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What follows are some more thoughts on an article I wrote a little while ago.

Ever notice how some companies start losing employees after their stock price tops off?  This was definitely more true in the dot com days, less so now.  However, the point remains the same.  If an employee has a really good idea (which may or may not be in the company’s area of expertise), what would the employee gain by giving his idea to the company?  He would lose the monetary compensation that he would have otherwise gained, and a good amount of recognition, which would probably go to the ‘head’ of the company instead.

It seems that the employee would more likely set out on his own to create his own company, in this way, he would have more freedom (to succeed or fail), and more incentive to work hard since it is his name and financial future that is on the line.

However, there are many things that need to be ‘re-invented’ when someone leaves to form a new company.  Why not structure a company in such a way as to have all (or most) of the positive aspects, and none (or little) of the negative ones?  As described before, a company could offer its employees several compensation packages: (1) time-based, (2) project based, or (3) cashflow based.

An additional feature could be that the employee could elect to not collect his company ‘profits’ as cash compensation, but rather retain them within the company for usage toward future company projects (thereby avoiding getting taxed prematurely, as would also happen if the employee set out on his own).

Is management overhead a problem?  If rentacoder.com (and other sites) work, then why can’t they work for this type of application?  If anything, it would help to more formally and thoroughly investigate the ‘cost-benefit’ for a particular project before going too deep in the implementation.

The days have come when you can design something and get it manufactured without any factories…

the story comes from wired:
http://www.wired.com/techbiz/it/magazine/16-04/bz_instapreneur

Some sites referenced in the article:

http://www.zazzle.com/
http://www.ponoko.com/
http://styleshake.com
http://www.spreadshirt.com

and of course, the original…

http://www.cafepress.com/

After reading Paul Graham’s article, “You Weren’t Meant to Have a Boss”, I decided to write about an idea I’ve had for a while. The basic idea has been illustrated in some form on some sites like rentacoder.com. The basic idea is to structure a company in such a way that all members have a choice in how they want to be compensated for their work (monetary compensation of course).

Background (What’s wrong with the typical corporate structure)

In my experience, two main things motivate people to work hard:

1. Money
2. Doing stuff you like

When someone has one or the other, then they will tend to work moderately hard. But when they have both, then will work extra hard! In the typical corporate structure, decisions are generally handed down from the upper management, especially financial decisions. An employee’s idea that can potentially save the company millions of dollars will generally not net the employee a corresponding increase in salary, even if it does manage to make it to upper management and get implemented. As a result, a typical corporate structure is sub-optimal in satisfying both points listed above.

Solution

A company should offer several forms of compensation to motivate its employees:

1. Salary (pay per hour of work)
2. Project-based compensation
3. Cashflow-based compensation

An employee would start off with a salary. This would allow the employee to gain a feel for how the company works and take the time to review projects and opportunities on which he may be interested in working. After a while, he may choose to take a pay cut in exchange for more free time (eg work 20 hours a week instead of 40, taking a corresponding reduction in pay). In his newly freed time, he may work on a project (the work handed out in this part of the system could be managed by a rentacoder.com like system), and get paid upon advancement of the project.

He may also embark upon a new project (or an addition to an existing project) which will generate additional cashflow for the company. This involves the highest risk, of course, and there is no guarantee of success. In this case, the employee is launching his own ‘mini-company’ within the company. He may be the only owner or there maybe multiple owners, with resultant income divided according to a pre-arranged agreement.

In this way, the company is more like an aggregation of smaller companies, rather than one large company, however, many of the benefits of being within a company will be available to its employees (access to company resources, etc)

Given this flexibility, employees have an incentive to work hard (they make more money), and they can choose the projects they want. They may even embark on a completely new project not within the company’s core business (though it would be much harder because of the lack of expertise in this new area). The employee would not have to fear (as much) about someone stealing the idea, because the employees in the company would be subject to a certain code of conduct, and thus they could more freely share ideas with each other.

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