Especially in business model driven startups the founding and early stage team is the deciding factor on whether the venture will succeed or not. There are many theories how to deal with this issues. This blogpost will discuss one of those theories and give you ideas, on how to make your team more performant.
Principal-Agent ProblemIn a social structure (such as a team) there are always differences in power and goals. The founding members might want to grow the venture as fast as possible whereas early employees might prefer an easier job or just to push their respective job area without taking into consideration the big picture. This gap in goal alignment is called the principal-agent problem as a principal (founder) wants something from an agent (early stage employee, partner etc.) but the two have non-aligned goals. Now there are several ways on how to tackle this issue: The principal could control the agent very strictly as when observed the agent will behave accordingly (see Sieger et al., 2013). A second idea would to create financial incentives to align the agent by paying a bonus based on their behaviour. The first idea is not feasible due to resource restrictions. When the principal constantly has to monitor the agent(s), he can hardly do any work himself. The latter approach is also not feasible due to three reasons:
- It is very hard if not impossible to churn down goals into clearly quantifiable elements which could be used to create a fair system that cannot be abused.
- Resource limitations in startups.
- Creating extrinsic incentives can even lead to crowding-out of intrinsic motivation (very bad!).
Luckily, there is a third way.
Psychological OwnershipImagine going to the same coffeshop every day to read the news and drink a nice espresso. You always choose the same table, nicely situated just next to the window so you have a great view on what is going on outside. One day you come in but someone else is sitting at the table.
How do you feel?
You do not have any formal ownership of the table, you are merely a (heavy) user. But still you feel ownership towards the table. Exactly this feeling can also be created for organisations. If you can make your team (and yourself) feel to be an owner (and this can be completely disconnected from actually owning shares) of your startup their goals will automatically be aligned with those of the principal.
Now we know that there is a way to align goals within your team, but how do you create psychological ownership (e.g. make your team feel that they own the organisation)?
The Three RoutesResearch on psychological ownership is relatively young. In 2001 and 2003 the two most defining papers on the topic have been published. Pierce et al. (2001) have created an inclusive theory on psychological ownership in organisations. They have identified three factors (called routes) which are important in creating psychological ownership:
- Controlling the target: If the agent has the ability to influence the organisation (e.g. create his own footprint in a project), he/she will feel more ownership towards the organisation. To achieve this, give your teammembers the ability to create something lasting.
- Coming to intimately know the target: If an agent gets access to crucial information within an organisation he/she will feel more ownership. Have an open communication within your organisation, share important developments with your teammembers!
- Investing the self into the target: Make your employees work had and push their personal limits and they will feel that the organisation belongs to them.
Implementing those measures will boost your productivity and make your startup a success. I am currently working on a more refined model (including leadership style and organisational structure) taylored especially for startups.