Whilst we like to think that startup success is largely dependent upon the skills of the entrepreneurs and the quality of their products, success can often be based upon far less tangible factors, as a recent post highlighting the impact friendships can have on a startup.

A new study from Johns Hopkins highlights how influential the contracts startup founders and early employees work under can also be.  The study suggests that contracts are less about the incentives they offer as they are about finding the right people to incentivize.

The researchers found that incentive clauses only tend to work when they’re given to people who would largely be high performers regardless of the contract they were given.  For those who wouldn’t be high performers, no incentive contracts are enough to boost their performance levels.

The right personalities

As such, the authors recommend assessing the personalities within a startup team, and personalizing the performance-related clauses in their contract accordingly so that you ensure that those most likely to respond positively do so.

“Equally-split contracts can encourage free-riding behavior. They are embraced by the least desirable collaborator types who protect themselves by not taking risks but still sharing equally in the proceeds,” the authors say.

Indeed, this may even involve delaying contracting until you learn about employees and can tailor things accordingly rather than rushing in with an incentive-based contract that is likely to fall flat.