Principle #6: Pay for performance not for effort.

Pay for performance not for effort.

Of course, every entrepreneur knows this, because this is how they pay themselves. But they sometimes forget that money and performance need to be closely aligned throughout the company and that rewards need to flow downwards based on actual success.

Sometimes this gets forgotten in the rush to hire talent and sometimes it gets left out of vital contractor arrangements. Big companies can afford to follow “industry practices” that might reward non-productive work. Startups cannot. Startups have to innovate, do a lot more with a lot less money, and still compete with the big guys.

So remember, this isn’t grade school kickball. If you find employees or contractors who want to be paid for effort rather than performance (“I showed up. Give me my money.”) then find someone new. In today’s economy, there are plenty of high-performing employees and vendors available and ready to work hard for your dollars.

Simply put, you want people (and vendors) whose self-identity is closely tied to their professional performance and who know what results look like. Don’t pay for anything less or you’ll find yourself going out of business fast.

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This blog is dedicated to providing advice, tools and encouragement from one entrepreneur to another. I want to keep this practical and accessible for the new entrepreneur while also providing enough sophistication and depth to prove useful to the successful serial entrepreneur. My target rests somewhere between the garage and the board room, where the work gets done and the hockey stick emerges.