One of my favourite business phrases is this:
Incentives shape behaviour.
Incentives shape the behaviour of all the people involved in our business value chain. And these incentives we create are also holistic in the sense that they go well beyond money. But before we go designing some kind of incentive program, we are better off thinking about what’s in it for all the people involved. People including but not limited to:
Our Employees
Our Shareholders
Our Suppliers
Our Retailers
Our Customers
Our Community
Our Government
Let’s focus for a few moments on our suppliers. Our usual predisposition here with suppliers is to get the best deal possible. The cheapest supply price. To negotiate hard. And if we do this we’ll make more profit. The flip side of course is that our supplier makes less profit. Maybe we’ll be one of their least profitable customers? In this case what kind of service are we going to get? How will they help us if things are urgent? Will they be as reliable as we need them to be? What will they tell the industry about us as a customer of theirs? In fact negotiating the best deal may just give us a disadvantage which is greater than the price benefits. It’s not such a great incentive for our suppliers and may lead to breakages in our business value chain. It’s smart to leave something in it for the other guy.
As Startups we should ask ourselves the following question….
Are we creating a system in which the people above will have an incentive to help us succeed, or will they simply be indifferent?
Michael Porter agrees with you (see his 2008 Harvard Business Review restatement and update of his Five Forces Framework). While he has traditionally taken a more overtly “zero sum” stance on relationships with buyers, suppliers, rivals (i.e. most of your candidates once you recognise employees, shareholders, community and government as having very broad supplier and/or buyer roles), he is coming around to the idea that you need to tread carefully and, indeed, nurture relations with those “forces” that matter.
So, getting back to your argument, it certainly makes sense to build appropriate incentives with those folk that make a difference to the quality of your offering. But, equally, it is just as important to know who doesn’t make a difference and not waste to much time pandering to their needs and wants.
steve, have you seen this TED talk about incentives? i think you’ll dig it:
http://www.ted.com/talks/dan_pink_on_motivation.html