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How many times have you seen an incentive system produce the exact opposite of the desired behavior? Why is that? And why can't organizations see, let alone fix, the problem? For example, I (Srikanth) went to visit a client in an Asian city. I stayed in a hotel in the middle of the city, and had to meet the client at his factory location that was quite far away. The client suggested that I catch the bus and gave me instructions. I went to the bus stop and waited. Several buses came close to the stop, but they all whizzed by without stopping. It wasn't that the buses were full. In fact there were plenty of empty seats. After half a dozen buses came tantalizingly close but without stopping to pick up passengers, I finally caught a cab. Upon my later than planned arrival at the factory, I apologized to the client and told him the cause for my delay. The client laughed and said, "The driver's bonus depends on whether or not he reaches his destination on time. So duri...

When scandals rock the business world, we all go scurrying to find big causes. Human greed. Structural economic pressures. Lax regulations. Psychological research, however, suggests that one cause may be as small as a metaphor in the mind. Contesting theory, which my colleagues and I pioneered helps explain the cognitive roots of poor decision-making in competitive situations. The key to this theory is recognizing that abstract human experiences are mentally processed through metaphors. Invariably and unconsciously, we understand the abstract through the concrete. For example, we often interpret organizations (an abstract idea) through use of an organizations-are-plants metaphor. So we talk about "branch" offices, "pruning" the workforce, and "growing" the bottom line. When a person in love says, "look how far we've come," she is thinking of love through a journey metaphor. Metaphorical interpretation is an unconscious process, but...