If you are leading a startup you will at some point have to decide how to compensate your team.  Who do you give equity to? Do you do profit sharing for the team, or just bonuses? Or should you just give a plain old vanilla salary.

Many of the CEO’s I have worked with are fundamentally sales guys. Not always, but often. They were frequently phenomenally successful sales guys in the past and their lone-wolf talents sent them off to start their own business which, because they could sell, avoided bankruptcy, beat the odds and became very successful.

Not surprisingly most of them love incentives and bonus plans – because most sales people are paid some sort of  commission. They figure that since it worked for them it should work for others. And it’s an honest mistake – one I’ve made. But I have often had this nagging doubt that just because it worked for this person in that circumstance, something doesn’t add up to it working now, in this role. But I could never convince myself and so I often lined up behind the driving force of the sales guy CEO.

I’m leading a startup at the moment, a B2B SaaS product. We have a staff of 4, soon to be 6, and 3 shared resources. So I’m thinking about compensation and incentives at the moment.

This morning I watched this TED talk: Dan Pink on the surprising science of motivation. (I’ve embedded it at the bottom of this post.)

His thesis is that consistent data from reputable universities shows that while incentives may work for well-defined, linear, mechanical roles, they are counter-productive for roles that require creativity and problem solving or have high degrees of ambiguity. Now I’m not a genius but I’m pretty sure I’ve never seen a startup whose work is primarily linear and well-defined. In roles that require creativity and problem solving and that operate in ambiguous circumstances, Dan argues the 3 key motivators are: AUTONOMY, MASTERY and PURPOSE.

Based on my huge respect for the work Gallup has done on engagement I think he’s very close but that he’s over-simplified it slightly. Gallup would argue that engaged employees can say yes to each of their famous Gallup 12 Questions, or Q12, or in short: are operating in an area of talent and passion, with a manager who cares and sets clear expectations for them.

Whether you go with Dan’s top 3 or the Gallup Q12, incentives or monetary rewards are strangely absent. So what is the leader of a start-up to do?

My plan for motivating my software startup team:

Here’s where I think I’m going as far as my plan for motivating my team:

  1. Make sure they have great front-line manager. For now that’s me but we’re hiring a new team leader so I can transition into an advisory role and I have to make sure I get them a first class, Gallup Q12 style manager. And while I’m their manager I need to focus on the next 3 items:  (I have to admit that even as I write this I’m thinking that I need to lift my head out of preparing the VC presentation and running financials and make sure I am doing what I just wrote.)
  2. Make sure that each of them is operating in their areas of talent and passion. Which means you had better have a way of figuring out their talents and passions.
  3. Set clear expectations. In writing, because the spoken word gets forgotten and becomes vague over time.
  4. Make sure that each of them know that I care about them personally. Which takes time doesn’t it. You have to slow down long enough to ask questions and listen and remember.
  5. Pay them well enough that money isn’t an issue. I generally aim for 70-80% of the salary range for that job in that market (assuming you can get your hands on a recent compensation survey report.)
  6. Give equity to the most senior leaders so that their success become inextricably linked to the long term success of the business. Where necessary give equity to some of the key people who take risks and sacrifice early on.
  7. Avoid a short term focused bonus or incentive plan.
  8. If the business generates profit, pay out decent bonuses to your team, but don’t link it to a linear “if you do X I’ll pay you a bonus of Y”. In fact, because of this TED talk, I don’t think I will promise a bonus at all. Instead I’ll be talking about “the team achieving its goals” and how we’ll all feel when we do because being part of a talented, successful team is very fulfilling for the kind of people I want on my teams. So when we do generate some profit (and we will), we’ll share the wealth in an appropriate way, but it will not be a focus of how we motivate it our team.

If you are leading a startup I’d appreciate your thoughts on the subject. Thank you for visiting www.strategycube.com

 

“You are going to take over the call centre and make it profitable” the CEO said. I had been the Director of Strategic Services for a $3 million direct marketing startup for only about three months when the CEO handed me the 24 person call centre and made me Director of Operations.

I had never run a call centre before but I had managed many teams. So I spent the first 3 months observing and started building my plan. The plan was going to mean of lot of change for those 24 people. I knew that I would need to fire at least 3 of the current managers. I know I would also be rearranging the work to better align it with the talents of remaining managers. I knew that change was stressful and that, if not managed well, could end up creating an environment of such low morale that we’d be worse off than before I took over. So I needed to help people deal with change.

I reached out to an HR consultant I knew and she recommended Who Moved My Cheese by Spencer Johnson. I bought a dozen copies of the audiobook version and gave them out to people in the call centre (including the ones I planned to let go).

What a great book! They use the timeless idea of a parable  – a story filled with meaning – to teach. It’s under 1 hour on audiobook and you will probably find you have more than a few laughs.

A number of the staff came back to me later and said that the book had really helped them in both their work and personal lives and that they had taken it home for their significant others to listen to and passed it around to friends.

I highly recommend it for anyone about to go through a big change or anyone struggling with change in their lives.

If you get it please let me know what you thought of it.

Thank you for visiting www.strategycube.com

GallupPathI often get hired to lead a specific marketing initiative for a mid-size firm. After I have worked with a particular executive for several months and trust has been established they often ask me to candidly tell them what I think the biggest issues at their company are. I almost never tell them it’s their marketing, or their lack of good IT systems. The biggest issues at mid-size firms are always related to their people: generally they have the wrong people in some key positions, they have no processes that identify talent during the hiring process and they have poor processes for managing talent within their organization. As such they have many people working in areas which they lack the talent for. This leads to low employee engagement which leads to poor customer service, low customer loyalty and ultimately puts a huge damper on profitability year after year.

So even though my primary practice is in helping mid-size firms grow profit using internet marketing, I have developed a secondary practice in employee engagement and talent management. Why? Because in the long run it will have a greater impact on profitability than any marketing strategy will.  Gallup calls it the Gallup Path and the graphic above shows you the powerful linkage between talent management and sustainable profitability.

If you are an executive and are interested in a roadmap to sustainable profitability through managing your talent then the seminal works on this topic are a series of books put out by the Gallup organization. They are international best sellers and I give these books to executives more than any other business book. It’s most helpful to read the books in order starting with First, Break all the Rules and then moving on in the order below. They come in both book and audiobook form.

First, Break All The Rules: What The Worlds Greatest Managers Do Differently (book)

First, Break All The Rules: What The Worlds Greatest Managers Do Differently (book)

First, Break All The Rules: What The Worlds Greatest Managers Do Differently (CD audiobook)

Now, Discover Your Strengths: How to Build Your Strengths and the Strengths of Every Person in Your Organization

Now, Discover Your Strengths: How to Build Your Strengths and the Strengths of Every Person in Your Organization (book)

Now, Discover Your Strengths (CD audiobook)

StrengthsFinder 2.0: A New & Upgraded Edition of the Online Test from Now, Discover Your Strengths

StrengthsFinder 2.0: A New & Upgraded Edition of the Online Test from Now, Discover Your Strengths

Strengths-Based Leadership

Go Put Your Strengths to Work: 6 Powerful Steps to Achieve Outstanding Performance


Marcus Buckingham: Go Put Your Strengths to Work DVD