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The Biggest Threat To A Growing Company’s Culture

By incentivizing the wrong thing, growing companies can create more problems than they solve.

The Biggest Threat To A Growing Company’s Culture
[Photo: Flickr user Internet Archive Book Images]

In 19th-century India, the city of Delhi had a snake problem. A rather large population of cobras slithered the streets with impunity. Indiana Jones would’ve hated the place.

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The British government decided to get rid of the snakes through crowdsourcing. Officials offered a bounty for every dead snake that locals brought in. But something unexpected happened. Soon after the British started to pay for every dead cobra, they realized that local entrepreneurs had begun to breed snakes in order to get paid. The government canceled the program. So the cobra farmers released their worthless snakes into the streets.

It turned out the British didn’t want dead snakes; they wanted fewer live snakes. By incentivizing the wrong thing, they inadvertently doubled their problem.

Growing Pains

When I read this anecdote in Lindsay McGregor and Neel Doshi’s new book, Primed to Perform, which comes out this week, I felt like I’d been kicked in the stomach. The book is an exceptional collection of leadership research that transforms the “art” of building a great company culture into a repeatable, scientific process. It shows how most companies, in their effort to incentivize employee productivity and retention, do the corporate equivalent of releasing snakes into their hallways.

My stomachache stemmed from the fact that, despite a relentless focus on culture from day one at my five-year-old company, Contently, the best practices we’ve implemented as our head count has neared 100 are the exact things research says kill company culture–and eventually, productivity.

We’d started off on the right foot: Early on, we realized that if we didn’t stress teamwork and populate our office with people who are givers, problem solvers, and who take pride in awesome work—the three cultural values we codified—we’d risk becoming a downright shitty place to work. Plenty of big companies—Google, Southwest Airlines, Zappos—have proved that employee happiness and corporate effectiveness aren’t mutually exclusive, and in many ways we wanted to grow up to be like them.

And yet, as we’ve grown, startup niceties like flat org charts and being able to fit everyone around one table gave way to departments, meetings, budget negotiations, and specialties that often competed in priority and ideology with other expertise. There was virtually no way to avoid that, but it led to natural tension (most of it productive) and the question: How do we build a large team and motivate everyone to work hard, on the right things, and together?

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In came the advice from advisers and friends’ companies: Build programs to “align incentives” between teams, create “lanes” in which people can operate, offer big-shot prospective hires who are on the fence more money and bonuses.

By about 50 employees, we realized that these strategies weren’t necessarily culture builders. We ended up letting go a few people who were polarizing and bad for our culture, despite paying them lots of money and working hard to align incentives. Around this time, we invited McGregor in to our monthly executive meeting to explain her framework for employee motivation and the counterintuitive truth about what makes high-performing cultures.

Rethinking Motivation

“Why people participate in an activity affects their performance in that activity,” McGregor writes in Primed to Perform. What’s much more effective than hammering in process and incentives? Making work purposeful and fun.

In other words, she says, the “why changes the how.”

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Most companies (and managers) default to two types of motivation to get their staff to do what they need: economic pressure (performance bonuses, etc.) or emotional pressure (managerial hovering, “I’m depending on you,” etc.). It turns out that these kinds of motivation may work in the short run, but they yield consistently negative effects in the long run.

For example, research cited in Primed by Duke professor Dan Ariely found that factory employees who were given bonuses for productive Mondays were much less productive by the end of the week, and MIT students who were paid to do math problems did worse than students who weren’t.

That’s consistent with other research McGregor and Doshi draw on in their book, showing how personalized pressure creates what they call a “distraction effect” that can undermine a company’s culture–especially as the business grows and expands. Like the cobra farmers, employees who’ve been given the wrong incentives are more likely to find creative ways to win personally than to find creative ways to help the company win.

That helps explain, for instance, why many companies with quarterly sales incentives based on number of deals (instead of long-term customer value) see rather inconsistent deal volumes and make compromises every March, June, September, and December. They might hit their deal targets, but they often end up with less happy customers and lower margins. (McGregor and Doshi document this phenomenon in depressing detail.) I believe that salespeople ought to make commissions, but we’ve found that those who believe in our mission and care about our company values are more likely to help the overall sales team succeed–and to succeed at a personal level–than commission-hungry lone wolves.

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Setting Up A Culture For Growth

So what things do lead to happy, productive company culture? McGregor and Doshi distill them into three direct motivators, in order of effectiveness:

Play: The joy of the actual work you’re doing. For example, I personally love writing and inventing and am therefore more motivated to work hard and be creative than if I were given twice as much money to do, say, supply-chain management.

Purpose: The mission or impact of the work you’re doing. This is why copious research shows that values-driven companies beat competitors in the market—because employees are more motivated to work hard and be creative. It’s why SpaceX was able to recruit the world’s best rocket scientists, even though many of them could make more money consulting.

Potential: The sense that your work is a stepping stone to something greater. As McGregor and Doshi explain it, this is the weakest of the direct motivations, but it’s still a powerful way to bring people together.

Some jobs are inherently less fun than others. (Although I know several people who love copy editing and accounting, I would claw my eyes out if I had to do those things for eight hours a day.) But there are ways to turn an otherwise boring job into play. It’s easier said than done, but the effort is time well spent.

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At Contently, the purpose we’ve evangelized from the beginning has been a huge element of our good culture—and a terrific tool for recruiting. One of the first things we created upon founding the company was a manifesto that laid out our vision: a better media world where businesses tell great stories instead of interrupting people, where creative people are able to survive doing what they love, and where there’s funding for socially important stories that give voice to the voiceless. This is why we put so much effort into two unprofitable sides of our business: Contently.net for freelance creative people, and Contently.org for funding investigative journalism.

Though I believe it’s important to be financially generous to my employees, when we look back at what’s attracted our employees to join our company, the deciding factor has never been financial or emotional pressure. It’s been because people believe in this future and purpose, because they believe in the power of great stories, and because they care about their friends in journalism and the arts–those who need jobs yet want to make a real difference through their craft.

Indiana Jones didn’t hunt for the Holy Grail because he was hoping for a raise. He did it for the adventure. And that, coincidentally, helped him stick things out when he had to deal with all those damn snakes.