Base120 · Systems

Incentive Architecture

SY · Systems

Design reward and penalty structures aligning individual actions with system goals

Model code
SY13
Transformation
SY (Systems) — Identify leverage points, feedback structures, and emergent dynamics in whole systems.
Priority
13 of 20
Framework
HUMMBL Base120 — 120 mental models across 6 transformations

When to use

"Use when individual actions do not align with system goals. Design incentives (rewards and penalties) that align individual actions with the system's objectives. Misaligned incentives are a leading cause of system dysfunction."

Example

"A sales team is incentivized on revenue, not on customer retention. They close deals with customers who churn in 3 months. The incentive (revenue) is misaligned with the system goal (profitable long-term customers). Realigning the incentive (recurring revenue) changes behavior."

Common misuse

"Assuming incentives determine all behavior. Incentives are powerful but not omnipotent. People also act on values, social norms, and intrinsic motivation. Design incentives that complement, not replace, these."

Also known as

Incentive DesignReward Architecture

Related models

SY11SY17P2