What does Jamestown Teach us about Incentive Compensation?

This weekend, Jamestown, Virgina celebrates its 400th birthday. For those of you that don't remember your grade school history, Jamestown was a settlement in the Virgina colony, which was privately funded and run by the Virgina Company under a charter granted by King James I of England. Jamestown, as an investment, was a terrible one -- it lost tons of money and, obviously much worse, lives. Neither the addition of a desirable cash crop (tobacco), slaves, or fines for bad behavior seemed to help until, in 1623, the colony established private property rights. With the advent of private property, the company aligned rewards with behavior which led to success for the investors and colonists of the struggling Virgina Company. In this article, I'll point out a few parallels between the group behavior in 17th century Virigina and your technical department, and point out why aligning rewards with desired behavior is so important.

Jamestown was worse than your tech department

Life in Jamestown was bad. Very bad. 80% of the settlement died in the winter of 1609-1610 and, worse, some attribute the massive loss of life to lazy colonists (Morgan). Upon his arrival less than 2 years after the devastating winter, their new leader, Sir Thomas Dale found the colonists at "their daily and usuall workes, bowling in the streetes" (Morgan). Dale put laws into place that forced them to grow corn so they didn't die. The system of punishments was overbearing by most accounts; it helped, but not enough. It was not until the advent of private property in 1623 that the starvation had been reversed (Boettke). With private property, the colonists could see a direct correlation between the quality of their work and their personal gain. With incentives properly aligned with the goals of the company (the settlement was, after all, an investment by a group of individuals) the settlement thrived.

Let's take a minute to process this: people were dying and it took someone, a very mean person by most accounts, to force people to plant food instead of going bowling. To survive. It is estimated that the colonists worked, on average, about 3-4 hours a day (Morgan) even though if they just worked a little more, lives would have been saved. Even the religiously based Plymouth colony in Massachusetts had similar experiences until they instituted private property (Bethell). One thing is very clear from these examples: even the best intentioned have difficulty working together for the greater good when not properly incented to do so.

my tech department isnt lazy, they work a lot

But are they working for you or themselves? A problem in this field, as I'm sure in many, is that there is greater incentive to work for your next job than your current one. With technology, it is often what you can list on your resume that will land you your next job and not what you've done for your employer, in terms of their success. Of the hundreds of resumes I've reviewed, rarely have I seen anything related to company performance. As a Programmer, or even a higher level position like System Architect, why bother? The recruiters do keyword searches, and many technical managers barely, if at all, understand the technologies used in their departments. In short, there is a very good chance that your company is paying people to work inefficiently so they can keep their resume current.

How Do I Know if they're doing it the right way?

That's tough; you probably won't. You you may, as I did, catch someone doing something really stupid like using web services to do post a form to itself, but removing that contractor doesn't do much overall. The problem is deeper than that: it is too expensive to review everything people do -- you must give them a good reason to work in the interests of the company.

You may want to respond to inefficient workers like the Virginia company first did: get tough. Getting tough, as the Virigia company soon learned, doesn't work either. In less than 3 months after he instituted his harsh laws, Sir Thomas Dale was removed from office (Morgan). Even if you do last longer than Dale did, you run the risk that your best team members may leave for greener pastures (many left Jamestown for other settlements to the north). In short, heavy handed dicipline is a no-win option.

Develop appropriate Metrics and Incentives

The best way, overall, is to make sure that the technical team is measured -- and rewarded -- based on their impact on the company. Further, this reward must exceed that of jumping ship with an extra buzzword in their pocket. If you can't measure the benefit of the technical team on the company's overall operations -- if there is no benefit to having the tech team -- then find one soon or quit. CEOs are getting smarter about technology and if you can't find the value, they probably can't either. The mystery that existed in prior decades of the technical genius is over; now you've got to prove your value or be risk being replaced.

One way to further encourage good behavior is to neutralize the benefits of bad behavior. Rather than let new technologies run wild and impact project success, develop a routine training and evaluation program where people are encouraged to learn a technology that may be relevant to something you're already doing. Budget time to investigate emerging technologies, and determine which can directly benefit the business. The advantages will be more than just a happy tech team; if done properly, you increase shareholder value. Happy shareholders and a happy, productive and efficient team: what could be better?

References

Bethell, Thomas. "How Private Property Saved the Pilgrims." Hoover Digest Online (1999) http://www.hoover.org/publications/digest/3507051.html

Boettke, Peter. "The Role of Private Property in a Free Society." Virginia Viewpont. http://www.virginiainstitute.org/viewpoint/2005_04_2.html

Diamond, Sigmund. "From Organization to Society: Virginia in the Seventeenth Century." The American Journal of Sociology. March, 1958.

Morgan, Edmund S. "The Labor Problem at Jamestown, 1607-18." American Historical Review. 1971. pages 595-611