Incentive conflicts can have a significant impact on firm value. Such was the case with a large US-based technology company, which experienced significant losses due to an incentive conflict that reduced its firm value. The conflict arose from the misalignment of incentives between the sales and marketing teams, leading to reduced revenue growth and decreased customer satisfaction.

At this particular company, there were two key legs of the organizational stool: revenue growth and customer satisfaction. Unfortunately, these two goals were in direct opposition to each other due to conflicting incentives among the sales and marketing teams. On one hand, the sales team had a short term focus – they wanted quick wins and immediate rewards for signing new deals. On the other hand, the marketing team had a long term view focused on building relationships with customers over time rather than simply closing deals quickly. This dichotomy between short-term and long-term goals created an incentive conflict as both teams struggled to achieve their respective objectives without sacrificing firm value or taking away from each other’s efforts .