I had a really great conversation recently about how important it is to align leaders with similar incentive structures to foster the right behaviours. Compensation structures are the one of the highest leverage driver of behaviour in an org (especially at executive level), and it’s important for leaders to have common incentive profiles to ensure they are working in the collective interest vs. their own.

Some teams work very differently so it’s not uncommon to see different structures coexist - certain executives compensated for making decisions that pay off in the long term (i.e. with equity), and others compensated for hitting short term goals (e.g. with cash bonuses).

But if there are no common elements to those incentive profiles, it can create unhealthy mercenary behaviours.

I see this difference often in leaders of pipeline-centric vs product-centric orgs. Pipeline orgs are designed to push pipelines forward, get more and bigger deals done. There’s a very clear 1:1 relationship between effort and outcome. Product centric orgs can get squishier - many decisions don’t pay off in the short term. Infact sometimes the opposite can happen - a short term failure can lead to a long term success. In these cases it doesn’t make sense to compeonsate an employee with a short term incentive like cash.

I’ve seen orgs do this well where all executives will have some component of their compensation that follows the same structure. Obviously stock option grants are a great way to make this happen. They are generally aligned towards long term goals and can make sure everyone acts in the long term best interests of the company.