A bad outcome invariably follows from explanations placing blame or part of it on people. ‘Lack of profile’, ‘low maturity’, ‘little protagonism’ are some of the most common assessments. It’s just that, in many cases, the problem isn’t with people, but with incentives.
It is very common for companies to underestimate the power that goal, bonus, promotion and recognition systems have on everyday behavior. Incentives do much more than just direct efforts: they teach what is and is not worth doing.
Incentives speak louder than speeches
Although they say they value collaboration, long-term vision and responsible decisions, in practice companies reward those who hit isolated numbers, resolve last-minute crises or deliver quick results – even at the expense of the team and the correct process.
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This mismatch generates a predictable effect: Professionals learn to prioritize what is rewarded and tolerated, not what is communicated. This is not bad faith, but rational adaptation to a poorly calibrated system of incentives.
A relevant portion of a company’s dysfunctional behaviors are not born from individual ethical failures, show studies by the Harvard Business Review. They are a consequence of goals and incentives that encourage poor choices.
When good incentives produce bad results
The belief that tighter goals help improve performance is a recurring mistake. Overly aggressive incentives tend to generate three common side effects.
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The first is to encourage ‘short-termism’. The team starts to optimize immediate results, without worrying about whether this compromises the sustainability of the business.
Secondly, comes the creation of silos. The areas end up competing with each other to maximize their own indicators, damaging collaboration and eroding synergies.
Finally, aggressive incentives fuel an aversion to transparency. Instead of exposing problems quickly, they are omitted to avoid impacts on the achievement of individual goals, to the detriment of the organization as a whole.
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The paradox is clear: The more the company tries to control the outcome through poorly designed incentives, the more it loses control over actual behavior.
Incentive is not just money
Another common misconception is reducing incentives to financial rewards. Promotions, visibility, autonomy, access to leadership and even tolerance for deviations also function as powerful incentive mechanisms – whether or not they are part of the company’s formal policy.
When professionals observe that certain behaviors lead to career growth, even if they are misaligned with the strategy, the system silently teaches what the organization’s “real game” is.
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Incentives, therefore, are everything that guides choices. And repeated choices shape Culture.
Incentives as a system and not as an isolated tool
The central point that many companies ignore is that There is no right or wrong incentive in absolute terms, there is one that is coherent or inconsistent with the behaviors you want to reinforce. Incentives do not operate in isolation. They integrate a system – made up of several subsystems – that directs the organization’s real Culture.
Companies that put all their money on goals and bonuses without looking at elements such as promotion criteria, dismissal decisions, recognition of merit, and corporate design end up creating predictable distortions. A common example occurs when the performance cycle is directly linked to the bonus: leaders tend to avoid harsher evaluations so as not to impact the team’s pocket, weakening the sincerity of the process.
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Likewise, when leadership goals only consider result indicators, the implicit message is clear: what matters is the final number – regardless of whether it was achieved with high turnover, low engagement or team burnout.
The incentive works in a way. But not to encourage the behavior that the company claims to value.
Who is responsible for designing incentives?
The design of incentives is a strategic decision, not an operational one, although many companies delegate this topic to technical areas. It reflects priorities, long-term vision and risk tolerance.
The final responsibility lies with the CEO, the board and senior leadership. It is these instances that define which results matter, which behaviors are acceptable and which trade-offs the company is willing to assume.
Poorly designed incentives are not accidents. They are consequences of decisions, or omissions, at the top.
The five golden questions every leader should ask themselves
A few simple questions help reveal dangerous misalignments:
- What type of behavior is rewarded when someone reaches a goal?
- Does the system encourage internal collaboration or competition?
- Is there a balance between result and delivery method?
- Are mistakes treated as learning or as a threat to the bonus?
- Do people clearly understand what is expected beyond the numbers?
When these answers are not clear, the incentive starts to produce noise instead of direction.
The side effect no one planned for
Instead of asking why people behave the way they do, perhaps the most productive reflection is another: what choices is our incentive system pushing every day? Incentives do not reveal intention, they reveal priority.
Before redesigning speeches, demanding stances or investing in new programs, it is worth carefully reviewing which behaviors are being rewarded, tolerated or ignored. Because people do not respond to what the company claims to value, but to what it actually rewards.
