Stop Measuring the Wrong Numbers in Your Company
You might think your reports are driving progress. But if they’re not, it’s because you’re measuring the wrong numbers in your company.
One client I worked with was making the unfortunate mistake of tying team bonuses to bottom-line profit. Sounds smart, right? I’m sure some guru somewhere told them that’s what they should do. Here’s why it was a big mistake - the team controlled one expense line their labor costs - basically a measure of how they spend their work day, their time and the CEO controlled everything else that drove profit, to include how to price contracts, and all the other expenses in the business. When profit slipped, everyone’s bonus suffered except the one person setting the rules.
This bonus scheme didn’t just hurt morale. It wrecked trust. The team stopped trying, turnover spiked, and the founder blamed “utilization” and “efficiency.” But the real issue wasn’t people, their time and efficiency, it was team buy-in over the metric they were being held accountable to.
This is the heart of my CFO Advisory philosophy: metrics should inspire ownership, not resentment. When you hold team bonuses hostage over what teams can’t control, you punish the very people you need most and are trying to motivate. Now I’m absolutely not saying the profit isn’t an important metric - it is arguably THE most important metric to track - but it is NOT necessarily an incentivizing team target. What might be a better one? How about gross profit per job - this more closely aligns to what the team can control and allows them some leeway to make process improvements that drive profitability - see where I’m going with this?
Make The Shift
Are you measuring what motivates your team to make the best decisions, make process improvements, and drive profitability? If not, you haven’t failed, you’ve been following advice that was not optimized for your business goals. The fix is to tie your KPIs to your goals and motivate people with the metrics they actually have some control over. Now, don’t go hog wild on this either, not all targets need incentivizing and some actually do better without it!
Now Try This:
Audit one metric. Ask how much influence the people being held accountable for this result actually have over it. If you find it’s little to no influence, you’re probably killing morale and, it’s time for a Metric Makeover.
