subset of the employees—are going in another direction or, perhaps, standing still. Frequently, the issue isn’t one of willful disobedience but rather a lack of alignment of incentives.
The Impact of Aligned Incentives
When incentives aren’t properly aligned, the relative importance of an activity isn’t the same for the entity pushing for the action, i.e., the organization, as it is for those tasked with carrying out that action, i.e., the individual employees. According to Forbes, “Incentives drive behavior, and behavior spawns culture.”
For example, a company might decide there is a great opportunity for it to explore a new market in a neighboring country and task its marketing and sales teams to see what’s out there.
However, those teams may have a full plate of other ongoing activities and obligations that they are prioritizing. Switching to something new and foreign can be stressful and intimidating and take more time than the familiar. Consequently, absent any real and tangible incentive, the new initiative won’t be a priority.
Implications for Small Teams
This dynamic isn’t only present at the macro level of major corporate decision-making. It can just as easily and frequently occur among small teams. For example, a manager’s compensation may include a bonus based on achieving certain goals, which require participation from his or her team members. But if those team members have competing objectives, they may dedicate more of their time and attention elsewhere.
Even though employees are hired to do a certain job and follow instructions from their managers up the chain of command, the wheels of progress can turn slowly if the right incentives aren’t in place. This can occur at the team level, as well. In a follow-up post, we’ll discuss some tips for better aligning incentives to achieve the best results.