Rewarding good decisions, rather than good outcomes

Let's start with the premise that we learn more from risk taking and failure than we do from the easy success. For most companies, they have to invest in potential failure in order to succeed. Taking risks, where other companies may not, is the surest way to break through the competition.

Much like Thomas Edison, a good proportion of you innovations should fail.

Now, most companies reward individuals and teams based on the outcomes of their actions. So, if a person is rewarded for just "making their numbers" or for successfully executing on the common plan, the company runs the risk of becoming stagnant in their field.

What if this were turned on its head? How about rewarding people for their decisions, rather than the outcomes? If a person is making smart decisions, regardless of the outcome, they should be rewarded. And the flip side is if a person is making bad decisions, they should not be rewarded.

This twist in logic has been useful for me in building an innovation fueled company. By letting people risk failure, so long as they are making smart decisions, we have been able to grab large chunks of the messaging market where other companies fear to tread.

One of the interesting side effects of building this type of culture has been that every employee has a deeper understanding and commitment to the overall success of the company. Engineers and product managers are encouraged to make decisions and try new ideas that may seem crazy on the surface. If they work, great! if they don't? Even better.

From a founders perspective, we are the ones who dream up the big idea/gamble/risk. As the team grows and is executing on that communal company vision, it is the small risks and innovations that keep a company successful.