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Ethical Manipulation: Entrepreneurial Non-Cash Compensation

Larry R. Stewart, Founder/Co-Founder, Trawet, Ltd. and It's a Wrap Up, Inc.

Manipulation, in the best sense, can be used effectively to motivate workers in entrepreneurial companies. By "manipulate," I don't mean the unethical variety, but rather doing what encourages employees to perform at their best in a setting that is, by definition, risky.

It's not much different from the cash bonus at established companies. That's a form of manipulation, too, as it serves to prompt a worker to rise to the expectations of a supervisor.

In entrepreneurial companies, however, there's a wrinkle. Because so much is at stake – indeed, the enterprise itself, if it fails to perform – the people whom founders should hire ought to be entrepreneurial. They must be workers who are engaged, creative, demanding of themselves and others – in short, people who might someday launch companies of their own, which founders needn't be afraid of – but more about that later.

For now, my objective is to discuss the compensation necessary to attract and retain such people. I speak as a two-time entrepreneur. In 1981, I co-founded It's a Wrap Up, Inc., which recycled packaging and had revenue of $1.3 million when I sold it in 1986 to a large greeting card company. In 1991, I founded Denver-based Trawets, an engineering consultancy to the entertainment industry.

In Praise of Cash – And More

When it comes to compensation, there's no substitute for a core of cash that puts a roof over one's head and food on the table. However, compensation involves more than cash.

Like the holiday gift-giver who selects an object befitting the recipient, the entrepreneur must also turn to supplemental compensation of a particular type to motivate workers. And I don't mean bonuses. They are the equivalent of the cash gift or impersonal gift certificate. They tend to disappoint – even de-motivate.

Instead, the forms of non-cash compensation that make sense involve little gifts, time off, trips and fame. I will discuss each in this article.

But first a caveat: for any pay package to be effective (and in particular, the non-monetary variety), entrepreneurs must underscore compensation with commitment to, respect for, and trust in the worker. Only in such an atmosphere can the non-monetary gestures that can mean so much be fully functional.

Motivating Without Money

You can't pay employees enough to exhibit the type of motivation necessary to build companies. It must come from within, as it does for the entrepreneur. To encourage it, therefore, money alone doesn't work.

It's the non-monetary rewards that can be most effectively leveraged. They're fun, challenging – and speak in a fundamental way to a piece of the ego that a person can't let go of. Here's how you can make the four I mentioned above work for you.

  • Trinkets

Little gifts, or trinkets, go a long way. They are what I call the "memory grabbers." Months later, workers might come across the item and immediately think about the company. However, don't be fooled by their simplicity. Trinkets shouldn't be given arbitrarily or lightly. Instead, tie them to a significant milestone for the company and at an event that includes workers' families.

At It's a Wrap Up, for example, when we were able, after much hard work, to stabilize our packaging with Velcro, we hosted an outing and catered dinner at a botanical garden for our staff of 12. The gift was a "carabineer," a link in a type of chain used by mountain climbers, indicating that we as a company had reached our summit. The setting was out-of-the–ordinary to convey that we drove the business, not the other way around. In other words, the predictable or routine doesn't work when dispensing trinkets.

  • Time

Both of my companies were seasonal to an extent, so I was able to correct for that by providing a non-monetary reward that no one has enough of: time. At It's a Wrap Up, business peaked in the summer, tanked in the fall, and ascended in the spring, and so, our staff fluctuated, respectively, from 12 to four to about eight. Those who weren't working got sabbaticals at half pay.

The strategy was a winner. Those on sabbatical were able to pursue interests of their own. Those at work were able to work at full clip rather than languish. Many in this latter group were younger workers, so they were able to get valuable experience – and anticipate their own time off.

  • Escapes

Because entrepreneurial companies need workers with spirit enough to engage in the unconventional – for that is what builds companies – it's a red flag when staff members get locked into a pre-set way of thinking or behaving.

At It's a Wrap Up, two of my most passionate young employees were able to propose – but not execute on – innovative solutions. So I spent about $12,000 to send them on an Outward Bound adventure trip. In the Arizona desert, they learned to rely on themselves – and a few close friends. Back at the company, they exhibited the ability to undertake a major strategic refocusing – our move from recycling paper to reusing plastic. From the adventure trip, they had learned to trust their judgment enough to follow through.

  • Fame

Who among us doesn't want that proverbial 10 minutes? For the entrepreneurial employee, it's a major motivator. At It's a Wrap Up, I offered three interns a sassy job title, "Designer-in-Training,' then elevated them nine months later to "Senior Designer." Upon completing an important project, they earned a larger office that I agreed to paint in the bright colors they favored.

I didn't have to give them a dime extra in salary. The ego-massaging perks were enough. Manipulative? We've come back now to that word. Sure, but in a good way. The interns knew what was going on and liked it; we didn't have to spend money unnecessarily and liked that. Be cautious, though: take baby steps, not giant steps, when dispensing fame. You don't want to give employees a false sense of security, or for that matter, any security at all.

Fame can be external as well. At Trawets, we allowed all workers to take four hours of paid time for community service. That got their names and faces in the local papers, and won valuable publicity for the company.

In sum, you as a company owner won't ever lose by providing trinkets, time, escapes and fame. The rewards come back many-fold – in increased productivity, cash that needn't be spent, and the ability to attract and retain the "right" people, those as entrepreneurial as you.

Now, about that retention – I told you I would get back to that issue. You needn't be concerned about losing people for compensating them in ways that encourage their entrepreneurial proclivities. If and when they leave, they will go feeling positive about your company. They are apt to launch companies that dovetail with yours, and upon which yours can feed.

Never fear the power of ethical manipulative behavior. When translated into the types of non-monetary compensation that speak to the inner desires of the people you want, you will be able to leverage talent for the good of your company.

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