Create Collaboration With The Right Incentives

I just read some fascinating research by Marshall W. Van Alstyne in Harvard Business Review. The figure below shows a network of high collaboration on the left, and a network of much lower collaboration on the right. The explanation turns out to be simple: it’s caused by two very different incentive systems. Alstyne found that “the people rewarded for individual performance shared information least; the people rewarded for team performance shared more; and the people rewarded for company performance shared most.” In the figure, each connecting line indicates email traffic between two people. Thicker lines correspond to a greater volume of email. As Alstyne explains it, the reasons are pretty simple: it reflects each person’s self interest, aligning with the different incentive systems. If your compensation is linked to the performance of everyone else, then you benefit from sharing and helping others. If your compensation is linked to your own performance, relative to others, then you’re likely to “hoard” information to maximize your own performance (and to undermine that of others).

This aligns with my own study of W. L. Gore, as I wrote about in my book Group Genius. At Gore, everyone at the company receives the same profit sharing percentage; no one gets profit sharing directly from their own projects and successes. When I asked CEO Terry Kelly why, she said it’s because it encourages a culture of collaboration. She said, “at Gore, you can pick up the phone and call anyone in the company to ask for help, and they will take that call.” And imagine the alternative: with individual rewards, why would you take a phone call from someone in a different division, who you’ve never met? It’s just going to slow you down in your progress on your own work.