Incentives: Building An Incentive Mechanism From Scratch
Let’s assume that we need an incentive mechanism to stimulate employee performance by allocating bonuses based on peer opinion. How do we design it?
Incentives: Example of a Common Incentive Mechanism
A bonus scheme proportional to sales performance is a common incentive mechanism used to motivate sales staff. In this text, the mechanism is used to illustrate components of incentive mechanisms.
Incentives: Components of Incentive Mechanisms
An incentive mechanism is used to influence behavior. What are the components of an incentive mechanism, and how is that related to decision governance?
Motivated Reasoning: How To Detect And Mitigate Its Risks
Motivated reasoning consists of processing information in a way that aligns with one’s desires, beliefs, or goals, rather than neutrally evaluating evidence. How to mitigate it through decision governance?
What Interests Do Stakeholders Have in Decision Governance?
If we know who the stakeholders are, when designing decision governance, then we need to know their interests, so that we can make sure these are met through the decision process.
Who are the Stakeholders of Decision Governance?
As decision governance influences how decisions are made, everyone who participates in preparing a decision, makes the decision, and lives with the consequences of it, is a stakeholder in the design and change of decision governance.
When to Override a Decision
To override a decision, you need to know a decision was made (observability), have rights to override it (authority), and believe that doing so will lead to a better outcome, including preventing undesirable outcomes (superiority).
Attention Depends on Stimuli & Goals
Decision governance can neutralize or amplify factors driving attention in a decision situation. The choice of strategy depends on the observed or anticipated behavior of the decision maker and the desired outcome.
How to Make GenAI Better Faster? Authorship + Community + Credibility
We should reduce the cost of authorship and create an incentive mechanism that generates and assigns credibility to authors in a community.
Are Easy Options the Likely Choice?
How many options will be identified when a decision needs to be made? How much thought will go into developing a robust rationale for each option? Doing both of these takes effort. Unless there are incentives to invest effort, a decision will be made from one or few low quality options. That is a simple…
Incentives in Decision Governance
Decision rights will be exercised, and decision obligations discharged only if there are incentives to do so. If you need to make a decision and bear the consequences, i.e., exercise decision rights and discharge obligations, the only reason to do so is if you see how it makes sense with regards to what you want….
Decision Responsibilities in Decision Governance
Being entitled to make decisions carries with it the responsibility for outcomes of actions that the decisions led to. Accountability can be implemented through decision governance by defining responsibilities for outcomes of decisions. The idea that decision responsibilities are the counterpart to decision rights is easy to understand. However, defining useful decision responsibilities involves finding…
When is Decision Governance Valuable?
Decision governance consists of defining how decisions should be made, and auditing that the processes for doing so are in fact applied. While it often seems like decisions are simply made, and there isn’t much to govern, this is incorrect. It is possible to completely change how to think about decisions, in particular in terms…
When Is It Useful to Reify Decisions?
It has been successfully argued in research on organizations that a decision is an abstraction [1], if it is defined as a commitment to a course of action. If I say that I decided to go skiing tomorrow, is this abstract or concrete? The only thing you can observe will be my behavior and the…
When Is a Career Resilient to AI?
The short answer: careers that reward creative problem solving in domains with scarce knowledge. Let’s unpack that.
Perplexing Secrecy of AI Designs
If AI is made for profit, then should its design be confidential? This choice is part of AI product strategy. The decision on this depends on the following at least. What is the relationship of each of these to AI confidentiality? Correctness: The more likely the AI / algorithm is to make errors, the more…
Specialization versus Transparency
In a firm, what is the relationship between transparency of information and specialization of work? Increasing specialization means that individuals over time deepen a relatively narrow set of skills and knowledge required for these, in response to the opportunities and problems they are responsible for. There are organizational structures that evidently encourage specialization, such as…
Alternative Incentives for Positive Network Effects
If a product/service should generate positive network effects, how do you make the value comparable for the 1st and the 1 billionth user? Accomplishing this means that you can offer more value to the early adopters, and if so, then the network of users should grow faster, or equivalently, adoption should be faster. “In economics,…
Economics of the Acceptability of an Argument
An argumentation framework [1] is a graph of nodes called arguments, and edges called attacks. If arguments are propositions, and “p1 attacks p2” reads “if you believe p1 then you shouldn’t believe p2”, then an argumentation framework looks like something you can use to represent the relationship between arguments and counterarguments in, say, a debate….
Speed vs Uncertainty
Figures 1 and 2 show cost versus time; Figure 1 shows long iterations, Figure 2 short iterations. We choose to do something at time zero, at the origin of the graph in the Figure, and when we do so, we do it under some assumptions that we made at that time. Dashed red lines convey…
Value of Competence
If competence shortens learning, then its value is proportional to the cost of learning, that is, of iterations that would have been needed to achieve the effects of competence, but without having access to it.
Requirements Contracts: Definition, Design, and Analysis
What are the necessary and sufficient conditions for a proposition to be called a requirement? In Requirements Engineering research, a proposition is a requirement if and only if specific grammatical and/or communication conditions hold. I offer an alternative, that a proposition is a requirement if and only if specific contractual, economic, and engineering relationships hold….
