A. Incentive Structure Overview Main Strategic Objective Increase quarterly revenue growth and accelerate customer acquisition. Current Incentive Observations Sales representatives receive bonuses for closing deals. Performance reviews heavily emphasize revenue numbers. Limited incentives for customer retention or satisfaction. Key Behavioral Assumptions More sales incentives will generate more revenue. Employees will balance short-term sales with customer quality. Revenue growth automatically leads to business success. B. Incentive Cascade Analysis Primary Behaviors Encouraged by Current Incentives Aggressive prospecting. Focus on closing deals quickly. Prioritization of high-value contracts. Secondary Behavioral Effects Reduced attention to customer fit. Increased pressure on sales teams. Less collaboration with customer success teams. Tertiary System-Wide Impacts Higher customer churn. Increased support workload. Declining customer trust and brand reputation. C. Unintended Consequence Assessment Potential Gaming Behaviors Overpromising product capabilities. Pushing discounts to secure deals. Closing low-quality customers unlikely to remain long-term. Hidden Distortions and Trade-Offs Incentive Hidden Trade-Off Revenue Targets Customer quality ignored Quarterly Bonuses Long-term value sacrificed Individual Rewards Reduced teamwork Strategic Outcome Risks Customer dissatisfaction. Revenue volatility. Higher acquisition costs due to churn. Reduced long-term profitability. D. Behavioral Dynamics Insights Individual and Team Response Patterns Individuals maximize personal bonus opportunities. Teams compete rather than collaborate. Customer success teams inherit poorly qualified customers. Incentive-Alignment Observations Revenue incentives align with growth. Retention incentives are missing. Customer experience receives limited attention. Long-Term Behavior-Shaping Effects "Close at any cost" culture develops. Ethical decision quality may decline. Organizational trust weakens over time. E. Optimization Recommendations Ways to Improve Incentive Alignment Combine revenue and customer retention metrics. Reward customer lifetime value (CLV). Include customer satisfaction measures. Risk-Reduction Suggestions Audit sales practices regularly. Monitor churn by sales representative. Establish quality-control checkpoints. Behavioral-Design Optimization Recommendations Create team-based bonus components. Reward cross-functional collaboration. Balance short-term and long-term performance metrics. F. Long-Term Sustainability Considerations Risks Caused by Poorly Aligned Incentives Unsustainable growth. Employee burnout. Customer trust erosion. Organizational Behavior Observations Employees follow measurement systems closely. Incentives often become stronger than strategic messaging. Teams optimize what gets rewarded. Long-Term Strategic Outcome Considerations Sustainable growth requires customer retention. Incentives should reinforce company values. Strategic resilience depends on balanced performance measures. G. Action Plan 5 Practical Steps to Redesign Incentives 1. Introduce Balanced Scorecards Combine: Revenue Growth (40%) Customer Retention (30%) Customer Satisfaction (20%) Team Collaboration (10%) 2. Reward Customer Lifetime Value Shift focus from deal volume to long-term customer value. 3. Add Team-Based Incentives Encourage cooperation between sales, onboarding, and customer success. 4. Create Early Warning Indicators Track: Churn rates Customer complaints Excessive discounting Product promise gaps 5. Review Incentives Quarterly Continuously assess whether incentives are producing desired strategic outcomes. Priority Order Fix customer-retention incentives. Add customer-quality metrics. Reduce overemphasis on quarterly revenue. Introduce team-based rewards. Establish ongoing incentive audits. Maintaining Long-Term Incentive Effectiveness Review incentive outcomes every quarter. Monitor behavioral changes, not just KPI results. Reward sustainable value creation. Align incentives with strategic objectives and organizational values. Continuously identify and correct unintended consequences before they scale. Key Insight People optimize what is rewarded, not necessarily what leadership intends. Effective incentive systems align short-term actions with long-term strategic success.