Risk and Reward

Last week’s episode of my podcast Beneficial Intelligence was about risk and reward. Humans are very good at calculating risk and reward. That means we will do what is best for us, even if it is not the best for the company.

It is easy to create incentives for being fast and cheap, but hard to create good incentives for quality. That’s why we try to use incentives for speed and cost, but try to use QA procedures to ensure quality.

Incentives almost always win over procedures. As CIO, you need to make sure there are also incentives for quality. If not, you can be sure that your procedures will be circumvented, and corners will be cut.

Risk and Reward

This week’s episode of my podcast Beneficial Intelligence is about risks and rewards. Humans are a successful species because we are good at calculating risks and rewards. Similarly, organizations are successful if they are good at calculating the risks they face and the rewards they can gain.

Different people have different risk profiles, and companies also have different appetite for risk. Industries like aerospace and pharmaceuticals face large consequences if something goes wrong and have a low risk tolerance. Hedge funds, on the other hand, takes big risks to reap large rewards.

It is easy to create incentives for building things fast and cheap, but it is harder to create incentives that reward quality. Most organizations don’t bother with quality incentives and try to ensure quality through QA processes instead. As Boeing found out, even a strong safety culture does not protect against misaligned incentives.

As an IT leader at any level, it is your job to consider the impact of your incentive structure. If you can figure out a way to incentivize user friendliness, robustness and other quality metrics, you can create a successful IT organization. If you depend on QA processes to counterbalance powerful incentives to ship software, corners will be cut.

Listen here or find “Beneficial Intelligence” wherever you get your podcasts.