The Agency Problem: When Agent Relationships Aren’t Working
Why Misaligned Agency Incentives Stall Growth
Across Teams, Vendors, and Leadership
The Classic Principal-Agent Problem
In economics and organizational theory, the principal-agent problem describes a misalignment: when someone (the agent) is hired to act on behalf of another (the principal), but their incentives diverge. Ownership hires leadership. Leadership hires managers. Managers hire employees. Companies hire agencies. And somewhere along the chain, the mission gets lost.
Modern organizations are riddled with agent relationships that no longer serve the principal’s goals. Instead of driving growth, agents protect their own comfort, optimize for their own metrics, or simply “show up” and expect reward.
Expanding the Definition of “Agency”
When we say “agency problem,” most people think of marketing vendors nickel-and-diming clients or burning hours without impact. But the issue runs deeper.
• A CEO who prioritizes personal brand over company performance
• A manager who avoids conflict to preserve team harmony
• An employee who expects a paycheck regardless of contribution
• A marketing agency that maximizes billable hours instead of client growth
These are all agent behaviors misaligned with principal intent.
Quadrant Insight:
This is a breakdown of strategic clarity (Idea), structural accountability (Process), emotional intelligence (People), and execution discipline (Action).
Symptoms of Misalignment
How do you know your agent relationships aren’t working?
• Entitlement over impact: Agents expect reward for presence, not performance
• KPI theater: Metrics are gamed to look good, not drive results
• Avoidance of risk: Agents resist experimentation that could benefit the principal
• Misaligned incentives: Compensation structures reward internal wins, not external success
These behaviors stall growth, erode trust, and create organizational drag.
Diagnosing the Disconnect
Ask yourself:
• Are your agents rewarded for protecting their lane, or expanding yours?
• Do your vendors optimize for their margins, or your market share?
• Are your employees focused on contribution, or compliance?
• Is leadership incentivized to challenge the status quo, or maintain it?
If the answer skews inward, you have an agency problem.
What Modern Principals Must Do
To fix the agency problem, principals must:
Align incentives to external success
Reward contribution, not just activity
Build systems that measure impact, not effort
Coach agents to think like owners, not operators
This applies to every layer of the organization, from the boardroom to the brand team.
Growth Spectrum’s Perspective
At Growth Spectrum, we help organizations diagnose and realign agent relationships. Whether through executive coaching, marketing strategy, or organizational diagnostics, our goal is to restore strategic clarity and mutual accountability.
We don’t just fix vendor relationships, we help leaders build cultures where every agent is activated toward growth.
Want to assess your agent relationships?
Fill out the Contact Us form to start the conversation
Email us at hello@growthspectrumllc.com
Check out our other blogs on Executive Coaching