What Crisis Reveals About Incentives
When time disappears, institutions stop performing their values and start revealing them.
Crisis removes the slack that lets institutions look better than their incentives. Under time pressure, organizations do exactly what their payoff structures reward — which is why disasters expose incentive design flaws that ordinary operations conceal for years.
Ordinary operations give institutions enough time to compensate for bad incentives. People work around the system, absorb the friction personally, and the organization looks functional. Crisis removes that margin. What remains is the incentive structure, operating without disguise.
This is the most useful diagnostic property of an emergency, and it is almost never harvested afterward.
Three patterns that surface every time
Across emergencies — natural, fiscal, public health — the same three patterns appear, and each is an incentive artifact rather than a character flaw.
- —Information stops moving upward because carrying bad news is individually costly.
- —Coordination fails between entities whose funding depends on distinct attribution of credit.
- —Speed is punished retroactively when the audit arrives after the emergency ends.
Designing for the next one
The fixes are structural and boring: pre-authorized decision rights, protection for people who escalate early, shared credit written into funding, and an audit standard that judges decisions against the information available at the time rather than the information available afterward.
Institutions that install those four things before the crisis behave differently during it. Institutions that promise to be braver next time behave identically.
An emergency does not build character in an institution. It publishes it.
Frequently asked
- Why do institutions perform worse under crisis than expected?
- Because crisis strips away the slack that normally hides bad incentives. Under time pressure, people follow the payoff structure exactly, and its flaws become visible.
- What should be changed before the next crisis?
- Pre-authorize decision rights, protect early escalation, write shared credit into funding, and judge decisions on information available at the time.
Most performance problems are payoff problems.
The Incentives Lab reconstructs what your organization actually rewards from evidence people cannot manage — promotions, calendars, budget shifts, attrition, and what happens after a bad quarter. Start with the free diagnostic, or talk to us about an audit.
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Ricardo Rosselló
Ricardo Rosselló, PhD is a scientist, the 12th Governor of Puerto Rico, U.S. Congressional Delegate for Puerto Rico, and co-founder of The Incentives Lab. He works on incentive design in the public sector: how policy shapes behavior at population scale, why government transformation stalls, and how institutions make decisions under crisis conditions.
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