Having a productive team is without a doubt one of the prerequisites for startup success. In the early stages of your venture, you are in a constant state of a race against time as you need to drive enough progress before you run out of money. Consequently, being able to motivate your early-stage team to work as hard as possible is key, and it could make the difference between success and failure.
Of course, managing and motivating people is one of the most difficult and at the same time most important startup skills. People management, however, is definitely not hard science. Because of this, you should take the recommendations in this guide as suggestions, rather than hard truths. It is up to you as a founder to make the judgment call on which motivation tactic fits your unique team and circumstances.
Table of Contents:
Daniel Pink discusses two types of motivation in his book Drive: The Surprising Truth About What Motivates Us: extrinsic and intrinsic. In this guide, we’ve divided the motivation strategies into these two groups.
1. Еxtrinsic Startup Team Motivation
Those are motivating factors from the outside. Their main benefit is that they are much easier to plan for and control as a manager.
1.1 Variable Payment - Bonuses, Penalties, and Employee Stock Options
The first and most common motivation strategy is the introduction of carrots and sticks – performance bonuses or/and (much more rarely) penalties.
Linking the pay of your employees to their performance is one of the simplest ways to motivate them to work hard. In fact, in verticals where performance is easily measurable, variable pay is industry-standard – the best examples being sales agents, who more often than not have performance bonuses.
The problem is that reliably measuring performance is not possible for most roles. In most cases, what you care about most is the quality and impact of the work of your team, not the quantity. Linking pay to the wrong quantitative metric (for example lines of code for programmers, which in the grand scheme of things don’t matter) can create the wrong incentives, which can reduce overall productivity rather than increase it. You don’t want your programmers to create an exorbitant amount of useless code driven by a wrong incentive structure.
Because of this, the industry-standard practice for startups when it comes to reliable pay is employee stock options. This way you allow your employees to benefit from the upside of the venture, which provides a powerful motivation to do their best to contribute to this success.
Options are convenient compared to flat bonuses for one more reason – they don’t require you to have cash, which is a big constraining factor in the early startup stages.
1.2 Scoreboards & Targets
Internal scoreboards (linked to bonuses) are a powerful tool if you want to benefit from the innate competitiveness of your team members.
While employee of the week/month/year is a cliche, it exists for a reason – humans are social creatures, and most of us yearn for recognition. Having the option to stand out can push a lot of people to walk the extra mile.
That said, an over-competitive culture could be toxic, which can backfire. This is risky, especially combined with the fact that it is hard to quantify the real productivity (and quality of work) of most people and to be objective. Because of this, like flat performance bonuses, internal scoreboards are not very widely applicable to startup teams.
If you think such a tactic would fit your team, it’s a good idea to try to set a very friendly tone for the competition, possibly implemented with humorous prizes and allowing for different distinctions.
1.3 Awards & Company Presents
Giving awards and company presents to your employees is another good motivating strategy. It allows you to show appreciation to the hard-working members of your team without risking the over-competitiveness of explicit competitions.
Implementing a lean version of this tactic is relatively easy – just give small presents every once in a while when somebody does something good and productive, or when someone puts in the extra effort. This is a good way to build in your team a sense of being valued.
Since everyone wants to be appreciated, this simple gesture could help you build a more productive culture.
1.4 Praise
The principle here is the same. Showing appreciation is important for a productive culture, especially in a small, close-knit team.
It’s a great idea to start your weakly team meeting by publicly thanking specific people for doing something noteworthy in the last workweek, sprint, or project.
2. Intrinsic Startup Team Motivation
The biggest problem with extrinsic motivating factors is that while they are easy to implement, they could backfire. External incentives tend to narrow down the focus of the team. This is good for some situations (e.g. when you’re focusing exclusively on sales), but it is not always productive, especially for startups that rely on creativity and experimentation. This is especially true in the idea and validation startup phases.
In other words, you need to be wary of the overjustification effect – the tendency of external incentives to drive out internal motivation.
Keep in mind that most people who join early-stage startups are open and creative by nature. It’s a good idea to try to put as few restrictions on such people as possible while trying to channel their effort in the same direction.
The best way to achieve this is by enhancing their personal, internal motivation.
2.1 Purpose
A sense of purpose is one of the most powerful motivating factors. By working in a startup you are not just doing a job to receive a paycheck – you are participating in something that has the potential to change the world, or at least the lives of many of the stakeholders in the project.
Use this to your advantage. It’s a good idea to build a habit of zooming out every once in a while and talking about the big picture for your project.
Having a powerful “why” is extremely helpful in putting your low-level tasks in perspective. Even if they are not enjoyable in themselves, they are an important part of something bigger.
This is the same reason why most parents say having children is very hard and full of drudgery, but at the same time, it’s one of the best things that has happened to them. The key to this paradox is purpose – changing diapers is less of a problem when you know that it is a small but necessary part of raising a person and building one of the deepest relationships in your life.
The same is applicable to startups – it is one of the few lines of work where a worthwhile purpose isn’t hard to find, and where the individual contribution of each team member is felt powerfully.
A useful practical advice is always to connect your tangible goals (like KPIs and various targets) to the purpose of your project so that you can make it easier for people to connect the dots between their day-to-day work and the big picture.
2.2 Relatedness and a Sense of Belonging
Belonging is one of the basic layers of Maslow’s hierarchy of needs – the first layer of the psychological needs in the pyramid. In that sense, after earning enough money to feel safe and secure, feeling a sense of social belonging in your work is probably the second most important thing anyone searches for in their professional life.
Don’t ignore this aspect – early-stage startup teams have a huge advantage in this regard because they are small. It’s easy to pay personal attention to your employees as individuals.
Social activities like eating together and celebrating milestones together are a good foundation to build a sense of community.
Equally importantly – allow yourself to be vulnerable. While this is likely bad advice if you want to climb the corporate ladder, it’s good advice if you are a leader of a small team. Feeling safe enough to be vulnerable is key to establishing deep connections on a human level.
Moreover, it has another benefit for early-stage startups – it builds a culture in which asking for help and even failure is socially acceptable. This is especially important if you want to incentivize your employees to experiment, which is absolutely crucial in the search for product-market fit in the validation phase.
2.3 Ownership & Autonomy
In the early stages of your venture, one of the things you need most from your team is initiative. Having people to fulfill tasks is simply not enough – you need to have experts who are motivated and empowered to generate solutions to problems and implement their own ideas based on their individual professional experience and domain knowledge.
In order to have people with this mindset, you need to cultivate it. Be open-minded and support experimentation. Welcome unsuccessful experiments – they are learning opportunities. Praise people for showing initiative and being proactive.
Delegate problems, not tasks. Give freedom to your employees to make decisions by themselves up to a reasonable degree. This will free up your team’s time from unnecessary meetings and channel it to more productive matters.
In Michele Gelfand’s book Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire Our World, she discusses how generally speaking any culture falls on the tight-loose scale. Tight cultures have strict rules and value procedures and hierarchies. Loose cultures are more flat and free.
The type of people who join early-stage startups are usually people that aren’t attracted to the traditional corporate environment. Because of this, it is a good idea to try to nurture a more loose culture if you want them to thrive in your organization. Of course, this shouldn’t be taken to an extreme, but in general, for early-stage startups, it’s more important to nurture creativity than procedural efficiency.
Most importantly, this approach to startup culture will help you forge competent leaders and managers in your early employees. This is absolutely crucial once your startup starts scaling and the team starts expanding.
2.4 Generate a Sense of Urgency
A slow pace of work can kill your startup – until your business becomes self-sustaining, each day brings you closer to the date in which you wouldn’t have money for salaries anymore.
The good thing about this is that it is a good foundation to build a real sense of urgency in your employees. Be open about your burn rate and the conditions you must reach in order to keep the project growing.
Clarity on this financial reality mixes very well with employee stock options (or equity for founders) – people would be extremely motivated to put in the extra effort in order to make the project work if they know the project has potential but is racing against the clock.
2.5 Provide a Suitable Environment for Personal Development and Professional Realization
Last but not least, people strive to grow. In the corporate world, this usually means moving diagonally – from one employer to another with gradually higher positions.
A high employee turnover rate, however, would simply kill an early-stage startup. You wouldn’t have the time and resources to constantly find, hire, and onboard new employees while your team is still very small.
Because of this, you need to convey the message that sticking with the company as it grows would provide your early employees the opportunity to grow with the company.
Employee stock options are one way to convey this message when it comes to financial matters. However, other aspects of personal development are also important. Give your team members the opportunity to develop their technical skills (for example, hire coaches, apply to courses, etc.), but also their people-management skills. This will be very important in any case as your early employees would often become the key figures in your organization when it increases in size.
4. In Summary
Motivating your team is crucial to success. In the early startup stages, you are racing against time. Being unproductive is something you cannot afford. In short, the main factors you can adjust to motivate your team are:
- Variable pay – employee stock options and performance bonuses
- A sense of purpose
- A sense of urgency
- A sense of belonging and appreciation – praise, awards, relatedness
- Personal growth – autonomy, ownership, professional growth
