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Constantly Review Incentive Structures
Leadership / Advice · Updated Apr 2026
People optimise for what's measured and rewarded. Make sure you're rewarding the right things.
The Principle
"Show me the incentive and I will show you the outcome." - Charlie Munger
If your incentives are misaligned, no amount of communication will fix behaviour.
Common Misalignments
- Rewarding individual output in a team that needs collaboration.
- Measuring lines of code or tickets closed instead of impact.
- Promoting the loudest people instead of the most effective.
- Penalising failure in a team that needs innovation.
How to Review
Ask regularly:
- What behaviour are we actually rewarding?
- What behaviour are we accidentally punishing?
- Are promotions going to the people we want others to emulate?
- Would a rational person, following our incentives, do the right thing?
Remember
People aren't bad. Incentives are bad. Fix the system, not the people.
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