What do your incentives actually incentivize?

It’s always worth taking a step back and considering second-order effects and beyond.

The first-order effects of your incentives are at least usually aligned with a desirable outcome:

You pay your sales staff a small base and then a commission, which encourages them to close deals. You kick off a new effort to rank engineering teams by how many bugs they close, which encourages them to ship bug fixes. You encourage your large multinational company to act like a startup, move fast, and break things, which encourages your employees to experiment more freely without regard to consequences, opening up new avenues for creativity.

To make these incentives work, you have to add metrics, which end up even more specific in the behavior they encourage: for commission, you might choose to pay your sales staff an upfront bonus for a deal, or to focus on LTV; for bug fixes, you might weight your metrics by severity.

And now, your sales staff is closing more deals, but they’re not as good a fit for your existing employees, so churn is on the rise. And now, your engineering teams are shipping buggier code, because they get rewarded for fixing it later. And now, your multinational organization is blamed for breaking society as a whole.

Foreseeing undesirable second- and third-order outcomes is hard, but not impossible. Reacting to them as they become apparent should be much easier, yet remains surprisingly uncommon.

What incentives do you have in your organization, especially those under your influence? What’s their stated intent? And, given a few minutes to consider, what other effects are they having?

(As an aside, this sort of evaluation is a great fit for bringing in a consultant; getting an outsider’s perspective can be invaluable in depth, speed, and effect when you and those around you are too close to the problems to really see them clearly.)