Illustration
  ABC Consulting has offices in several major cities in Eastern Europe.Sometimes consultants in one office work on projects for other offices.The transfer price charged is $1,100 per day of consulting.
  The Managing Director of the Kyiv office of ABC Consulting discovered that he could hire reliable consultants on a freelance basis for $500 per day. On a recent project,in July,he used the services of a local freelance consultant for five days,paying $2,500 in total. “I‘ve saved the Kyiv office $3,000!”he declared triumphantly at the end of the week.
  During the week in question,the Moscow Office of ABC Consulting had a free consultant who could have done the work that the freelance consultant was hired to do. This consultant earns a fixed salary,so the additional cost to the company of this consultant working on the project in Kyiv would have been a flight ticket of $500 and accommodation of $500 in total.
  The decision of the Managing Director of the Kyiv Office to hire the freelance consultant cost the ABC Group an additional $1,500 (the fee paid to the freelance consultant of $2,500 less the savings on travel and accommodation of $1,000)。
  This is an example of goal incongruence.The managing director of the Kyiv office has made a decision that is good for the Kyiv office,but not good for the overall group.The reason for this was that the internal transfer price was too high.