Thanks to a tumble from Hiten Shah, I just watched and loved Dan Pink’s TED talk on incentive structures and performance. Dan makes a case that monetary performance-based incentives increase productivity for mechanical tasks, but not for complex creative ones. Instead, you need to focus on three things:
This is exceptionally true in software startups. Yes, people dream of valuable equity, but for the day to day, freedom and flexibility trump bureaucracy and control. Pride trumps fear. Inspirational goals and love of team trump incremental bonuses.
If you have an employee for whom this is not the case, then they probably do not belong in your startup.
The one area where monetary performance incentives really do need to exist alongside those 3 listed above is sales. In general, employees should be free to set their own schedule that gets the work done. Vacation policies should be irrelevant for all but accounting purposes. Meetings should be kept to a minimum, with minimum number of attendees wherever possible.
This does not mean anarchy. Employees need to communicate when and how they are reachable (you can’t have an emergency and have someone totally AWOL). If someone needs to be awake and in the office with other teammates in order to accomplish a task or effectively brainstorm, then so be it — it is a necessary constraint to “getting work done”. If someone is flaking out and abusing the system, then you need to quickly get them back on track and, failing that, fire them.
If you have a great software development team, don’t forget to let them look up from the high-pressure dev plan (in some cases, you might have to force them!), and take a breather now and then to work on something fun, new and challenging.
I first met Dan over a decade ago when he wrote Fast Company’s cover story “Free Agent Nation“, and I was building an online marketplace for freelance work and knowledge exchange. He’s tackled one relevant topic after another and I look forward to reading this book when it comes out.