Incentive Alignment Against the Dark Side
We are what we measure. Set the team's incentive on the behavior, and lengthen its time horizon.
- Difficulty
- Moderate
- Time to result
- ~ongoing to results
- Steps
- 4
- Confidence
- 90%
Behavioral tactics are ethically neutral; incentives decide which way they point. Berman's guard rail is structural rather than moral: incentivize the team on the customer behavior (which tracks customer benefit) rather than on active use or conversion, and stretch the incentive's duration from quarterly to annual or longer. She earned this the hard way — a conversion-bonus contract turned her, a financial-health researcher, into a predatory lender within weeks.
Origin
Kristen Berman's own cautionary tale from a Lending Club engagement, told against the backdrop of her simultaneously running Duke University's Common Cents Lab, a financial-health lab for low-to-moderate-income Americans.
Core principles
- 01The answer to 'is this manipulation?' comes down to incentives, not intentions.
- 02We are what we measure — and it really matters what you measure.
- 03Behavior metrics align with customer outcomes better than active-use or retention metrics do.
- 04A quarterly target selects for short-term levers; an annual or longer one selects for the interests of the company and consumer.
- 05Good intentions and a good employer do not protect you. Berman's client was offering genuinely better rates to low-FICO borrowers, and she still drifted.
How to run it
- 1
Audit what the team is actually paid on
Look at the bonus, the OKR, the contract. Whatever it rewards is what the team will optimize, regardless of the mission statement.
Watch out A cliff-shaped incentive (all-or-nothing on hitting a number) is the most corrosive shape. Berman was paid a lot for a five-point conversion bump and zero otherwise; she landed 4.5 and got nothing.
- 2
Move the incentive onto the behavior
Set the KPI for product and marketing on the specific customer behavior rather than active use, retention, or raw conversion — behavior aligns more closely with the customer's own outcome.
Pro tip Still measure active use and retention. Just don't pay people on them.
- 3
Lengthen the incentive's duration
Shift from quarterly to annual or longer horizons. A quarterly target pushes you toward whatever produces a short-term bump; a long horizon forces you to look after the customer and the company.
- 4
Measure customer outcomes explicitly
When applying any Right for Wrong or friction tactic, make the customer's outcome a tracked, reported metric — that is the only real check on the toolkit being used against them.
In the wild
Lending Club hired Berman to raise borrower conversion, with a large payment if she hit a five-point bump and nothing if she didn't. Over the engagement she found herself proposing tactics the legal team had to refuse — while simultaneously running Duke's Common Cents Lab building savings tools for low-to-moderate-income Americans. Two hats, one incentive structure doing the driving.
→ She hit 4.5 points, missed the cliff, and got paid nothing — but the real output was the lesson: the incentive, not the practitioner's values, determined the design.
Common mistakes
Trusting values over structure
Berman was a financial-health researcher who drifted into predatory design in a matter of weeks. If a behavioral scientist running a financial-health lab can be bent by a bonus, so can your team.
Paying on conversion
Conversion is the metric most easily bought with tactics that harm the customer. Behavior metrics, and longer horizons, are harder to game against the user's interest.
Is it for you?
Best for
Product leaders and founders introducing behavioral design into a team, who need a structural safeguard rather than a code of ethics.
Not ideal for
Teams with no discretion over their own KPIs or compensation — flag it upward instead of pretending the guard rail exists.
From the transcript
“I like to say kind of we are what we measure and it really matters what you measure”
“so my incentive structure was to increase the conversion flow and over the course of working with them I became a predatory lender”
“one would be to set the incentive on the behavior because the behavior is going to align more with the”
“setting the incentive in the kpi and the product and the marketing team on the behavior is going to result in a more customer friendly…”
“second would be increasing the duration of the incentive so if you're trying to hit a quarterly outcome you're likely going to do things that…”
From the episode
Using behavioral science to improve your product
Kristen Berman (Irrational Labs)