KPIs, Rewards and Business Acumen

At Income|Outcome workshops, we delve into Key Performance Indicators (KPIs) and other metrics to explore how measurement influences behavior—and ultimately, the health of your business.

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Measuring the Right Things

Toward the end of our workshops, we examine how different metrics drive behavior:

• Sales Revenue: Focusing solely on the top line can lead to decisions that lose money.
• Profit: Measuring only profit can cause teams to hoard resources across the Balance Sheet.
• Return on Assets (ROA): Emphasizing ROA might prompt teams to strip assets out of the business.

The challenge is clear: How can you incentivize people to think like long-term owners and make decisions that benefit the whole business?

Rethinking Monetary Rewards

Perhaps the question is flawed. Research by Sam Glucksberg, published in the Journal of Experimental Psychology in 1962, showed that monetary rewards can actually impede creativity. In simpler problems, cash rewards speed up solutions, but in more complex, creative tasks, they tend to slow down the process.

Algorithmic vs. Heuristic Tasks

In his 2009 book Drive: The Surprising Truth About What Motivates Us Daniel Pink explains that work falls into two categories:

• Algorithmic Tasks: These are routine and follow set procedures (e.g., working as a grocery checkout clerk).
• Heuristic Tasks: These require experimentation and creative problem-solving (e.g., creating an ad campaign).

While algorithmic work can be effectively managed with carrot-and-stick incentives—and even automated—heuristic work thrives on the joy of creative challenge. In environments where innovation is key, financial incentives may even reduce productivity.

Implications for KPI Design

The takeaway for leaders and L&D professionals is to design KPIs and reward systems with caution:

• Set Challenging Yet Appropriate Goals: Metrics should motivate without stifling creativity.
• Avoid Narrow Focus: Overemphasis on any single financial metric can distort behavior and harm overall business health.
• Cultivate a Culture of Long-Term Thinking: Encourage decisions that build sustainable success, not just short-term wins.

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While KPIs, standards, and metrics are essential for goal setting and performance improvement, they must be carefully chosen to support both productivity and creative engagement. The key is to balance the need for measurable targets with the recognition that the best work often comes from those who are driven by the challenge of innovation—not just the promise of a bonus.

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Discover how Income|Outcome workshops can transform your approach to KPIs and rewards.

‍Contact us today to learn how we can help you foster a culture of long-term business acumen and creativity.

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