Three common dilemmas in corporate governance all point to the same root cause: the mismatch between institutional design and human nature.
The first dilemma is perverse incentives. When a company has no reasonable workload boundaries or incentive mechanisms, the more an employee does, the more tasks they are given. Hard work is not rewarded; it is punished with more work. The result is a reverse incentive: those who work hard lose out, while those who coast are comfortable. Employees actively reduce their output and pretend to be busy, and overall efficiency declines.
The second dilemma is diffusion of responsibility. In large organisations, everyone feels responsible for only their small piece. When something goes wrong, it is no one person fault. The consequence is that everyone completes their own tasks, but the overall goal is not achieved.
The third dilemma is short-termism. The evaluation cycle determines behaviour. Quarterly reviews incentivise short-term numbers. Annual reviews cause long-term value to be systematically neglected. When everyone is chasing short-term metrics, the accumulation of long-term competitive advantage is systematically overlooked.
These three dilemmas share a common root: there is always a gap between what can be measured and what truly matters. Companies measure what is easy to measure, but what truly determines long-term success is hard to measure. This is the measurement paradox: you measure what people do, so people do what you measure, but what you measure is often not what you truly want.
The direction for resolving these dilemmas is not to design more sophisticated evaluation systems. It is to find a balance: use systems to guarantee minimum standards, and use culture and values to drive excellence.