I’ve been thinking around incentives in a large multi dimensional organization which collaborates with external partners.
My view is that we should have incentives for each “part”, but that we would be equally responsible to achieve those.
As an example with 3 business areas (but in real life we would do this with all business areas) – A, B and C.
I would get a target of XXA MEUR revenue, B has XXB MEUR, and C has XXC MEUR.
During the yearly budget planning, I would then be interested in what the others think they would get in the year – because if they don’t, then I suffer. In similar way, others are interested in what I say because they don’t want to suffer if I don’t make it.
On monthly reviews we then are more interested in what others get – because if they are not reaching their targets neither are we. We should have a 1 summary slide on that in each monthly meeting so that we all start to know each other’s business – and maybe spend 30-40 minutes on that, so that we can discuss where we need to put more and less attention.
This would then allow for us to move FTE targets around – or reallocate hours of people in our business units where we see more potential. In a good world, I get rewarded because C makes their goal when maybe my area is having a downturn in the business. We would need to talk about when we would shift FTEs in the org – maybe once or twice a year when we see a pattern stabilising. Also would give some rotation / growth possibilities.
We would also need to be careful about how we reward people – for example if I am not making my targets, but I and team are helping C make theirs (because that is where the business is for that year), then we need to be able to recognise that too. Nice thing is that this also handles downturns in a specific business area – which is part of life. Compare this to now, where if I am lucky I have a good portfolio and if I am unlucky I spend my time trying to grab other people’s portfolio (red ocean) or spend lots of money creating a new market (blue ocean).
You can then extend up or down a layer or across. As an example downwards, in this year we would have had a company goal around Azure. C would have divided their business goal into parts, one of which would have been Azure. I would have done the same. We then put the people together who are doing Azure as they should both help each other to reach that goal. Important thing here is not to link the goal to the revenue of the product they own (as then we waste time arguing who owns the product), but to link it to a product and it does not matter who owns that.
We can also then extend to other parts of the org, for example in each country they would have a cloud goal that then adds up to our cloud goal.
You can then extend to partners, so we would say to Partner D that here are the people who have goals around Azure and goal is 10M EUR. Now who in your org is going to help us get that?