incentives and penalties
Culture is the fundamental fabric of any society, and startup culture is one of those things people understand at a vibe level but do not understand how it is actively shaped.
Working in startups, I realizedâculture is a living, breathing thing. Itâs like the dragon from Game of Thrones. Itâs cute and small in the early stages and becomes an indomitable force later onâit can make you insanely powerful or destroy any city in a few seconds.
Dragons are fed juicy, tasty meat to grow. But startup culture feeds off incentives and penalties.
Before you label me a tyrant, incentives and penalties do not have to be rewarding with gold or whipping with a stick. It can be as small as celebrating the right milestone or over-celebrating a wrong one.
But what do you incentivize or penalize for?
Values.
To build a dominant culture, the incentives and penalties should be aligned with the values that the company wants to upholdâin the face of both good and bad.
Religions did a brilliant job shaping culture. At the risk of oversimplification, religious culture is:
- A collection of stories demonstrating the hierarchy of good and bad values
- A set of incentives and penalties to encourage followers towards good values and away from bad values
If you think about it, itâs crazyâreligions do not give you any monetary incentive. In fact, in many religions, the incentive and penalty are in the afterlife.
So, the incentive or penalty in itself is trivial, but understanding clearly what you will be incentivized or penalized for is important.
Startup culture is no different. Itâs a collection of values, incentives, and penalties, packaged as a startup story.
Except in the very early stages, the story is forming alongside the culture. You actively shape the story with the right incentives and penalties to uphold the right values.
You have to be a lot more carefulâevery incentive is valuable, and sometimes no penalty is an incentive in itself.
Letâs take a very common cultural valueâCustomer Obsession. Every company from Amazon to Apple says this is a very important cultural value. But how often is someone incentivized for displaying customer obsession? A round of applause can show that customer obsession is very important here.
If youâre a leader, your role is to shape the culture actively. You have to fight your own biases. You need to have the tough conversations and stand for the right cultural values.
If you do it well, you will shape a dominant culture. You will attract the right kind of peopleâinvestors, employees, and, most importantly, right customers.
PS: I mentioned the word âhierarchyâ alongside good and bad values. I will talk about this topic more in the future.