Individual functions hit their targets. The organization misses its goals.
When two teams make sensible decisions that hurt the business, look at what each team is being rewarded for.
Two teams can each deliver exactly what they were asked to deliver and still leave the company worse off. Their scorecards are green. The company’s result is not.
Take a common example. A commercial team is rewarded for growth. An operations team is rewarded for reducing cost. The first pursues customers whose requirements add complexity. The second limits the capacity needed to serve them. Each team can justify its decisions using its own target.
The disagreement gets described as a cooperation problem. Leaders arrange another meeting. The meeting may improve the conversation, but the targets pulling the functions apart remain in place.
Read the targets before judging the behavior.
Steven Kerr named the broader problem in his 1975 paper, On the Folly of Rewarding A, While Hoping for B: organizations can reward conduct that conflicts with what they say they want.
First ask whether the incentives support the current strategy or were designed separately.
Pay plans can roll over from one year to the next while the strategy changes. They can also be redesigned to solve an immediate cost problem without anyone checking what behavior the new arrangement will encourage. Either way, a local target can outlive the business logic that once justified it.
People responding to those targets may be making sensible choices. Calling them uncooperative does not fix the conflict.
Find the decision that exposes the conflict.
Start with a recent decision on which two functions disagreed. What outcome was each function trying to protect? What did its targets reward? How was the conflict resolved?
An escalation alone does not prove the incentive design is wrong. Some trade-offs belong with senior leaders. Look for a pattern: the same conflict, the same clashing targets, and no clear way to decide what the whole business needs.
Then look at the last time anyone checked those targets against the current strategy. Who was responsible? When did the people responsible for compensation and strategy work through it together?
Put the total outcome in the room.
Bring one recurring conflict to the leader responsible for the result shared by both teams. Put the two team targets beside the result the company needs. Agree on a temporary rule so the work can continue while the incentives are reviewed.
Ask what the business needs from both functions together.
For example, agreeing to serve a more complex order needs a decision about its margin, capacity and service promise together. A sales target and a cost target will not settle that choice on their own. The temporary rule should make clear who can approve the trade-off and which result takes precedence.
Make the incentives support the strategy.
A temporary decision can break a deadlock. Unless something changes, the same conflict will return with the next customer, investment, or planning cycle.
Whenever the strategy changes, name someone to check whether the incentives still support it. Have the people responsible for strategy and compensation do that work together. Give the decision a clear owner and review it regularly.
Start with strategy. Check whether resources and incentives support what the company says it wants. Culture affects how people handle the disagreement. Technology may make the competing numbers visible. But a better dashboard cannot reconcile contradictory objectives.
A strategy is incomplete until the incentives support it.