Why do incentives matter so much in business?
Replied byRory Sutherland
Vice Chairman at Ogilvy UK
Niche: Marketing
Revenue: Estimated $2B+ USD/month
Location: London, United Kingdom
Started: 1948
People respond to the incentives around them. If executives receive rewards for short-term cost savings but are not responsible for long-term damage, they will naturally focus on reducing expenses. Good incentives encourage value creation, while bad incentives often encourage behavior that hurts businesses over time.
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