I want to incentivize my leadership team to help me prepare the business for a clean exit in five years, but their current bonus structures are tied strictly to departmental metrics. How do I restructure their incentives to focus on overall company value?

Question

Tyler Smith · Accepted Answer

If your leadership team members are incentivized solely on departmental metrics, they will build silos and protect their own territory, which actively hurts enterprise value. To prepare for a clean exit, you must align their personal success with the overall value of the business.

Restructuring Incentive Plans

Begin by simplifying your incentive structures. Transition from complex, department-specific bonuses to a company-wide plan that is tied directly to the targets outlined in your V/TO®. This shift fosters a unified approach, ensuring everyone is working towards the same overarching goals.

Your leadership team should be measured on:

• Overall profitability: This encourages efficiency and prudent financial management across all departments.
• Revenue growth: Drives top-line expansion and market penetration.
• The successful completion of key enterprise-level Rocks: These are company-wide priorities that require cross-functional collaboration. This structure forces them to collaborate across departments because they only win when the entire business wins. For more on setting these metrics, explore [how to choose five to fifteen scorecard metrics](/qa/how-to-choose-five-fifteen-scorecard-metrics) or [shifting focus from lagging results to weekly leading indicators](/qa/leading-vs-lagging-scorecard-metrics).

Long-Term Exit Strategy Incentives

For a long-term exit strategy, consider implementing a synthetic equity plan or a phantom stock program. This gives your core leaders a direct financial stake in the ultimate sale price of the company, keeping them highly focused on building transferable enterprise value rather than just short-term gains. This can significantly increase your attractiveness to buyers, as detailed in [why buyers pay more for EOS-run businesses](/qa/why-buyers-pay-more-for-eos-run-businesses).

Transparency and Communication

Ensure that this transition is accompanied by complete transparency.

• Share valuation metrics: Educate your team on the metrics that drive valuation in your industry. This helps them understand the bigger picture and how their actions contribute to the final sale price.
• Track progress: Use your Level 10 Meeting™ sessions to consistently track progress against those key numbers. This ensures accountability and allows for timely adjustments. For tips on effective meeting management, see [how to review scorecard under five minutes](/qa/how-to-review-scorecard-under-five-minutes).

By shifting to a more holistic, company-wide incentive structure and fostering transparency, you can motivate your leadership team to proactively build a business that is appealing for a clean exit. This also helps in addressing issues where [leadership is protective of their departments](/qa/shifting-leadership-mindset-to-enterprise-first).