The employee incentive program I set up backfired for the business

I know metrics are crucial to measuring and running a business. I got some books on entrepreneurship and business and found a set of common metrics startups and business used to measure their performance. I chose eight and added some more to capture a deeper understanding of particular aspects of my business. I then read about linking people’s performance to the metrics and using this to set targets for individual bonuses.

When I chose metrics, I didn’t pay any attention to their interrelationships. I quickly learned I had made a mistake by ignoring these. One of the key metrics was a 10% increase in new customers. Another was a 10% reduction in the investment in existing customers. I increased staff bonuses for each new customer they got. At the end of the first quarter we saw a 35% increase in new business but we lost 5% of our existing customers and only 15% of existing customers used our services more than once.

At the end of the next quarter the we saw another large increase in new consumers but a even bigger churn for existing customers and less than 10% using our services more than once. I brought this to the team and they saw no problems, they were following the metrics-based incentive program and happy with their bonuses.