The economic problem of (an organization) is rapid adaptation to changes in its particular circumstances. Then, the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources available to meet them.
This problem cannot be solved by first communicating all this knowledge to a central board which then issues its orders. But the "man on the spot" cannot decide solely on the basis of his limited, but intimate, knowledge of his immediate surroundings.
There still remains the problem of communicating to him such further information as he needs to fit his decisions into the whole pattern of changes of the larger (organizational) system.
-- Friedrich Hayek
If you play defense in a soccer team that pays for performance, would you rather win 5-4 or lose 0-1?
If you play offense, would you rather win 1-0 or lose 4-5?
Your commitment to the team may lead you to chose the former, but your coach's commitment to "rewarding excellence" may lead him to cut you off the team.
This is the hardest problem any organization has to solve: How to optimize the system -- which requires people to sub-optimize their subsystems -- while incentivizing these same people to optimize the subsystems, which requires them to sub-optimize the system.
In this video, you will understand why this is the hardest problem, and why it has a "soft" solution.
Further Reading: Doing Your Job May Be Hazardous To Your Career
Fred Kofman, Ph.D. in Economics, is Vice President at Linkedin. This post is part 2.1. of Linkedin's Conscious Business Program. You can find the introduction and structure of this program here.