The importance of having skin in the game

I was talking with a teammate of mine (let’s call him Bob) about one of our previous hires (let’s call him Chad), who we had to let go for performance reasons. Bob was telling me about how he feels personally responsible for hiring Chad.

Bob felt that Chad managed to “fool” him in the interview process, which he took as a personal affront - primarily for being unable to adequately gauge character. We could spend a whole article on this point and how this isn’t the right lens to judge both yourself and others, because of myriad situations that really contribute to such an outcome. This is not that article.

The second thing that Bob told me was far more illuminating to me. He said that he felt he had let me down by adding this person to the team which didn’t contribute to raising the bar of the team. This I found to be a super interesting insight.

Bob is a very strong performer on the team and my gut reaction was to console him and tell him that this decision did not diminish his value to the team. Evaluating humans and evaluating code can be two very different skillsets.

On the other hand, I think this was exactly what Bob should feel. Not humiliation or embarrassment but that sense of accountability that led to an unsatisfactory outcome. I think this is good for both Bob and the team and here is why.

People will only perform their best if they feel like they have skin in the game. If a person feels like there is nothing to gain from an experience at work, be it technical skill, monetary gain, challenging problems or a sense of ownership, that is likely the end of the road for them. They will start looking for other opportunities.

Getting that skin in the game is crucial to having a self-motivated drive to improve status quo and do greater things. It builds character as a result of the self introspection or skill acquisition that one needs, to feel a sense of real involvement. You stop seeing the world as if things are happening _to you_ and feel agency to create change. When you have no skin in the game it’s easy to complain about all the things that are going wrong. When you have skin in the game, you are incentivized to make changes so that you don’t feel the need to complain.

Your responsibility as a manager

Having your team feel like they have skin in the game has to be coupled with you, as their manager, being able to provide air cover for them. If all you are doing is making your team feel accountable for their decisions, but not providing them with any support, that can very quickly turn into disillusionment. It will cause scenarios where your team will go out on a limb but you will not back them up. This is awful for team morale. Don’t shirk your responsibilities towards supporting your team.

How do you create an environment where people feel like they have skin in the game? There are a few ways that have worked for me -

• Figure out what is important to your team and help them get there - If you hire the right type of people, you will find a lot of alignment between what you want from your team v/s what they want themselves, but its not always 100%. You don’t need to achieve 100%, but focus on advancing goals and career aspirations in mutually beneficial ways (or even unilaterally for your top performers). They will appreciate and remember how much you have their back and will do the same for you and your team.

• Give them agency - Allow your employees to take ownership of projects and initiatives. When they feel accountable for specific outcomes, their engagement increases. The micromanager trope is well-known, and avoiding it isn’t just about not asking your team for frequent updates. Agency often involves creating space and opportunities for your employees to be able to exercise their strengths. Even the best surfers know they need to do the hard work to be in place to catch the big wave. Magic doesn’t _just_ happen.

• Ask don’t tell - Involve employees in an inclusive decision-making processes. When they have a say in the company's direction, they feel more responsible for its outcomes. We follow a “pull” model instead of a “push” model where we will give the team all the reasons for why something is important but not force them to work on it. The idea is that if you have hired people who know what is important for the business and are able to couple that with their awareness of the system, merely pointing them in the right direction will result in great outcomes.

• Build trust and be transparent - Maintain transparency about company goals, performance, and challenges. When employees understand the bigger picture, they can align their efforts accordingly. As a leader, sometimes you must withhold plans to avoid disrupting the team with constant reprioritization, as some plans never materialize. This works as long as the team trusts you and the fact that what they don’t know, they don’t need to know.

• Give them redirecting feedback often - You might be tempted to not give your highest performers critical or redirecting feedback. This feeling tends to stem from the fact that there might be other people who need that feedback more, or that the strong performers already know what they want. This kind of thinking couldn’t be further off. Firstly, there is documented literature at this point that points to the benefits of improving your highest performer’s performance over improving your lowest performer’s performance. Secondly, this shows your best performers that you are invested in their holistic career growth and are giving them a reason to continue excelling in their roles.

• Be ruthless in your support for your team (even when they aren’t in the room with you) - This basically means advocating for their needs, recognizing their contributions, and defending their interests in discussions and decisions that affect them. Such unwavering support fosters a culture of trust and loyalty, motivating your team to perform at their best. It also ensures that their voices are heard and valued, even in their absence. By constantly championing your employees, you demonstrate your commitment to their well-being and professional growth, which in turn cultivates a positive and productive work environment.

• Incentivize them monetarily and non-monetarily - Last but not the least, offer bonuses, raises, and profit-sharing to reward their work financially. Complement these with non-monetary incentives such as professional development opportunities, flexible work arrangements, and maybe other unconventional benefits (things like sabbaticals, mentorship, networking etc). These diverse incentives boost morale, enhance job satisfaction, and motivate employees to excel.

This is not a science but an intentional best-effort attempt to increase your team’s personal stake in their work environment.