Why your performance system is undoing your strategy

Your strategy says collaborate. Your performance system rewards the individual. People will always optimise for what gets measured, and they are being rational when they do.

In 2022, researching strategy execution, I asked a senior leader what was stopping her teams collaborating across functions.

Her answer stopped me: "You cannot give away all your resources if you are being rewarded with individual objectives. People are competing."

The strategy needed collective action, yet the performance system rewarded self-preservation. 

People were not being difficult. They were being rational.

She was not describing a culture problem, she was describing a design problem.

This is the execution contradiction. 

This wasn't one organisation. Institutional collectivism, the extent to which a firm actually rewards collective action, was the highest-rated dimension in my research: 91.5% of senior leaders said it had a high to extremely high impact on strategy execution. Yet over half reported the same contradiction she described. Their strategy required collectivism. Their processes and rewards incentivised the individual.

Your strategy says one thing. 

Your performance system rewards another. 

And people will always optimise for what gets measured.

Performance and measures is one of the six dimensions I assess in Operating Model work, because a reward system pointed at the individual will quietly outvote any strategy that needs the collective.

This is part of lever 6 (Performance & Commitment) of the Strategy Execution by Design Model.
See the full framework →

Not sure which of the seven conditions is holding your execution back?
Take the Strategy Execution Maturity Model Assessment →

Written by Rebecca Reti, strategy and execution consultant working with boards and executive teams across Australia and New Zealand.

This one prompted a lot of conversation on LinkedIn.
Join the discussion on LinkedIn →