All Indicators Succeeded... Yet the Goal for Which They Were Set Failed

Management may achieve all performance indicators, and everyone receives their bonuses, while the company’s value to shareholders erodes. The problem is not weak execution, but rather that we measure success while creating failure.

Your company may achieve the highest revenue growth rate, and managers may fulfill all performance metrics and receive their annual bonuses, while at the exact same time, the company's value to shareholders quietly erodes.

How does that happen? Because a company does not live on revenue alone; growth might be funded by debt or investment rounds, profits may decline, and cash flow could be weaker than ever. Yet the dashboard doesn't see that, simply because no one asked it to.

Management does not get what it wishes for; it gets what it rewards.

Incentives drive behavior, and this is not a theory, but a managerial reality. If you reward people for revenue, they will chase revenue. If you reward them for customer counts, they will chase numbers. If you reward them for cutting costs, they will cut costs. Do not ask afterward why that outcome occurred—you are the one who designed the path to it.

Management does not get what it wishes for, but what it rewards. Therefore, designing performance indicators is not a simple administrative task, but a strategic decision; because every indicator is a message telling employees: This is the success we want from you.

If the message is wrong, excellent execution won't save you; the indicators may fully succeed, while the company fully fails.

Indicators may fully succeed, while the company fully fails.

Therefore, do not start with performance indicators. Instead, start with the question that precedes them: What value do we want to create for shareholders? Then design the incentives that lead to it, and finally build the indicators that measure it.

Reverse this order, and we will measure success while manufacturing failure. The most dangerous mistake in management is not setting bad indicators, but setting excellent indicators for the wrong goal.

People do not work to achieve the company’s strategy; they work to achieve what they are rewarded for. That is why incentives are stronger than instructions, indicators are stronger than speeches, and behavior is always a reflection of the system designed by management.

Quality of thinking precedes quality of results.

Management gets what it rewards

Mohamed Bin Saleh

Interested in Management and Finance