Category: Skill Building

The Three Drivers of Contentment & Motivation at Work

What motivates us to perform and drives contentment at work? Most entrepreneurs struggle with this question. You want success, want to have drive and yet rely too heavily on fear-based or external motivators which often leave a negative residue. The research shows that the most effective motivators are intrinsic and positive.

A champion needs a motivation above and beyond winning.
~ Pat Riley, six-time NBA championship coach (Lakers/Heat)

This post comes from the first part of a lunch & learn session I recently did at one of my former portfolio companies, Graphiq.

What truly motivates us? Three words: Mastery, Autonomy & Purpose. Daniel Pink, in his book Drive, reviewed the sea of research around motivation at work. While factors like money, prestige, punishment or fear can drive us, these pale in comparison to MAP. This video does a great job expanding on this work (worth the 10 min watch):

Mastery: the urge to improve, to have a sense of forward progress. In my Flow framework, this is at the heart of “thriving in the entrepreneurial journey”…defining the core elements of your identity (and focus) and then applying the habits and discipline to master the key skills critical to them. For example, in a work context, this could be “becoming the best salesperson possible” and developing the skills around prospecting, objection handling, relationship management and negotiations. On a personal level, it can be self-mastery and developing a greater sense of equanimity & patience in your daily interactions, better self-care practices (sleep, working out) and becoming less reactive to ups and downs of daily life. As you get better at something, the more rewarding it becomes.

Autonomy: the desire to direct our own lives. As we master our core responsibilities, everyone in the organization or those around us feel more confident in giving us more freedom: when we work, how we work, what we work on, who we work with. Said another way, we experience less micro-management and enjoy more degrees of freedom.

Purpose: The service to something larger than ourselves. When we do something for our own gain, it can motivate us but it is short-lived and often requires another hit (like an addict). Service can be defined in a host of different ways ranging from providing superior care to customers to mentoring junior reports to helping those less fortunate to being a role model for others. The key is that it is not focused on your own gain.

So, to reiterate…three words: Mastery, Autonomy & Purpose.

Contentment
That said, none of us want to win the battle and lose the war.  Too often, we drive ourselves hard only to feel empty or drained at the end. Contentment comes from when we progress towards something better/greater versus escaping from our fears and inadequacies. Let me repeat this as IT IS CORE…focus on motivation around progressing Towards something versus the anxietal default approach of motivation through Escaping our Fears & inadequacies (e.g. the inner voice that says “look asshole, if you don’t do this right, you’ll be a failure or you’ll get fired or you’ll be embarrassed or…).

In Which Wolf Do You Feed?, I discussed the importance of Intrinsic versus Extrinsic motivations.  In his book, Pink argues that effective human motivation is largely intrinsic around mastery, autonomy and purpose. He argues against old models of motivation driven by rewards and fear of punishment, dominated by extrinsic factors such as money.

My challenge: see how you can integrate more positive, intrinsic motivators into your daily work. Define your core role at the firm, laying out the key responsibilities and outputs for this and then commit to building the skills and obtaining the knowledge to be your highest version of this (vs just getting by). Focus on the input(s) versus the output. Start with just one area or skill and go from there. Additionally, write down 2-3 ways in which your work is in service to others. Put these out where you can see them. Focus your motivation on this versus simply gaining recognition or earning more money/bonus.

Multiples vs IRR

One of my most popular posts from VC Confidential…

“You Can’t Eat IRR.” — anonymous

I was at a business school today helping judge several business plans. As group after group presented, I saw each make the same mistake as the previous. When they tried to justify the investment from the perspective of the VC, they kept telling us that this was a 40% IRR deal or a 25% IRR as if we had magical IRR thresholds.

The reality is that the venture world is all about multiples and the IRR’s are the results. I don’t know what the original legacy behind this was, but from a practical perspective, it is driven mostly by the fact that we live in a boolean world. Some is also based upon the high net worth legacy of our business. Originally, because pension law did not permit the large institutional investors in, our business was funded by family offices, endowments and foundations. Multi-generational families, while they want high IRR’s, are really looking to double or triple their invested capital.

From a portfolio perspective, if we invest in 10 deals, 4 are tube shots, 2 we fight to get our money back on, 2-3 we get 2-5x on and the 10th deal drives the return (hopefully north of 10x). If we doubled our money in 1 year (100% IRR) but lost all our money on the next deal over 6 years, we aren’t happy (net gain is $0). We don’t care that we made 2x in 1 versus 3 years or lost all of our money over 6 years versus 4 years (this impacts IRR), because we earned 1x on the capital.

We often see complex financial models with discounted cash flows, hurdle rates and such. These are useless. I have never seen a set of financials in an early stage company that ever reflect what Darwin will allow to happen in reality. So, you start your modeling with unreliable numbers. Secondly, what is the beta for an early stage biotech deal, a semi-conductor start-up, etc? Can you assess the risk associated with a given management team? How about a new market space?

Perhaps we are too lazy to try and figure this out, but after decades of effort, the only method that seems to work in the venture world is to target 10x on each early stage deal (3-5x on later stage plays). They all look like the next Microsoft, but eventually, the portfolio of these settles down to the profile above. In the early stage world, if you target, say a 40% IRR, through assuming a number of 5x wins in a compressed period of time, you will likely be out of the business. Your 5x wins, while possibly generating high IRR’s, don’t return enough multiple to pay for the 4 tube shots and 2 break-even deals. Your winners need to deliver 10x.

So, next time you are trying to convince a VC about the merits of your firm, show them how they can make 10x capital on a realistic exit scenario (not how to get a 40% IRR).