Business Punk (Part 5) – KPIs and Bonus
When I joined industry, the payment system was quite different from today: We agreed on an annual compensation, done. After some years the system changed, and salary became more and more split into fixed and variable components. The logic: Support entrepreneurial behavior. Train a workforce that is acting like if they would own the company.
The picture was far too optimistic. We have seen in large organizations that sandbagging became a favorite hobby traveling with the will to reduce risk. Consequently, organizations looked for risks to be controlled or even better avoid any visible risk. Budgets became more and more relevant for individual´s decisions. The big new developments typically did not start in large organizations.
Changing organizations travelled together with the acceptance of loss of variable compensation or the manager came from outside of the organization and negotiated a works contract apart from standard. Unbalanced KPIs generated inner-company competition: Reducing capital employed may support a KPI of Supply Chain Management and simultaneously have impact on the chance to supply. An optimized supply chain may force production to underperform.
If we want to innovate, it´s about a company´s way of acting and thinking. KPIs may contribute much more than we believe, and a CFO is not necessarily the most entrepreneurial person. Targets may be taken more seriously than we believe, and for the time being we are not best in predicting future developments. If you want to change your organization into more innovative, let´s talk.