From “The Wrong Incentive” by Roger Martin, Baron’s, Dec 23, 2003:
How, then, should incentive compensation be structured? It should be based exclusively on features of the real market — sales, costs, investments, margins, profits. These are items over which management and employees have some control and their actions can be directly linked to such items. Compensation plans should look more like royalty streams than annual bonuses.
I’m not sure what a royalty stream for the janitor would look like.