Incentives – Behavior is Always Determined by the Structure of the Compensation Plan
In the Creative Process Workbook, we dissect the role of incentives on behavior. The following axiom will transform your life – behavior is always determined by the structure of the compensation plan. When you know how the incentives are aligned, people’s behavior becomes crystal clear. Why are individuals telling you what they are telling you? What is the purpose of the business and/or organization you are engaged with? Does the expert you hired have your best interests at heart or hers? These questions are critically important to the flow of accurate information.
There is a multitude of examples of misaligned incentives. The following are two enlightening illustrations. The FDA has a policy that a pharmaceutical company only needs to have two studies that prove the efficacy of a drug to be able to release it to the public. They fund and manage the research. If they do a dozen studies, and six show negative results, four show no efficacy, and two are positive, the drug will be approved. They then promote it as a wonder drug. Drug addiction and side effects have affected almost everyone directly or indirectly.