Our leadership team compensation is tied to individual department metrics, which incentivizes our leaders to protect their own department budgets rather than collaborate. How do we align leadership compensation with overall company Traction?

Question

Tyler Smith · Accepted Answer

When you compensate executives based solely on departmental performance, you subsidize turf wars. Your sales leader closes unprofitable accounts to hit revenue bonuses, while your operations leader slashes service quality to hit margin targets. Department heads act like ambassadors fighting for their personal territory rather than enterprise leaders driving a unified business.

To fix this dynamic, you must restructure executive incentives so that no leader wins unless the entire company wins.

First, eliminate individual departmental bonus pools. Your leadership team sits at the enterprise level of the Accountability Chart. Their primary responsibility is the health of the entire organization, not just their functional silo.

Second, tie executive variable compensation to enterprise-level results. The baseline bonus pool must be contingent on hitting the company-wide revenue and profit targets defined in your Vision/Traction Organizer® (V/TO®). If the business misses its overall profit threshold, zero executive bonuses are distributed, regardless of how well an individual department performed.

Third, incorporate leadership team health and execution discipline into compensation. Require that a leader must achieve at least an eighty percent Rock completion rate and maintain eighty percent or higher on their weekly Scorecard measurables throughout the year to qualify for their enterprise profit share.

Additionally, factor in the EOS® People Analyzer®. An executive who generates profit but consistently damages company culture or violates Core Values should not receive executive incentive payouts.

When executive compensation is tied to enterprise health, cross-functional hoarding stops. Department heads begin helping their peers solve operational bottlenecks during the Level 10 Meeting™ because their personal financial outcomes are tied to collective execution.