Cash is king, we've all heard, and certainly just about everyone has experienced the motivating effects of a promised payday. So what could possibly be wrong with using financial carrots to encourage your employees to work to their full capacity? 

"It is counter-intuitive, but I'm personally not a big fan of bonuses," Justin Moore, co-founder and CEO of business-continuity and disaster-recovery company Axcient, explained to Inc.com. "The problem is this: say we agree to three things in January that are really important for you to accomplish this year and I'm going to tie your bonus to. You are going to do that to the exception of all else, but what happens if mid-year priorities change?"

But it's not just that lack of agility implied in annual bonuses that Moore dislikes. "If you have a sense of purpose in accomplishing something, you're doing it because you get some personal reward out of it, not because there's a stack of money being given to you at the end of it. It's been shown that financial incentives, while they work in certain situations, long term actually reduce creativity and eliminate some of that sense of accomplishment," he says.

So what does Axcient use to motivate employees instead of bonuses? Something we rarely associate with improving employee drive: metrics. Moore insists that a thoughtful program of metrics, coupled with public recognition for those who meet their targets, brings more out of his team than the lure of an end-of-the-year pay out. But what exactly constitutes metrics properly done?

Measure the Correct Things

"Measuring the wrong thing is actually worse than not measuring anything at all, because it will actually focus all your energies in the wrong place," says Moore, who says Axcient once made a mistake in deciding what to measure. "One of the metrics we measured was the backlog of support cases. We thought, the larger the volume of open cases at the end of the week, the worse our support experience is going to be. That seemed logical."

"In fact, that was the wrong thing to measure. We found what created a bad support experience was actually something different. As long as you set a specific time by which you're going to pick up the phone when someone calls in with a new support case, people are OK, because it's all about having a clear expectation then keeping to that. So we shifted our focus--we're going to respond to our customers within X hours; we're going to update them within Y hours. We found the backlog actually went up, but our customer satisfaction went way up," he says, emphasizing choosing the right metric to keep track of your progress towards achieving your goals as a company and checking them regularly--daily, weekly or monthly at most. Quarterly doesn't cut it.  

Have Employees Set Their Own Metrics

"We rarely give top down goals," says Moore. Instead, managers sit down with employees to discuss what they need to accomplish and help them work out their own targets and metrics. "I'll sit down with my direct reports and say, what are the things that we should be measuring to ensure that we're on track to hit our goals? I'll ask them to come up with specific targets. What do we want to track on a weekly basis?"

Moore offers reassurance to managers worried that their employees won't set ambitious enough targets for themselves. "I've heard managers say: 'How do you know people aren't going to sandbag? No one's going to set goals that are too challenging.' That is not my experience at all," he says. "If you hire great people and you have a strong culture where people believe in the vision of the company and feel like they have the empowerment to help the company achieve that vision, actually people will likely set targets that are too high because they're ambitious and they want to succeed."

The art of setting metrics, he continues, is in fact ensuring employees don't set unrealistic expectations for themselves by asking questions like: Do you really think that's achievable? Do you think you should give yourself some more cushion? Have you taken into account the unknown?

And employees appear to enjoy being in the driver's seat when it comes to their metrics. "Because the targets are always mutually agreed upon and we are involved in setting our own goals, it is never a point of conflict or unwarranted stress," explains James Lii, manager, strategic accounts at Axceint. "Any stress is what we have put on ourselves," he concludes.

Review and Reward

Reviewing metrics and adjusting them to the reality of the situation on the ground is crucial, according to Moore. "You have to be honest and really look at them and go, are these achieving the desired intent?" he says, warning that, "otherwise you get stuck on something that might not be the right thing." Pam Lyra, VP of support at Axcient, confirms the importance of reviewing metrics regularly. "If a metric isn't capturing what we're trying to gain insight to, it’s modified," she says.

Public recognition of those who meet their metrics is equally key and Axcient relies on a public leader board in the cafeteria showing who's exceeding expectations (and who's not) to instill a healthy degree of competition in employees. But Moore also stresses that bosses shouldn't undervalue simple recognition. "It's the little things in life--a manager sitting down one on one and saying, hey, amazing job. You really knocked it out of the park. These were some really aggressive targets and you've had a real impact on the company. I think what frustrates employees most is when they do things and it is just crickets--no one even acknowledges it. A genuine, sincere appreciation goes a really, really, really long way. Longer than money, in my opinion."

Do you agree that a carefully thought out program of publically acknowledged metrics beats bonuses?