The Executive Operating System 6 of 10 – Incentives Run the Company

Thinking Pattern #6: People do what pays them.
Not what you say. Not what you present in strategy decks. Not what you repeat in leadership meetings. They do what pays them.

Here’s why: people are coin operated. Every system you built as a leader inside a company trains behavior, and that training is driven by incentives. Compensation, KPIs, promotions, recognition, even what gets discussed in meetings, all of it signals what matters. Over time, teams stop listening to what leadership says and start responding to what the system rewards.

This is not a culture issue. It is a design decision.

Alignment Is Engineered

Executives often talk about alignment as if it is something to be encouraged. It is not. Alignment is engineered. It shows up when incentives point in the same direction and disappears when they do not. When teams move in different directions, it is not confusion. It is clarity. Each team understands exactly what they are supposed to optimize for.

This is where companies lose control without realizing it.

Stop Optimizing in Pieces

Marketing is measured on volume, so it produces more of it. Sales is paid on closed revenue, so it prioritizes what will close fastest. Operations is measured on efficiency, so it protects cost. Each function is performing as designed, yet so many companies feel disjointed, slow, and inconsistent. The issue is not effort. The issue is that the system rewards different outcomes.

Behavior Follows the Reward

Executives then try to solve this with communication, new processes, or added oversight. None of that changes behavior. Let me state that again – different communication tools, new processes (AI!), and added check-ins or meetings DOES NOT CHANGE BEHAVIOR IN YOUR FAVOR.
People do not change because they were told to collaborate more. They change when the definition of success changes.

If you want better customers, but reward sales only on closed deals, you will get more deals, not better customers. If you want efficiency, but reward output, you will get more activity, not better results. If you want collaboration, but evaluate teams independently, you will get protection, not partnership.

No one is deliberately making mistakes. They are following the system you provided because leadership owns the outcome.

This is where accountability sits. The behavior inside the company is not random and it is not personality driven. It is the direct output of how people are measured and rewarded. If short term decisions keep winning, the system pays for short term outcomes. If teams protect their own results, the system rewards individual performance over shared success.

That’s not a coincidence. It is math.

Where Strategy Becomes Real

Incentives determine how capital actually moves through the business. They shape what gets prioritized under pressure and what gets ignored when trade-offs arise. Strategy defines direction, but incentives determine execution. If those two are not aligned, the company will drift, no matter how clear the strategy sounds.

Strong operators treat incentives as part of system design. They decide what behaviors should exist, then build the structure that makes those behaviors the most rational choice. When this is done well, alignment does not need to be managed. It becomes natural. Teams make decisions that benefit the company because that is what benefits them.

In reality, most companies do the opposite. They describe the outcome they want and hope the system supports it. Spoiler alert: it rarely does.

If you want to understand how your company actually operates, ignore what is said and look at what is rewarded. That will tell you how decisions get made, how teams behave, and where the business is really going. Then decide if that is what you intended.

Whether you designed it deliberately or not, incentives are already running your company.

The Takeaway & Actions

Executive Implication: If you want to change how your company behaves, stop talking about it and change what gets rewarded.

Start by auditing your incentives across every core function. Look at compensation plans, KPIs, reporting dashboards, and what actually gets discussed in leadership meetings. You are not looking for what sounds right. You are looking for what people are optimizing for in practice.

Write it down plainly. Marketing is paid for this. Sales is paid for this. Operations is measured on this.

Then ask one question. Do these add up to the same outcome?
If they do not, you have designed internal competition. Fix that first.

Define a shared outcome at the company level. This is not a new slogan, tagline, or logo. It’s a measurable result that requires all functions to move in the same direction. Revenue quality. Retention. Profitable growth. Pick one that forces tradeoffs. Then realign incentives to support it.

Marketing should not be rewarded for volume if sales cannot convert it. Sales should not be rewarded for deals that do not hold. Operations should not be rewarded for savings that reduce growth capacity. Tie a portion of each team’s success to the shared outcome. Make it visible. Make it matter.

Finally, remove anything that contradicts it. Old KPIs, legacy comp structures, vanity metrics. If it pulls behavior in a different direction, it stays in control. You do not need more alignment meetings. You need a system that makes the right behavior the most rational choice.

Once incentives are aligned, execution follows naturally without forcing it.