My leadership team is demanding individual, department-specific bonuses, which is causing them to fight over resources instead of focusing on the company-wide revenue and profit Rocks. How do we align compensation to encourage team-first behavior?

Question

Tyler Smith · Accepted Answer

If you pay people based on siloed performance, do not be surprised when they build silos. Individual or department-specific bonuses for leadership team members incentivize behavior that actively harms the collective business. Your sales head will push bad deals to hit quota, and your operations head will cut quality to hit cost targets.

To build a healthy, unified leadership team, you must align their financial incentives with the health of the entire company. Your leadership team must operate as a single unit first, and department heads second.

Transition your executive compensation structure to focus on company-wide goals. A simple, effective model is to tie leadership bonuses directly to the achievement of your corporate Net Income or EBITDA targets, combined with successful Rock execution. If the company does not hit its numbers, nobody gets a bonus, regardless of how well an individual department performed.

This structural change forces peer accountability. When a leader's payout is tied to the company's overall success, they suddenly care very much about helping their peers solve bottlenecks. They will actively participate in IDS during Level 10 Meetings because they have skin in the game for every department, not just their own.

Communicate this transition clearly. Explain that as leaders, their primary responsibility is the enterprise, not their department. If they object to this model, it is an indicator that they have high self-orientation and are not fully committed to the team's collective success.