"The truth is that incentives often backfire because of something called Goodhart's law. Once we target something to incentivize, it ceases to be a good target. A classic example occurred when the British offered bounties for dead cobras in India. Instead of hunting cobras, people started breeding them which, needless to say, didn't solve the problem."
"Smart leaders understand that behavior is downstream of culture. There are norms that underlie behaviors, and those norms are encoded by rituals that guide everything from how you hire to how you promote, and how you determine compensation. That's why you can't just tweak incentives. For meaningful change, you need to activate cultural triggers that shift norms from the inside out."
"This direct model was a simple idea and a clear competitive advantage, but none of the incumbent industry giants, such as Compaq and HP, managed to adopt it. It wasn't for lack of trying. The advantages of Dell's model were well known, widely publicized, and seemingly straightforward to replicate. There were a number of efforts to replicate it."
Incentives can produce unintended consequences because measurement and targeting alter the target's value and behavior, as Goodhart's law shows. Examples include bounty programs that encourage the creation rather than elimination of the targeted problem. Behavior reflects underlying cultural norms that are encoded and sustained by rituals governing hiring, promotion, and compensation. Lasting change requires activating cultural triggers that shift norms internally rather than merely adjusting reward structures. Even clear, replicable operational advantages—such as Dell's direct-sales model—can fail to spread when incumbents' organizational culture and processes block adoption despite awareness of the benefits.
Read at Fast Company
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