FairShare is the most advanced form of deployment of the FairSetup model. Before discussing FairShare, let’s focus on why people work.
While money is the central component of any business, money is generally not the primary motivator. When do people work best? When they feel that they are treated fairly – when they feel that, if they put in a lot of effort, they are adequately rewarded for their impact. Until now, this sort of mindset was reserved for startups. FairSetup is a new type of compensation: one where a motivated company culture is achieved for by creating a system that fairly rewards all participants for their impact.
What makes people feel like their are being treated fairly? The ultimate form of fairness is a feeling of ownership.
What is ownership? It is 1) the ability to make decisions and 2) ownership of future profits. Most, especially late-stage commodity-type, employees are not interested in making strategic-level decisions. At the same time, they do want to profit from their impact on the company and are willing to take a risk to participate in the upside.
FairShare, the most advanced form of deployment of FairSetup, offers exactly that – if you are an employee who works hard and the company does well, you own some of that tasty future profit. The goal of FairShare is to give employees a sense of ownership so that they work hard and profit when the company does well and share in company’s plight when it doesn’t.
FairShare is an easy-to-understand transparent profit-sharing model. Hiring additional people to grow your team becomes easier – no need to dilute, dilution happens naturally as more people become members in the compensation pool.
What’s even better is that FairShare helps address the necessary transience of high quality employees. For example: let’s say that you need a high quality programmer when building a large system. After the system is built, their involvement is no longer necessary. Under FairShare, the programmer will want to build the system as quickly as possible and then move on to other interesting projects, because most compensation comes from success of the system, not the act of building it.
All in all, FairShare brings entrepreneurship into organizations of any size.
A recent article published in the Wall Street Journal called Big Incentives Can Hinder, Rather Than Help, which talks about a research coming out of CalTech that showed that positive incentives work up until a certain point, but then performance starts to drop. The suggested explanation is that performance drops due to distraction, which happens due to loss aversion – that is, performance drops due to anxiety introduced by the idea of “If I don’t do well, then I won’t get my reward!”
