The Hidden Flaw in Bonus Schemes: Why Rewarding Functional Outputs Stalls Progress

Organizations striving for agility and innovation often encounter an invisible barrier — bonus schemes tied to functional outputs. While these incentives are designed to drive performance, they frequently reinforce silos, misalignment, and short-term thinking. Instead of fostering collaboration and customer-centricity, they encourage employees to optimize for their own department’s success rather than the organization’s collective goals.

The Silo Effect: When Incentives Work Against Progress

Consider a company where sales teams are rewarded for hitting revenue targets, product teams for delivering features, and customer service for closing tickets quickly. At first glance, these incentives seem logical. However, in practice, they often create conflicting priorities. The sales team may overpromise to secure deals, leaving the product team struggling to deliver unrealistic commitments. Meanwhile, customer service may focus on speed rather than meaningful problem resolution, leading to dissatisfied customers. Each function operates in isolation, chasing its own success without considering the bigger picture.

This fragmented approach directly contradicts the principles of agile, customer-centric organizations. When teams are rewarded based on individual performance metrics rather than collective impact, collaboration suffers, and true innovation becomes difficult. The result? A company that is busy but not necessarily effective.

Rethinking Incentives: From Silos to Shared Success

To drive meaningful change, organizations must rethink how they define and reward success. Bonus structures should reflect the interconnected nature of modern business, incentivizing employees to work toward shared goals rather than isolated outputs. This shift requires:

• Tying Rewards to Customer Outcomes: Instead of measuring success by department-specific KPIs, organizations should prioritize customer satisfaction, retention, and long-term value. For example, rather than rewarding a product team for launching a new feature, tie their bonus to how well the feature improves user engagement or solves a real customer pain point.
• Encouraging Cross-Functional Collaboration: Recognizing teams for their collective contributions fosters a culture of collaboration. If marketing, sales, and product teams are collectively rewarded for successful product adoption, they are more likely to align efforts rather than work in competition with one another.
• Emphasizing Long-Term Impact Over Short-Term Gains: A common pitfall of traditional bonus schemes is that they encourage quick wins rather than sustainable growth. Organizations should shift focus to long-term performance indicators such as customer lifetime value, innovation impact, or team adaptability.

The Path to a Unified Organization

Relying on outdated, function-based incentives keeps organizations stuck in rigid structures, unable to fully embrace agile and customer-first models. The future of work demands a more holistic approach to motivation — one that recognizes individual contributions within the broader context of team success. By redefining how success is measured and rewarded, companies can break down silos, drive innovation, and create a culture that truly prioritizes customer value.

It’s time to stop incentivizing internal competition and start rewarding collective progress. True transformation begins when organizations align their incentives with the outcomes that matter most.

Francisco Cobos

🐢 “Poc a Poc” (Little by Little)