You can recruit the sharpest minds across departments. You can give them a clear mission, run the perfect design sprint, and even hold weekly stand-ups with just the right Miro board aesthetic. But if their incentives are misaligned? That cross-functional team will eat itself alive.
You can recruit the sharpest minds across departments. You can give them a clear mission, run the perfect design sprint, and even hold weekly stand-ups with just the right Miro board aesthetic.
But if their incentives are misaligned?
That cross-functional team will eat itself alive.
This is the hard truth many leaders overlook: you don’t get collaboration by asking for it—you get it by rewarding it.
The Root of the Problem: Competing KPIs, Competing Loyalties
In most medium to large organizations, incentives are still tied to individual performance or departmental success.
And that makes perfect sense—until you ask those same individuals or departments to collaborate on something bigger than themselves.
Imagine this:
Now, ask them to work together on an innovative customer experience initiative that requires compromise on all four fronts.
Cue the tension.
People will always optimize for what gets measured, rewarded, and remembered. So unless those things are aligned around shared outcomes, your cross-functional efforts are already underwater.
A Harvard Business Review study found that 65% of companies struggle to align incentives for team-based collaboration, leading to siloed execution, fragmented results, and demoralized teams.
Budgets Are Incentives, Too
Another hidden driver of misalignment? Budget ownership.
When each department owns (and guards) its own budget, collaboration starts to feel like a zero-sum game. If I give you resources, I lose them. If I share headcount or tech capacity, my own roadmap slips.
No matter how friendly the cross-functional meetings are, the message beneath the surface is clear: My priority is my team’s survival and success.
Collaboration becomes conditional, political—and optional.
What Actually Works: Reward the We, Not Just the Me
As Adam Grant has pointed out, organizations that shift from individual incentives to team-based success measures foster more collaboration and shared ownership.
Why? Because when people win together, they stop trying to win against each other.
Here’s how to begin making that shift:
🧭 1. Redesign KPIs to Reflect Shared Outcomes
Instead of function-specific metrics, co-design KPIs that reflect cross-functional goals. For example:
When outcomes are shared, so is responsibility.
🤝 2. Introduce Collective Performance Reviews
Add a component to performance reviews where team members evaluate how they contributed to collective goals—and how they supported others in doing the same.
Make peer input and cross-functional collaboration a meaningful part of the review—not just a checkbox.
💸 3. Pool Budgets Around Initiatives, Not Departments
Pilot cross-functional budget “pods” where resources are tied to an initiative, not a department. Let the team prioritize where the money goes.
Yes, it’s messier. But it also reflects how real-world collaboration works.
🏆 4. Celebrate and Reward Team Wins Publicly
Too often, orgs celebrate launch days and individual heroes. Instead, spotlight teams who demonstrated great collaboration—even if the results are still early.
Show that how the work gets done matters as much as what gets done.
Incentives Create Culture—Quietly but Powerfully
You can hang posters about collaboration. You can say “we’re one team” all you want. But if your incentives say “win for your department,” that’s what people will do.
Culture isn’t what you preach. It’s what you pay for, promote, and protect.
So if you want empowered cross-functional teams to thrive, align the scoreboard with the behavior you want to see. Reward risk-sharing, not resource-hoarding. Reward problem-solving, not silo-polishing.
Because when teams are rewarded for working together, they stop guarding turf—and start building breakthroughs.
Want help redesigning incentives that fuel collaboration, not competition? Explore how we support AI-Ready Teams and coaching for organizational leaders at Centered.
#Centered #BreakthroughInnovation #CrossFunctionalTeams #IncentiveDesign #Collaboration #Leadership #OrgDesign #AdamGrant
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