Decision Makers' Incentives

Even when decision makers are happy to consider expert advice and analysis, they may take decisions which appear perverse to others, including their advisers.  This is often because have very different incentives and objectives to those of their advisers.

At its simplest, advisers should be incentivised to design policies that work, that are properly planned and that are well resourced. But decision makers - whether senior executives or politicians - will often want rapid results at minimum cost.

Equally obviously most decision makers are strongly incentivised to impress their senior colleagues or impress voters at the next election. They particularly hate media criticism, fair or unfair.  For private sector executives, a policy success is one that gets them a juicy bonus, or gets the head hunters calling.  For politicians, a policy success is:

Remember, too, that powerful people seldom have the time or inclination to understand the detail. Much of their decision making may be based on intuition and gut feeling, and this can make sense if they are highly experienced and aware of current developments inside or outside their organisation.  It is much more dangerous, of course, if they are attached to half-remembered and possibly long discredited theories.

Finally, decision makers (and often their advisers as well) may find it very difficult to recognise that their plans are going wrong, because they will then be associated with what will be characterised by others as a mistake or a failure.

(Most, if not all, of the above problems particularly affect politicians who have short time horizons because of the electoral cycle and because they may be reshuffled. They will almost certainly not acknowledge that a policy has failed for fear of suffering political or career damage.  This inhibits learning, of course.)

 

Martin Stanley

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