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KPIs and Bonuses: Motivation and Morale

In the last post from this series, "Bonuses and Wasted Resources: The Right Set of KPIs", I wrote about how it's really hard (or even impossible) to find a set of KPIs where cheating or wasting resources becomes impossible for the people being measured. But what if management can really find that right set of KPIs, that makes it impossible for people to cheat or waste resources? Now the performance of all employees will improve, right?

Turns out, no, you still have problems. It turns out, most (if not all) people actually want to do good work.

But when management forces them into that right set of KPIs (that tries to make cheating impossible while rewarding desirable outcomes), they make it harder for them to actually do their work. People will have to spend more and more time checking if they are within their KPIs, reducing the time being productive at work.

Also, in our industry, it is extremely important to find creative solutions for hard problems. To be creative, people need an environment where they can fail safely, and where they have lots of options (different ways) for solving the problem. The right set of KPIs takes away both: They can only fail so often before their KPIs go down. And because the KPIs were designed to inhibit certain behaviors (cheating, wasting), they also take away options for solving problems [*].

So, with the tightly woven right set of KPIs, managers make it harder for their people to be productive and to do good work. But that can be offset with the desired outcomes that the KPIs encourage, right?

Well, no. If management makes it hard for people to do good work and to be productive, job satisfaction will suffer. Some people will just tune out and only do what they are told [**]. Some will leave. And those who leave will probably be company's best talents - Those who have lots of options finding new jobs.

So, if managers constrain their people with KPIs, their best people will leave. And others will resort to just doing what they're told, killing creativity in your company / teams. I don't think this is really what they wanted.

But what if you can find the right set of KPIs, and create an environment where everybody is motivated and wants to stay with the company? Then everything will be fine, right? Well, I don't think so. In the last post from this series, I will tell you why. Stay tuned, and subscribe to my Newsletter so you don't miss it!

[*] Don't get me wrong: I do not want your people to cheat. But the KPIs that were designed to inhibit the cheating and wasting resources will almost certainly also inhibit good behavior.

[**] I have talked to several managers that complained that some of their people are lazy and that they cannot find good people. All of them had systems in place that prevented their employees from doing good work - At least to some degree.

My name is David Tanzer and I have been working as an independent software consultant since 2006. I help my clients to develop software right and to develop the right software by providing training, coaching and consultanting for teams and individuals.

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