Goal-Oriented Company

April 5, 2016 · 2 min · Fabio Pelosin

Originally published on the Discontinuity blog, April 2016.

The idea of a goal-oriented company rests on the fact that when personal incentives align with company goals, execution improves through dynamics similar to those of capitalism.

The company rewards people with points based on the concrete contributions they deliver. Points are assigned only once an objective is actually achieved.

Points represent remuneration for the risk borne in creating value for the initiative. The risk derives from the partial or full deferral of monetary compensation for contributions made for the benefit of the company.

The number of points per objective is agreed in quarterly meetings when short-term strategy is set, before work starts. This mechanism has the advantage that the company’s objectives are communicated transparently every three months.

Points must be agreed upon by all partners; failure to agree on scores for an activity blocks the activity itself, since there is no economic incentive for completion. This is a feature, not a bug. The desire to maintain operations and the fact that points are decided ex-ante guarantee the functioning of the process.

Key details

  • Rights are represented by points; only proportions matter.
  • Profits (and exit proceeds) are split proportionally to points owned.
  • Legal rights are defined by the company’s charter/shareholders’ agreement; points govern internal allocation among founders/contributors. This mechanism is enforceable between private parties.
  • Founders begin with equal equity; on request, notary updates share split to match points.
  • Every quarter, publish an operational plan with points allocated to each goal.
  • Supermajority (e.g., 95%) prevents small control factions.
  • Third parties can be allocated points if all founders agree.
  • No risk, no points. No value, no points.
  • Agreements are recorded via certified email (PEC) or equivalent verifiable channel.
  • Sub-allocations are allowed if a contributor delegates part of a goal; confirm via written agreement.
  • Culture should promote fair compensation over adversarial negotiation.
  • Account for goodwill and learning: points for similar goals should decay over time.
  • Offer below-market cash by compensating with points when appropriate.