Aligning Incentives

intermediate1 min readleadership · economics · psychology · military strategy · business

Sun Tzu’s image of kicking away the ladder describes commitment through removing retreat options. Applied to a group, this can create pressure to pursue a shared objective; it does not by itself align everyone’s incentives.

THE IDEA

Aligning Incentives

One of the challenges of leadership is aligning incentives. How do you get people to move in the same direction without being waylaid by immediate reward? Sun Tzu suggested over 2,000 years ago that a good leader “leads his men into battle like a man climbing to a height and kicking away the ladder.” When you can’t go back, your motivation is to go forward together.

When to use it

Examining whether closing a failing product line will help focus resources on a shared objective.
An individual commits to a fitness goal by signing up for a marathon with a non-refundable entry fee and telling friends about it.
Analyzing a military commander’s decision to prevent retreat and the risks that decision creates.
Assessing whether a binding team commitment creates a shared goal or merely removes individual options.

FROM THEORY TO EVERYDAY LIFE

In practice

Startup Commitment

A startup founder announces that she has left her previous job and sold her house to finance the business. This shows her personal commitment, but investors and employees may still have different risks, rewards, and alternatives. Her sacrifice alone does not align their incentives.

Team Deadlines

A project manager agrees to a fixed external deadline with a client. The commitment gives the team a shared constraint for prioritizing work, but competing tasks and internal conflicts still need to be resolved.

✳

A MOMENT TO REFLECT

Put it to work.

Think of a time when you created a 'point of no return' for yourself or a team. How did it affect motivation and outcomes?
In what situations could 'kicking away the ladder' backfire, and how can you mitigate those risks?
How does aligning incentives through irreversible commitment differ from using positive reinforcement or rewards?