Team Incentive Quotes

Pick a leader who will make their citizens proud. One who will stir the hearts of the people, so that the sons and daughters of a given nation strive to emulate their leader's greatness. Only then will a nation be truly great, when a leader inspires and produces citizens worthy of becoming future leaders, honorable decision makers and peacemakers. And in these times, a great leader must be extremely brave. Their leadership must be steered only by their conscience, not a bribe.

Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning. The forces of destruction begin with toddlers—a prize for the best Halloween costume, grades in school, gold stars—and on up through the university. On the job, people, teams, and divisions are ranked, reward for the top, punishment for the bottom. Management by Objectives, quotas, incentive pay, business plans, put together separately, division by division, cause further loss, unknown and unknowable.

Great teams are not created with incentives, procedures, and perks. They are created by hiring talented people who are adults and want nothing more than to tackle a challenge, and then communicating to them, clearly and continuously, about what the challenge is.

Most peasants did not miss the school. "What's the point?" they would say. "You pay fees and read for years, and in the end you are still a peasant, earning your food with your sweat. You don't get a grain of rice more for being able to read books. Why waste time and money? Might as well start earning your work points right away." The virtual absence of any chance of a better future and the near total immobility for anyone born a peasant took the incentive out of the pursuit of knowledge. Children of school age would stay at home to help their families with their work or look after younger brothers and sisters. They would be out in the fields when they were barely in their teens. As for girls, the peasants considered it a complete waste of time for them to go to school. "They get married and belong to other people. It's like pouring water on the ground." The Cultural Revolution was trumpeted as having brought education to the peasants through 'evening classes." One day my production team announced it was starting evening classes and asked Nana and me to be the teachers. I was delighted. However, as soon as the first 'class' began, I realized that this was no education. The classes invariably started with Nana and me being asked by the production team leader to read out articles by Mao or other items from the People's Daily. Then he would make an hour-long speech consisting of all the latest political jargon strung together in undigested and largely unintelligible hunks. Now and then he would give special orders, all solemnly delivered in the name of Mao.

When groups are small, for example, everyone’s stake in the outcome of the group project is high. At a small biotech, if the drug works, everyone will be a hero and a millionaire. If it fails, everyone will be looking for a job. The perks of rank—job titles or the increase in salary from being promoted—are small compared to those high stakes. As teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase. When the two cross, the system snaps. Incentives begin encouraging behavior no one wants. Those same groups—with the same people—begin rejecting loonshots.

the Times says there's a heroin epidemic, Malone thinks, which is only an epidemic of course because now white people are dying. Whites started to get opium-based pills from their physicians: oxycodone, vicodin... But, it was expensive and doctors were reluctant to prescribe too much for exactly the fear of addiction. So the white folks went to the open market and the pills became a street drug. It was all very nice and civilized until the Sinoloa cartel down in Mexico made a corporate decision that it could undersell the big American pharmaceutical companies by raising production of its heroin thereby reducing price. As an incentive, they also increased its potency. The addicted white Americans found that Mexican ... heroin was cheaper and stronger than the pills, and started shooting it into their veins and overdosing. Malone literally saw it happening. He and his team busted more bridge-and-tunnel junkies, suburban housewives and upper Eastside madonnas than they could count....

The more we give of ourselves to see others succeed, the greater our value to the group and the more respect they offer us. The more respect and recognition we receive, the higher our status in the group and the more incentive we have to continue to give to the group.

QUESTIONS TO CONSIDER • As you survey your company-wide policies and procedures, ask: What is the purpose of this policy or procedure? Does it achieve that result? • Are there any approval mechanisms you can eliminate? • What percentage of its time does management spend on problem solving and team building? • Have you done a cost-benefit analysis of the incentives and perks you offer employees? • Could you replace approvals and permissions with analysis of spending patterns and a focus on accuracy and predictability? • Is your decision-making system clear and communicated widely?

the bigger the goal, the more effort it requires, the more dopamine we get. This is why it feels really good to work hard to accomplish something difficult, while doing something quick and easy may only give us a little hit if anything at all. In other words, it feels good to put in a lot of effort to accomplish something. There is no biological incentive to do nothing.

understood that part of the reason large teams are crippled in their ability to innovate and move fast is that because it’s hard work to manage them, companies build infrastructure to make sure people are doing the right things. But the teams I saw that accomplished great stuff just knew what they most needed to accomplish; they didn’t need elaborate procedures, and certainly not incentives.

The transformation of a business-as-usual culture into one focused on innovation and driven by design involves activities, decisions, and attitudes. Workshops help expose people to design thinking as a new approach. Pilot projects help market the benefits of design thinking within the organization. Leadership focuses the program of change and gives people permission to learn and experiment. Assembling interdisciplinary teams ensures that the effort is broadly based. Dedicated spaces such as the P&G Innovation Gym provide a resource for longer-term thinking and ensure that the effort will be sustained. Measurement of impacts, both quantitative and qualitative, helps make the business case and ensures that resources are appropriately allocated. It may make sense to establish incentives for business units to collaborate in new ways so that younger talent sees innovation as a path to success rather than as a career risk.

The second way was explained to me by a group of General Electric executives a few years back. I pressed them about their rather extreme ‘rank and yank’ system (which has been modified recently, but not much), where each year the bottom 10 percent of employees (‘C players’) are fired, the top 20 percent (‘A players’) get the lion’s share – about 80 percent – of the bonus money, and the mediocre middle 70 percent (‘B players’) get the remaining crumbs. I pressed them because a pile of studies shows that giving a few top performers most of the goodies damages team and organizational performance. This happens because people have no incentive to help others – but do have an incentive to undermine, bad-mouth, and demoralize coworkers, because pushing down others decreases the competition they face. Performance also suffers because hard workers who aren’t anointed A players become bitter and withhold effort.

Ever since the 1960s, upon the urging of Dr. T. Berry Brazelton and the all-knowing Dr. Spock,* mothers have been encouraged to read to their children at a very early age. For toddlers and preschoolers who relish this early diet of literacy, libraries become a second home, story hour is never long enough, and parents can’t finish a book without hearing a little voice beg, “Again… again.” For most literary geek girls, it’s at this age that they discover their passion for reading. Whether it’s Harold and the Purple Crayon or Strega Nona, books provide the budding literary she-geek with a glimpse into an all-new world of magic and make-believe—and once she visits, she immediately wants to apply for full-time citizenship. “We tell ourselves stories in order to live.” —author Joan Didion, in The White Album While some children spend their summers sweating on community sports teams or learning Indigo Girls songs at sleep-away camp, our beloved bookworms are more interested in joining their local library’s summer reading program, completing twenty-five books during vacation, and earning a certificate of recognition signed by their city’s mayor. (Plus, that Sony Bloggie Touch the library is giving away to the person who logs the most hours reading isn’t the worst incentive, either. It’ll come in handy for that book review YouTube channel she’s been thinking about starting!) When school starts back up again, her friends will inevitably show off their tan lines and pony bead friendship bracelets, and our geek girl will politely oblige by oohing and aahing accordingly. But secretly she’s bursting with pride over her summer’s battle scars—the numerous paper cuts she got while feverishly turning the pages of all seven Harry Potter books.

When we cooperate or look out for others, serotonin and oxytocin reward us with the feelings of security, fulfillment, belonging, trust and camaraderie. When firing at the right times and for the right reasons, they can help turn any one of us into an inspiring leader, a loyal follower, a close friend, a trusted partner, a believer . . . a Johnny Bravo. And when that happens, when we find ourselves inside a Circle of Safety, stress declines, fulfillment rises, our want to serve others increases and our willingness to trust others to watch our backs skyrockets. When these social incentives are inhibited, however, we become more selfish and more aggressive. Leadership falters. Cooperation declines. Stress increases as do paranoia and mistrust.

a handful of decisions that only the board can make: the decisions to select, retain, or dismiss the chief executive; to establish a climate of ethics and integrity; to set the goals and incentives for the executive team; and to pinpoint the company’s central idea, risk appetite, and capital structure.

What’s fascinating is that most guards in the Stanford Prison Experiment remained hesitant to apply ‘tough’ tactics at all, even under mounting pressure. Two-thirds refused to take part in the sadistic games. One-third treated the prisoners with kindness, to Zimbardo and his team’s frustration. One of the guards resigned the Sunday before the experiment started, saying he couldn’t go along with the instructions. Most of the subjects stuck it out because Zimbardo paid well. They earned $15 a day–equivalent to about $100 now–but didn’t get the money until afterwards. Guards and prisoners alike feared that if they didn’t play along in Zimbardo’s dramatic production, they wouldn’t get paid. But money was not enough incentive for one prisoner, who got so fed up after the first day that he wanted to quit. This was prisoner number 8612, twenty-two-year-old Douglas Korpi, who broke down on day two (‘I mean, Jesus Christ […] I just can’t take it anymore!’21). His breakdown would feature in all the documentaries and become the most famous recording from the whole Stanford Prison Experiment. A journalist looked him up in the summer of 2017.22 Korpi told him the breakdown had been faked–play-acted from start to finish. Not that he’d ever made a secret of this. In fact, he told several people after the experiment ended: Zimbardo, for example, who ignored him, and a documentary filmmaker, who edited it out of his movie.

If we work in an environment in which leadership tells the truth, in which layoffs are not the default in hard times and in which incentive structures do not pit us against one another, the result, thanks to the increased levels of oxytocin and serotonin, is trust and cooperation. This is what work-life balance means.

Most important, the PayPal team realized that getting users to sign up wasn’t enough; they needed them to try the payment service, recognize its value to them, and become regular users. In other words, user commitment was more important than user acquisition. So PayPal designed the incentives to tip new customers into the ranks of active users. Not only did the incentive payments make joining PayPal feel riskless and attractive, they also virtually guaranteed that new users would start participating in transactions—if only to spend the $10 they’d been gifted in their accounts.

It’s not easy to recognize, in real time, when you’re throwing good money after bad—which is why I think analyzing progress should be a “team sport.” You have to be willing to solicit input from people who have different perspectives on the project. To overcome the “sunk costs” fallacy, this helps to change the default incentive (to keep going) so people can feel good about saying it’s time to stop. Astro Teller, head of the radical innovation company called X at Alphabet (Google’s parent company), gives failure bonuses to employees who admit a project isn’t working.

when we find ourselves inside a Circle of Safety, stress declines, fulfillment rises, our want to serve others increases and our willingness to trust others to watch our backs skyrockets. When these social incentives are inhibited, however, we become more selfish and more aggressive. Leadership falters. Cooperation declines. Stress increases as do paranoia and mistrust.

Fowler, like other new Uber hires, had been advised of the company's core values.47 Several of those values were likely to have contributed to a psychologically unsafe environment. For example, “super-pumpedness,” especially central to the company, involved a can-do attitude and doing whatever it took to move the company forward. This often meant working long hours, not in itself a hallmark of a psychologically unsafe environment; Fowler seems to have relished the intellectual challenges and makes a point to say that she is “proud” of the engineering work she and her team did. But super-pumpedness, with its allusions to the sports arena and male hormones, seems to have been a harbinger of the bad times to come. Another core value was to “make bold bets,” which was interpreted as asking for forgiveness rather than permission. In other words, it was better to cross a line, be found out wrong, and ask for forgiveness than it was to ask permission to transgress in the first place. Another value, “meritocracy and toe-stepping,” meant that employees were incented to work autonomously, rather than in teams, and cause pain to others to get things done and move forward, even if it meant damaging some relationships along the way.48

They can even end up pitting coworkers against one another, accidentally promoting behaviors that undermine the progress of the group as a whole. One of my favorite examples comes from the heady days of America Online (AOL). The company would routinely send out CDs in an attempt to get people to sign up for its product. One group within the company, responsible for acquisitions, was given financial incentives for hitting subscription goals. And so all tactics were designed to do just that: sign people up. There were offers of 100 free hours in the first month, which became 250 free hours, then even 700 hours. I remember when the offer got to 1,000 free hours, as long as they were used in the first 45 days (which left 1.7 hours of sleep per night for anyone who could take advantage of the promotion). It worked. Whatever tactics the acquisition group members developed were designed to do one thing and one thing only—maximize their bonus. The problem was there was another group responsible for retention; they had to find ways to get all the people who had canceled their subscriptions to come back. By creating a system in which each group was preoccupied with its own metrics without concern for anyone else’s or even what would serve the company best, the leaders of AOL had effectively incentivized their people to find ways to cost the company more money.

Over time, though, the team was able to arrive at a coherent set of principles to guide a shift in strategy. Under the emerging plan, U.S. officials across agencies would be expected to deliver a consistent and coordinated message on the need for reform; they would develop specific recommendations for liberalizing political and civic life in various countries and offer a range of new incentives to encourage their adoption. By

what tactics you use to build teams, persuade or influence others, Some common tactics include: Gathering data to support your conclusion. Understanding and addressing people’s underlying motivations or incentives. Developing support from key team members first and then leveraging that to get other people on your side. Showing your own vulnerability to encourage others to show theirs. Being a good role model or example. Gradually leading people to a conclusion by agreeing on a common framework first. Developing credibility and engendering trust.

To brainstorm challenges or problems you have faced, consider if you’ve encountered any of the following issues at work: Ethical dilemmas. Conflicting incentives. Insufficient resources (time, money, expertise). Incomplete or inaccurate information. Low morale, interpersonal issues, or other emotional problems (with teammates or the team as a whole). Cultural or workstyle conflicts. Changing demands. Inability to accomplish a task or meet expectations.

Striking compromises across people. Finding ways of making teammates feel valued. Being able to agree to things that are suboptimal for you in the interest of the greater team good. Understanding people’s underlying motivations and incentives. Motivating teams and boosting morale. Relinquishing your ego and encouraging others to do the same. Setting common goals, metrics, and procedures. Balancing autonomy with team cohesion. Building the confidence of those around you. Increasing individual accountability. Setting a good example. Taking personal responsibility. Showing compassion and empathy for coworkers. Identifying and dividing responsibilities. Sharing knowledge and responsibilities. Mitigating the damage from a negative teammate or situation. Building trust across the team.

The original idea, favored by Jack Welch, former CEO of GE, was that every company should aim for a certain level of turnover, whatever the consequences. The system was rife with perverse incentives. Peers who sabotaged others’ work could save their own jobs; managers might hire less-capable people on their teams to keep from having to fire existing employees whom they favored. Despite the system’s drawbacks, Welch’s influence was so far-reaching that stack ranking was adopted at many of today’s tech giants, where it wreaked havoc on morale and productivity for decades. Eventually, its negative effects became well known enough to make the practice a liability at companies chasing workers whose specialized talents made them scarce, such as engineers. In the mid-2010s, companies including Google, Microsoft, and Amazon abandoned it.

Before the management of the company just described could become fast innovators, they had to develop and embrace a new philosophy of organizing around time. The new philosophy is embedded in these eleven key principles: Time is the key performance variable to be managed to attain improved cost and quality. Time benchmarks are set by the performance of competitors and, if faster, by what is technologically possible. The support functions necessary to advance the development process are actively managed to be “invisible.” Their need is to be anticipated; they are to be invested in and kept up-to-date. They are never to be allowed to slow the development process. Each program is to be managed and executed by a small, dedicated, decision-empowered, and experienced team. Team members have common goals and are measured and evaluated as part of a team. The development programs are to have four steps, and the company will organize itself around these steps: Planning and preparation Product definition Design development Manufacturing ramp-up Product improvement The objective of planning and preparation is to avoid having to invent in the middle of the development process—make unknowns be knowns. After definition, the product specification is frozen. The definition is committed to and not allowed to be changed. The improvement phase is to be used for costs and feature enhancements. Functional expertise resides in the development program. Manufacturing and design resources are full-time participants in the definition team. Manufacturing resources are full time participants in the design team. Team members are collocated. Senior management reviews are few. The role of senior management is to ensure that the program teams have the appropriate resources, incentives and environment to execute their tasks quickly. New programs are generated continuously, at regular market-driven intervals, and incorporate more incremental advances and fewer “great leaps forward.

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FOCUSING TOO MUCH ON THE NUMBERS In the second example, I managed the team to a set of numbers that did not fully capture what I wanted. I wanted a great product that customers would love with high quality and on time—in that order. Unfortunately, the metrics that I set did not capture those priorities. At a basic level, metrics are incentives. By measuring quality, features, and schedule and discussing them at every staff meeting, my people focused intensely on those metrics to the exclusion of other goals. The metrics did not describe the real goals and I distracted the team as a result. Interestingly, I see this same problem play out in many consumer Internet startups. I often see teams that maniacally focus on their metrics around customer acquisition and retention. This usually works well for customer acquisition, but not so well for retention. Why? For many products, metrics often describe the customer acquisition goal in enough detail to provide sufficient management guidance. In contrast, the metrics for customer retention do not provide enough color to be a complete management tool. As a result, many young companies overemphasize retention metrics and do not spend enough time going deep enough on the actual user experience. This generally results in a frantic numbers chase that does not end in a great product. It’s important to supplement a great product vision with a strong discipline around the metrics, but if you substitute metrics for product vision, you will not get what you want.

A half century after Nidetch’s Mallomar binges, scientists had developed a technology that could see cravings erupting, like solar flares, inside the human brain. In early 2008, a research team at the Lewis Center for Neuroimaging at the University of Oregon measured just such a craving in a nineteen-year-old college student we will call Debbie. Debbie had her head inside a very large, very expensive round magnet called an MRI scanner when an image of a chocolate milk shake was flashed before her eyes for two seconds. As soon as Debbie saw it, certain parts of her brain became “activated,” which is to say they drew in lots of blood as millions of neurons were fired. These regions—the left medial orbitofrontal cortex, anterior cingulate cortex, and three other small, curly pockets of gray matter—are all associated with “motivation.” And the functional MRI (fMRI) showed them glowing a bright yellowy orange, like coals in a hot fire, indicating those parts of her brain were churning through quite a lot of blood. She was experiencing “incentive salience,” the scientific term for a Frankenstein craving, or a heightened state of “wanting.” Debbie got what she wanted.

PayPal’s big challenge was to get new customers. They tried advertising. It was too expensive. They tried BD [business development] deals with big banks. Bureaucratic hilarity ensued. … the PayPal team reached an important conclusion: BD didn’t work. They needed organic, viral growth. They needed to give people money. So that’s what they did. New customers got $10 for signing up, and existing ones got $10 for referrals. Growth went exponential, and PayPal wound up paying $20 for each new customer. It felt like things were working and not working at the same time; 7 to 10 percent daily growth and 100 million users was good. No revenues and an exponentially growing cost structure were not. Things felt a little unstable. PayPal needed buzz so it could raise more capital and continue on. (Ultimately, this worked out. That does not mean it’s the best way to run a company. Indeed, it probably isn’t.)2 Thiel’s account captures both the desperation of those early days and the almost random experimentation the company resorted to in an effort to get PayPal off the ground. But in the end, the strategy worked. PayPal dramatically increased its base of consumers by incentivizing new sign-ups. Most important, the PayPal team realized that getting users to sign up wasn’t enough; they needed them to try the payment service, recognize its value to them, and become regular users. In other words, user commitment was more important than user acquisition. So PayPal designed the incentives to tip new customers into the ranks of active users. Not only did the incentive payments make joining PayPal feel riskless and attractive, they also virtually guaranteed that new users would start participating in transactions—if only to spend the $10 they’d been gifted in their accounts. PayPal’s explosive growth triggered a number of positive feedback loops. Once users experienced the convenience of PayPal, they often insisted on paying by this method when shopping online, thereby encouraging sellers to sign up. New users spread the word further, recommending PayPal to their friends. Sellers, in turn, began displaying PayPal logos on their product pages to inform buyers that they were prepared to honor this method of online payment. The sight of those logos informed more buyers of PayPal’s existence and encouraged them to sign up. PayPal also introduced a referral fee for sellers, incentivizing them to bring in still more sellers and buyers. Through these feedback loops, the PayPal network went to work on its own behalf—it served the needs of users (buyers and sellers) while spurring its own growth.

small teams consistently outperform larger organizations when it comes to innovation. Incentive prizes are perfectly designed to harness this energy.

The investors needed to see that the younger team had sufficient hands-on experience and appropriate incentives,

With a salary, salespeople work as members of a team. When you put them on commission, you’re giving them an incentive to follow individual agendas.

Motivating people is more than having the right incentives, the right programs and the right benefit packages. It's about tapping into the unique passions, personalities and strengths of those entrusted to our care.

We have to understand that the closer you get to the corridors of power, to the Oval Office and Congress, the more you become a prisoner of the past .The closer you get to the marginalized, the grassroots and the groundlings, the greater your incentive to think imaginatively and 'outside the box.

Assuming that you make the decision to multithread your organization, the optimal management approach is to think of each thread as a different company. For each thread, you’ll need to identify a leadership team (“cofounders”) and create an incentive structure that allows it to operate with a great deal of independence and reap the benefits of success, without making your current managers so envious that it tears the organization apart. This is always challenging!

If the trusty hunters gave up at any time simply because they were exhausted, then they, and those in their tribe, would not eat very often and would eventually die off. And so Mother Nature designed a clever incentive to encourage us to keep going—a little endorphin rush.

And when that happens, when we find ourselves inside a Circle of Safety, stress declines, fulfillment rises, our want to serve others increases and our willingness to trust others to watch our backs skyrockets. When these social incentives are inhibited, however, we become more selfish and more aggressive. Leadership falters. Cooperation declines. Stress increases as do paranoia and mistrust.

If we work in environments that make it harder to earn these incentives, then our desire to help our colleagues or the organization diminishes. And, absent the presence of commitment, any desire our colleagues may have to help us also declines.

In other words, it feels good to put in a lot of effort to accomplish something. There is no biological incentive to do nothing.

Conway’s law tells us that we need to understand what software architecture is needed before we organize our teams, otherwise the communication paths and incentives in the organization will end up dictating the software architecture.

These are all executives who have been trained for years to grow their own businesses and are compensated based on their profitability. Suddenly I was saying to them, essentially, “I want you to pay less attention to the business at which you’ve been very successful, and start paying more attention to this other thing. And by the way, you have to work on this new thing along with these other very competitive people from other teams, whose interests don’t necessarily line up with yours. And one more thing, it won’t make money for a while.” In order to get them all on board, I not only had to reinforce why these changes were necessary, but I also had to create an entirely new incentive structure to reward them for their work. I couldn’t penalize them for the purposeful erosion and disruption of their businesses, and yet there were no early bottom-line metrics to assess “success” in the new business. We

Promote Ownership Q: Do you offer any compensation to your team in the form of company “ownership”—including a share of profits or growth? Q: Do you regularly communicate to your team your short-term goals and your long-term goals for the business? Q: Is there an incentive (or a barrier) for employees to improve or fix areas of the business outside of their own department or responsibilities?

Influence. How do people get support for critical initiatives? Is it more important to have the support of a patron within the senior team, or affirmation from your peers and direct reports that your idea is a good one? Meetings. Are meetings filled with dialogue on hard issues, or are they simply forums for publicly ratifying agreements that have been reached in private? Execution. When it comes time to get things done, which matters more—a deep understanding of processes or knowing the right people? Conflict. Can people talk openly about difficult issues without fear of retribution? Or do they avoid conflict—or, even worse, push it to lower levels, where it can wreak havoc? Recognition. Does the company promote stars, rewarding those who visibly and vocally drive business initiatives? Or does it encourage team players, rewarding those who lead authoritatively but quietly and collaboratively? Ends versus means. Are there any restrictions on how you achieve results? Does the organization have a well-defined, well-communicated set of values that is reinforced through positive and negative incentives?

Equal Status: While the two groups might be highly unequal in society at large, they must have relatively equal status in the context in which contact between them takes place. Working alongside each other as colleagues qualifies; working together as boss and subordinate does not. Common Goals: Members of both groups need to work together in pursuit of a shared goal. Pursuing the championship as teammates counts; participating in the same tournament as members of opposing teams does not. Intergroup Cooperation: Members of both groups need to have an incentive to work together cooperatively. Ideally, they need to work together to solve a problem, with each member of the group making a clear contribution. Support from Authorities and Customs: Authority figures need to favor and encourage better intergroup understanding. If a greater mutual understanding is against the law or risks angering your boss, it is far less likely to occur.

Over the course of many years, Amazon has put in place mechanisms to ensure that the Leadership Principles translate into action. Three foundational mechanisms are: the annual planning process; the S-Team goals process (the S-Team consists of the senior vice presidents and direct reports to Jeff Bezos); and Amazon’s compensation plan, which aligns incentives with what’s best for customers and the company over the long term.

Identifying Cultural Norms The following domains are areas in which cultural norms may vary significantly from company to company. Transitioning leaders should use this checklist to help them figure out how things really work in the organizations they’re joining. Influence. How do people get support for critical initiatives? Is it more important to have the support of a patron within the senior team, or affirmation from your peers and direct reports that your idea is a good one? Meetings. Are meetings filled with dialogue on hard issues, or are they simply forums for publicly ratifying agreements that have been reached in private? Execution. When it comes time to get things done, which matters more—a deep understanding of processes or knowing the right people? Conflict. Can people talk openly about difficult issues without fear of retribution? Or do they avoid conflict—or, even worse, push it to lower levels, where it can wreak havoc? Recognition. Does the company promote stars, rewarding those who visibly and vocally drive business initiatives? Or does it encourage team players, rewarding those who lead authoritatively but quietly and collaboratively? Ends versus means. Are there any restrictions on how you achieve results? Does the organization have a well-defined, well-communicated set of values that is reinforced through positive and negative incentives?

In gathering data from more than five hundred people about their experience on more than one thousand teams, I have found a consistent reality: When there is a serious lack of clarity about what the team stands for and what their goals and roles are, people experience confusion, stress, and frustration. When there is a high level of clarity, on the other hand, people thrive. When there is a lack of clarity, people waste time and energy on the trivial many. When they have sufficient levels of clarity, they are capable of greater breakthroughs and innovations—greater than people even realize they ought to have—in those areas that are truly vital. In my work, I have noticed two common patterns that typically emerge when teams lack clarity of purpose. PATTERN 1: PLAYING POLITICS In the first pattern, the team becomes overly focused on winning the attention of the manager. The problem is, when people don’t know what the end game is, they are unclear about how to win, and as a result they make up their own game and their own rules as they vie for the manager’s favor. Instead of focusing their time and energies on making a high level of contribution, they put all their effort into games like attempting to look better than their peers, demonstrating their self-importance, and echoing their manager’s every idea or sentiment. These kinds of activities are not only nonessential but damaging and counterproductive.

A vivid feeling of solidarity, whether racial, national or religious, is undoubtedly an effective means of preventing labor unrest. Even when the type of solidarity is such that it cannot comprise the employer, it nevertheless tends to promote labor contentment and efficiency. Experience shows that production is at its best when the workers feel and act as members of a team. Any policy that disturbs and tears apart the team is bound to cause severe trouble. “Incentive wage plans that offer bonuses to individual workers do more harm than good…. Group incentive plans in which the bonus is based on the work of the whole team, including the foreman … are much more likely to promote greater productivity and greater satisfaction on the part of the workers.”21

Amazingly, in one condition of a 1966 experiment, 76 percent of the homemakers in a middle-class enclave in Northern California agreed to just such a request.1 How did the researchers conducting the study achieve such an extraordinary rate of agreement? Did they offer lavish payments? Make impassioned arguments? Make some ominous threat? None of the above. Instead, they used a variant of the foot-in-the-door technique.I A week or so earlier, a different member of the research team had simply asked these same homeowners if they would put a four-by-four inch sticker in the window of their house or car bearing the message “BE A SAFE DRIVER.” Virtually everyone agreed with this trivial request, and in so doing they made themselves vulnerable to the much larger request to come.II Social psychologists have a long tradition of showing that people can be induced to do surprising things without being offered much in the way of incentives, threats, or compelling arguments—that seemingly minor variations in the situation confronting people can have sizable effects on the way they behave.

I managed the team to a set of numbers that did not fully capture what I wanted. I wanted a great product that customers would love with high quality and on time—in that order. Unfortunately, the metrics that I set did not capture those priorities. At a basic level, metrics are incentives. By measuring quality, features, and schedule and discussing them at every staff meeting, my people focused intensely on those metrics to the exclusion of other goals. The metrics did not describe the real goals and I distracted the team as a result.

The more we give of ourselves to see others succeed, the greater our value to the group and the more respect they offer us. The more respect and recognition we receive, the higher our status in the group and the more incentive we have to continue to give to the group. At least that’s how it’s supposed to work. Whether we are a boss, coach or parent, serotonin is working to encourage us to serve those for whom we are directly responsible. And if we are the employee, player or the one being looked after, the serotonin encourages us to work hard to make them proud.

Teams with a system mindset, level 2, probe the decision-making process behind a failure. How did we arrive at that decision? Should a different mix of people be involved, or involved in a different way? Should we change how we analyze opportunities before making similar decisions in the future? How do the incentives we have in place affect our decision-making? Should those be changed?

When groups are small, for example, everyone’s stake in the outcome of the group project is high. At a small biotech, if the drug works, everyone will be a hero and a millionaire. If it fails, everyone will be looking for a job. The perks of rank—job titles or the increase in salary from being promoted—are small compared to those high stakes. As teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase. When the two cross, the system snaps. Incentives begin encouraging behavior no one wants. Those same groups—with the same people—begin rejecting loonshots. The bad news is that phase transitions are inevitable. All liquids freeze. The good news is that understanding the forces allows us to manage the transition.

As a group grows, the balance of incentives shifts from encouraging individuals to focus on collective goals to encouraging a focus on careers and promotion. When the size of the group exceeds a critical threshold, career interests triumph. That’s when teams will begin to dismiss loonshots and only franchise projects—the next movie sequel, the next statin, the next turn of the franchise wheel—will survive. Even more important, we will see how to control that transition: how to change the magic number.

Teams with an outcome mindset, level 1, analyze why a project or strategy failed. The storyline was too predictable. The product did not stand out enough from competitors’ products. The drug candidate’s data package was too weak. Those teams commit to working harder on storyline or unique product features or a better data package in the future. Teams with a system mindset, level 2, probe the decision-making process behind a failure. How did we arrive at that decision? Should a different mix of people be involved, or involved in a different way? Should we change how we analyze opportunities before making similar decisions in the future? How do the incentives we have in place affect our decision-making? Should those be changed?

In the next chapter, I will show you that team size plays the same role in organizations that temperature does for liquids and solids. As team size crosses a “magic number,” the balance of incentives shifts from encouraging a focus on loonshots to a focus on careers. The magic number is not universal, however. Teams transform at different sizes, just like solids melt at different temperatures. The reason is the key idea behind our fourth rule. It’s why we can change the magic number. Systems have more than one control parameter.

Individuals should be given every incentive possible to work as a team. If the team’s throughput is increased by my helping someone else, that’s what I should do. Team velocity matters; individual velocity doesn’t.

One of my favorite examples comes from the heady days of America Online (AOL). The company would routinely send out CDs in an attempt to get people to sign up for its product. One group within the company, responsible for acquisitions, was given financial incentives for hitting subscription goals. And so all tactics were designed to do just that: sign people up. There were offers of 100 free hours in the first month, which became 250 free hours, then even 700 hours. I remember when the offer got to 1,000 free hours, as long as they were used in the first 45 days (which left 1.7 hours of sleep per night for anyone who could take advantage of the promotion). It worked. Whatever tactics the acquisition group members developed were designed to do one thing and one thing only—maximize their bonus. The problem was there was another group responsible for retention; they had to find ways to get all the people who had canceled their subscriptions to come back. By creating a system in which each group was preoccupied with its own metrics without concern for anyone else’s or even what would serve the company best, the leaders of AOL had effectively incentivized their people to find ways to cost the company more money.

Conway’s law tells us that we need to understand what software architecture is needed before we organize our teams, otherwise the communication paths and incentives in the organization will end up dictating the software architecture. As Michael Nygard says: “Team assignments are the first draft of the architecture.”7

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