Who monitors the monitors?

In our problem solving framework we ask three simple questions to diagnose goal misalignment:

• Q1:  Who made the bad decision?
• Q2:  Did they have enough information to make a good decision?
• Q3:  And the incentive to do so?

Answers to these three questions will isolate the source of the problem and suggests one of three generic solutions:

• S1:  Let someone else make the decision, someone with better information or better incentives.
• S2:  Give more information to the current decision-maker.
• S3:  Change the incentives of the current decision-maker.

The first solution is always tempting, but you have to make sure that whoever makes the decision has goals aligned with those of the organization, i.e., enough formation to make a good decision, and the incentive to do so.  This is sometimes referred to as the problem of "who watches the watcher?"

The economist has an article on the history of this problem:

In business and finance, this is known as the “principal-agent” problem. Shareholders employ managers to run a company; investors use fund managers to look after their savings. That makes sense. It allows us to take advantage of the expertise of others, and of economies of scale in fund management (it costs little more to look after $10m than $1m). But it is extremely hard to align the interests of principals and agents exactly.

To spoil the ending, the solution is always "it depends."