Give entrepreneurs a goal - and a wide berth

The first three parts of my six-part series on creating an entrepreneurial culture focused on hiring a high-octane team of entrepreneurs: seeking out those with a competitive streak, screening out MBAs and finding people who look inward, not outward, for results.

But once you've got them in place, how do you structure their incentive system – bonus plan or commission structure – to get the most out of them?

The first thing to note is that you can manage for adhesion to a process, or manage for a result – but never both.

For example, you can say to someone: "I want you to follow these six steps when trying to sell our product."

Employees – in particular, junior ones – will benefit from the framework and from the knowledge that, if they follow the six steps, regardless of the result, you will see them as having done a good job.

The other way you can manage people is to offer a bonus for a result. For example, you may ask employees to sell 10 widgets each month without telling them how they need to go about achieving the result.

The biggest mistake you can make, especially with your entrepreneurial team members, is to manage both what you want them to do and how you want them to do it.

For example, if you said, "I want you to sell 10 widgets by following these six steps," a creative, resourceful entrepreneur will feel handcuffed by being asked to stay within a strict set of guidelines while being held accountable for a result.

To manage entrepreneurs effectively, you need to give them a goal, broad operational freedom, a clear description of the resources ( budget, team members, etc.) that they have available to them and an objective reward (preferably without a cap) for achieving the result.

Keep in mind that high performers hate being lumped in with everyone else. While average employees love team incentives, your entrepreneurs will hate them. Team incentives ("If we hit plan this month, everybody gets the first Friday in July off") are a turn-off to high performers because they contribute more than most to the results and don't understand why everyone should benefit equally from their effort.

Instead of telling entrepreneurs how to do their job, give them an objective goal, a wide berth and an objective reward for achieving it.

Special to The Globe and Mail

Next: Managers, stop asking so many questions

John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He is the author of Built To Sell: Creating a Business That Can Thrive Without You, which will be released in April.