Your Employees Aren't the Problem. Your Incentives Might Be.

Corey Flores here checking in from Detroit, Michigan.

Being in Detroit got me thinking about how much of American business was shaped here. Manufacturing, automobiles, assembly lines, mass production and figuring out how to get thousands of people working toward the same outcome.

It also got me thinking about something I have learned while building my own company.

Sometimes we get frustrated with people for doing exactly what we taught them to do.

Not intentionally, of course.

You tell your salespeople you want great customers, but you pay them based only on how much they sell.

You tell your team quality matters, but all you talk about is speed.

You tell people to take ownership, but every meaningful decision still needs your approval.

You tell employees to be honest when something goes wrong, then somebody gets destroyed the first time they admit they made a mistake.

Eventually people figure out what actually matters.

That is why I have started paying much more attention to incentives.

Because whether you realize it or not, your business is constantly teaching people how to behave.

People Pay Attention to What Actually Gets Rewarded

Every company has two sets of rules.

There are the rules we say out loud.

Then there are the rules everybody learns by working there.

The second set is usually more powerful.

If the employee who produces the most revenue gets celebrated even though everyone hates working with the customers they bring in, the team notices.

If the manager who develops great employees keeps losing those employees to other departments while managers who hold onto everybody get rewarded, people notice.

If someone admits a mistake and gets embarrassed for it, everyone notices.

If somebody solves a major problem and nobody acknowledges it, they notice that too.

People are smarter than we sometimes give them credit for.

They figure out very quickly what the company actually values.

So one question I think every owner should ask is:

What are we accidentally teaching people to do?

The answer might surprise you.

A $500,000 Contract Can Still Be a Bad Deal

Sales is probably the easiest example.

Let's say somebody on your sales team closes a $500,000 account.

Everyone celebrates.

The salesperson gets a commission.

Revenue goes up.

It looks like a win.

Then operations gets the customer.

The scope is terrible.

Margins are terrible.

They need constant attention.

They pay late.

The customer wants things that were never included in the original agreement.

Your team starts spending twice as much time servicing the account as expected.

Six months later, everybody is asking how you got into this situation.

Go back to the beginning.

How was the salesperson paid?

If their compensation was based almost entirely on getting the contract signed, then the company basically told them:

Get the contract signed.

We might have wanted them to think about profitability, customer fit, payment terms, retention and operational complexity.

But did we actually reward any of those things?

That's the difference.

Revenue Shouldn't Be the Only Scoreboard

I love revenue.

Every business owner does.

But revenue by itself can hide a lot.

I would rather have $1 million in great revenue than $1 million that requires $990,000 worth of headaches to keep.

There are other things worth measuring.

Gross profit.

Customer retention.

Payment history.

Refunds.

Cancellations.

Customer satisfaction.

Expansion revenue.

Quality of the account.

How much servicing the customer actually costs.

How long the customer stays.

How many referrals they produce.

A salesperson who closes slightly less revenue but consistently brings in profitable customers who stay for years may be considerably more valuable than somebody who constantly brings in large deals that become operational nightmares.

Your compensation system should understand that difference.

Be Careful What You Put on a Bonus Plan

There is an old business lesson that basically says whatever you measure will improve.

I think that is only half true.

Whatever you measure will probably change.

Whether it improves the company depends on what you measured.

Tell a call center the only goal is shorter calls and calls will probably get shorter.

That doesn't mean customers will be happier.

Tell a marketing team the only thing you care about is leads and they can probably generate more leads.

That doesn't mean they will be good leads.

Tell a manager labor costs need to come down and they may find a way to reduce labor.

Then you find out six months later that customer service suffered because you were understaffed.

Numbers need context.

One metric rarely tells the entire story.

Your Marketing Team Can Have Bad Incentives Too

I see this constantly in marketing.

Businesses become obsessed with impressions, clicks, followers, views and leads because those numbers are easy to show on a report.

Then everybody celebrates because a campaign generated 5,000 leads.

I have another question.

Did any of them buy anything?

Then I have more questions.

What did it cost to acquire the customer?

What was the average sale?

How many leads were actually qualified?

How quickly did sales follow up?

How many became appointments?

How many appointments showed up?

How many closed?

How many stayed?

How profitable were they?

That is the conversation I want to have.

At Flores Marketing Firm, I don't want us chasing numbers simply because they look impressive in a presentation.

I want the numbers connected to an actual business result.

A million views can be valuable.

A thousand views can also be valuable.

It depends on who is watching and what happens afterward.

Sometimes the Problem Isn't Motivation

This is another mistake I have made and watched other owners make.

An employee isn't performing, so we assume they need to work harder.

Maybe.

But before jumping to that conclusion, I think there are a few things worth checking.

Do they actually know what winning looks like?

Do they know which result matters most?

Do they have the authority to accomplish it?

Do they have the tools?

Are two different managers giving them conflicting instructions?

Does the compensation plan reward what we're asking them to do?

Would doing exactly what we're asking actually benefit them?

That last question is important.

You can give somebody a motivational speech every Monday.

But if your system rewards the opposite behavior, the system will eventually win.

Ownership Requires Authority

You hear business owners say this all the time:

“I need my employees to take more ownership.”

I have said it too.

But you can't ask somebody to take ownership over something they aren't allowed to control.

If a manager has responsibility for a result, they need enough authority to influence that result.

Otherwise you've given them accountability without control.

That creates frustration.

If somebody owns a department, be clear about what decisions they can make.

What can they spend?

What can they approve?

What requires your involvement?

What can they change?

When should something be escalated?

This is something I continue working on as Flores Marketing Firm grows.

The bigger the company becomes, the less realistic it is for everything to run through me.

If I have to personally approve every small decision, I can't complain that people aren't taking enough ownership.

I have to give them room to own something.

Make It Safe to Tell You Bad News

This one is huge.

I would rather hear about a problem when it costs $1,000 than when it costs $100,000.

But that only happens if people feel comfortable bringing problems forward.

If employees think telling the truth is going to get them screamed at, embarrassed or immediately blamed, eventually they stop bringing you problems.

The problems don't disappear.

You just hear about them later.

That is much worse.

I want people around me who will tell me:

Corey, this isn't working.

Corey, I made a mistake.

Corey, I think we're spending money in the wrong place.

Corey, this customer is becoming a problem.

Corey, I disagree with this decision.

I might not agree with them.

But I want the information.

As an owner, you can't make good decisions with bad information.

Reward People Who Prevent Problems

Companies are usually great at celebrating the person who saves the day.

Somebody works until midnight fixing an emergency and becomes the hero.

That's great.

But I also want to know why we had the emergency.

Sometimes the most valuable employee is the person who quietly prevented ten emergencies from happening in the first place.

That person isn't always as visible.

The accountant who catches something early.

The employee who documents a process correctly.

The manager who trains someone before there's a problem.

The salesperson who turns down a bad deal.

The customer-service person who notices a pattern before customers start leaving.

The person who spends an extra ten minutes making sure something is right.

Those things matter.

A company shouldn't only reward firefighters.

It should reward people who stop the building from catching fire.

Incentives Aren't Always Money

When people hear “incentive,” they immediately think compensation.

Money obviously matters.

But people respond to plenty of other things.

Recognition.

Promotions.

Freedom.

Responsibility.

Access.

Better opportunities.

Schedule flexibility.

Interesting projects.

Learning.

Titles.

Trust.

Who gets invited into important meetings.

Who gets the best accounts.

Who gets leadership's attention.

All of those things communicate something.

Sometimes a sincere public acknowledgment from the owner means more to somebody than a small bonus.

The important thing is understanding what behavior you're encouraging.

Audit Your Company From the Employee's Perspective

Here is an exercise I think is worth doing.

Pick five important roles in your company.

For each person, write down what you say you want from them.

Then write down what actually gets them:

Paid.

Promoted.

Praised.

In trouble.

More responsibility.

Less responsibility.

Now compare the two lists.

If they don't match, don't be surprised when behavior doesn't match either.

I would do the same thing with your managers.

What behavior are they rewarding?

Sometimes the owner designs a great culture and a middle manager accidentally creates a completely different one underneath them.

You need to know.

The Same Rule Applies to Customers

Businesses train customers too.

If customers learn they can pay 60 days late with no consequence, some will.

If every customer who threatens to cancel gets a discount, eventually customers learn to threaten cancellation.

If scope creep is always accepted, people keep expanding the scope.

If your best pricing is only available to people who complain, you're teaching customers that complaining pays.

That doesn't mean being difficult.

It means being consistent.

Good customers usually appreciate knowing where the lines are.

Clear expectations create better relationships.

Owners Respond to Incentives Too

This is probably the part nobody likes admitting.

We're not above any of this.

Business owners respond to incentives just like everybody else.

If revenue is growing, we can ignore problems longer than we should.

If something is making money, we become emotionally attached to it.

If people constantly tell us yes, we start avoiding the people who tell us no.

If being busy makes us feel important, we'll keep creating reasons to stay busy.

Sometimes the incentive problem is sitting in the owner's chair.

I have learned to ask myself:

Am I making this decision because it's actually good for the company, or because it rewards me personally in some other way?

Ego is an incentive too.

Build the Behavior Into the Business

Detroit changed the world by figuring out how to build systems that could repeatedly produce an outcome at enormous scale.

I think there is a lesson in that for every business owner.

You can't build a serious company by depending entirely on everybody waking up every morning and magically making the perfect decision.

You have to create an environment that makes good decisions easier.

Hire good people.

Give them clear expectations.

Give them useful information.

Give them enough authority.

Measure the right things.

Reward the right behavior.

Correct the wrong behavior.

Then keep adjusting the system as the company grows.

Because eventually culture becomes less about what the founder says and more about what the company repeatedly does.

That's what people learn from.

So if you're frustrated with something happening repeatedly inside your business, don't immediately ask:

“What's wrong with these people?”

Ask a better question first.

“What about our company is making this behavior make sense?”

You might discover that the employee doesn't need fixing.

The system does.

And fixing the system once is a lot more valuable than correcting the same behavior forever.

Build a Company That Produces Better Outcomes

As Flores Marketing Firm continues to grow, this is something I'm paying closer attention to inside our own company and with the businesses we work alongside.

If you're building something serious and need a marketing and growth partner who understands there is a lot more to growing a company than simply buying ads, apply to work with Flores Marketing Firm.

Let's build it the right way.

Corey Flores
Founder, Flores Marketing Firm