While it is necessary to delegate authority to individuals with specialized knowledge, that very delegation opens the door to incoherent organizational action. What is needed, therefore, is an incentive system that will encourage organizational specialists to use their knowledge in the coherent pursuit of organizational goals. An ideal incentive system will overcome information asymmetries and team production externalities, transforming an organizational social dilemma into an organizational “invisible hand.” An incentive system should harness individual self-interest in pursuit of organizational goals.

Most hierarchies make little attempt to use their compensation systems to overcome the temptation of team members to shirk. Only 22 percent of U.S. workers feel that there is a direct connection between their effort and how much they are paid, despite the fact that 61 percent want their pay to be tied to their performance (Lawler 1987: 69–76).