The Incentives Problem
Janna Bastow
Product ?? ? Invented the Now-Next-Later roadmap, ProdPad, and Mind the Product
Every problem you run into at work usually comes down to one thing: misaligned incentives.
To really get a handle on these misaligned incentives—and start doing something about them—you've got to get to the root of the problem first.
The Iron Triangle of constraints – the root of the incentives problem
You might be familiar with the Iron Triangle of time, cost, scope, and quality (usually squeezed out in the middle!). For any one of these factors to give, we've got to be willing to give on another front.?
It's rare that we have endless time or budget, so we often have to make sacrifices on scope or quality. That's exactly what we're doing when we run experiments with prototypes or MVPs. We're choosing to forego perfect quality or full scope so we can gain time and save costs.
These time and cost savings are gold for any company that's looking to move fast and iterate as it learns.
As product people, we make these trade-offs constantly, often without even noticing it. These decisions help us strike the right balance between speed and quality to hit the outcomes we're after.
The problem comes when different stakeholders in the business are chasing different outcomes—and are stuck within the same Iron Triangle.
Misaligned incentives spell trouble for product teams
A classic example: Your tech lead and your salesperson are in disagreement. It's not personal; they've just got different ideas of what the priority should be. And bending to the other person's priorities feels like going against what they're personally incentivized to achieve.
Your dev team is usually advocating for quality and scope. They want it done right, and done fully. Meanwhile, the sales team is frustrated, pushing to get it out the door faster and can't understand why the timeline keeps shifting.
Both sides are feeling the pressure to give in. In an engineering-led company, the salesperson often has to back down. In a sales-led company, the devs might have to take the hit.
And as the product manager? You're stuck right in the middle, mediating between these two teams, trying to find a balance that works for the business without eroding trust on either side.
How to solve misaligned incentives
Fixing misaligned incentives starts with trust and building a shared language. Everyone needs to speak openly about their own incentives and the trade-offs they're willing (or not willing) to make.
Talk to the salesperson.?What's at risk if the deadline slips?
Sometimes, nothing serious is actually on the line, but there's a sense of eroded trust because they can't see the value in that final 20% of development time. Helping them understand why that last chunk of time matters—whether it's for quality, security, or documentation—can often bring them on board.
Other times, their paycheck is on the line. If they can't sell the current iteration of the product, they're desperate for the next release to unlock sales. This creates real pressure, but it's not a burden that should fall entirely on the dev team. If a product isn't sellable, the sales team shouldn't be on commission for it. That's a conversation for the exec team about how salespeople are being compensated, and it needs to be addressed.
If you don’t get support from your execs and salespeople in this tough conversation, there’s a possibility that your company is actually stuck in the?Agency Trap, where the misaligned incentives go straight through to the core of the business model.
Talk to the developer.?What happens if we release a portion of the work now? It's not a threat, but a way to explore whether work can be broken into smaller chunks, or if it all needs to ship together. This helps to clarify what’s done, what's not, and why it matters. Your job is to translate their insights for other stakeholders, buying time and space for the devs to get their work done properly.
Finding common ground might lead to a compromise. Maybe the teams agree on a limited experiment, releasing part of the work to gather feedback, with a plan for engineers to revisit it afterward. Or perhaps these conversations help the salesperson understand the process better, or simply bring the engineer into the discussions earlier next time to avoid misunderstandings.
Incentives run deep in company culture
These issues might seem like small misunderstandings, but they often tie back to how the company is structured and how it operates.
Some companies get stuck in a short-term mindset, constantly chasing quarterly results without thinking about long-term health. It leads to bad decisions.
For instance, publicly traded companies are under constant pressure to keep their stock price rising steadily. CEOs in these companies have no incentive to take risks or explore new opportunities—they’re focused on keeping things predictable and safe.
This drive for predictability leads to silos. Teams are measured independently, focusing only on their specific metrics. But silos stifle innovation and create conflicts, like support teams cutting call times at the expense of customer satisfaction or sales teams meeting fewer customers because of travel cuts.
Hey product people, are you working in a profit center or a cost center?
A lot of this boils down to whether a division is treated as a profit center or a cost center.
Profit centers generate revenue, so they get more funding. Cost centers, like HR or operations, are necessary but don’t directly drive revenue, so they’re seen as areas to keep costs low.
Product and tech often fall into the cost center category. R&D is seen as a necessary evil, not a future investment in revenue growth. And that mindset explains a lot.
CTOs aren’t incentivized to maximize value for users; they’re incentivized to keep tech costs down. Think of all the metrics we’ve lived by—velocity, burn-down charts, story points. These measure output, not outcomes. They’re great for squeezing productivity from a tech team but don’t tell you if you’re building the right thing.
Focusing on output instead of outcomes leads to companies missing the bigger picture—just like Blockbuster, which could have bought Netflix but stuck to the safe, predictable path.
Incentives Drive Everything
In the end, it’s all about incentives. When something feels off, take a closer look at who’s being incentivized and how. Once you understand that, you can pull the right levers and make more persuasive arguments—it might just save your company from becoming the next Blockbuster ??
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