Situations / Metrics and incentives
Metrics and incentives
Setting targets, KPIs, bonuses or rules that shape behavior.
Tools to try
Patterns at play
- No. 0153 Cobra EffectYou offer a reward for each pest killed, then discover someone is breeding pests to collect it.
- No. 0437 Goodhart’s LawWhen a number becomes the goal, people find ways to move the number that don’t move the goal.
- No. 0458 Hawthorne EffectWith a researcher watching you try the new app, you read every instruction you would normally skip.
- No. 0597 Matthew EffectThe editor requests another book from the famous author while your first manuscript still sits unread.
- No. 0630 Moral HazardYour insurance pays the whole repair bill, so you accept the first quote instead of shopping around.
- No. 0679 Normalization of DevianceThe backup alarm has been silent for weeks, but every shift has gone fine, so today’s crew leaves it broken.
- No. 0736 Peter PrincipleYour best salesperson gets promoted, then spends every team meeting rescuing deals instead of coaching anyone.
- No. 0769 Principal-Agent ProblemYour adviser recommends a fund, and you discover it pays them more than the cheaper option would.
- No. 0773 Prisoner’s DilemmaYou check your phone while your friend talks, then look up to find your friend scrolling while you talk.
- No. 0861 Risk CompensationYou install a new collision warning system, then start following the car ahead a little more closely.
- No. 0936 Simpson’s ParadoxYour team’s conversion rate rises on both phones and computers, but the overall rate falls.
- No. 1030 Theory of ConstraintsYour team doubles its assembly speed, but finished orders still pile up beside the same overloaded testing bench.
- No. 1043 Tragedy of the CommonsYou stop watering your lawn, but the shared reservoir keeps falling while the sprinklers run next door.
- No. 1064 Unintended ConsequencesYou turn off phone notifications, then find yourself checking the screen every five minutes.
Concepts to know
- No. 0056 Asymmetric InformationYou test-drive a used car for twenty minutes; the seller has driven it for five years.
- No. 0355 ExternalityYour neighbor finishes a cheap backyard bonfire, while you bring the laundry inside and close every window.
- No. 0556 Leading vs. Lagging IndicatorYour support dashboard stays green all week, but unanswered tickets are piling up before customers start canceling.
- No. 0599 Mean vs. MedianYour boss announces that average pay is $100,000, and nobody at your lunch table earns anything close to it.