

Ask HN: Should we give incentives ? - joseakle

I've been thinking how to, or if we should, give incentives at my company.<p>We are slowly becoming profitable. We are "ramen profitable" since both of the founders live from our salary. But we have three angel investors who would like a reward on their investment. And seven more employees.
I've been reading articles by HBS and some blogs.<p>One possible scheme i've thought of is this one.<p>First cover all costs including salaries, taxes, credit, etc.
Build a 5% reserve for legal or other.
As long as profits are 20% of sales or lower, pay them as dividends to investors.
Redistribute any profits above 20% of sales to founders and employees.
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marilyn
This may be more theoretical than you are hoping for, nonetheless, I'd like to
suggest Dan Pink's TED talk on _The Surprising Science of Motivation_
<http://www.ted.com/talks/dan_pink_on_motivation.html>

Pink explains how financial incentives often have the opposite effect on
motivation than we would want or expect. He suggests that the causes of true
motivation boil down to autonomy, mastery and purpose. The video is worth the
20 minute investment.

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joseakle
Great! I watched it.

So now i'm really thinking if we should have financial incentives ...

The thing is most articles that say incentives don't work area about pay for
performance, but the problem is if performance is not measured in money it's
kind of hard to compare.

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JacobAldridge
Incentives to employees work best when they meet two criteria:

1) They are directly linked to performance. Giving our random amounts of money
(eg, Christmas Bonus because the business had a good year) can backfire
because it sets the expectation that such incentives will be standard, not a
bonus. Rewarding those employees who meet or exceed their targets - financial
or otherwise - encourages them to keep working hard.

2) They should be personal. Most people would rather you spend $x on a
personal gift (eg, movie tickets) than give them some multiple of x in cash.
It shows you care.

Regarding the angels, I would again ensure you understand their personal
motivation and expectations. If they want an equity stake because they think
you could be huge, chances are they would rather you reinvested in strategic
growth than return a dividend.

