In seventh grade, I attended I.S. 25 in Flushing, NY. It was a rare public school that had a computer lab for its time. The computer lab was not lush because the school couldn’t afford the latest technology, such as the Commodore 64 or the Apple II, but we had the Radio Shack TRS-80, which has been affectionately renamed the Trash-80. Each student had their own floppy disk to store their work until I could win some prize money for hacking my way to outselling more chocolates and cookies than the daughter of the Parents-Teachers Association (PTA) president (that is a story for another time). We used that prize money to buy a small central hard drive to store our work because floppy disks were unreliable.

There was one principle for the computer lab. As it was an expensive lab, it was only for serious work. I had my vision of serious work, making a game that only had ASCII characters. I stored my work on the central hard disk and toiled for several lab sessions. When I completed my program and started playing the game, other students downloaded the game and started playing as well. Soon, the whole computer lab was playing the game. Our principal walked in just in time as this was happening and threw a fit that the computer lab is for serious work, not for games. He asked who the culprit was, for which I took full responsibility, and then he sent me to detention.

Our computer lab teacher, Ms. Petosa, was shocked at the punishment. She tried to console me, but I never accepted authority figures at face value again. She gave me a way out of being bored in detention by giving me eight and ninth grade math competition problems. I completed them all without writing anything else but the answer. She told me I had answered all the questions correctly but had to show my work. My defiant self would constantly challenge authority figures and ask why.

She explained that you want to show your work for two reasons: (1) do it for yourself because you can spot any errors in your logic or steps more quickly, and (2) showing your work will help others follow and learn your logic and methods to solve the problem. Again, my defiant self asked why.

She explained further that for you to lead others, it is not to be the best but to make others better and better than even you. You can be the best, but if you want to accomplish more, you want to harness and leverage the ability of others. My defiant self asked, isn’t it better that I focus on making myself the best?

Ms. Petosa started to get frustrated but looked me in the eye and said, ” I know, you know, and we all know you are smart. I am considering making you math team captain even though you are in seventh grade. You’ll have to lead people older than you who think they are more intelligent than you. Can you lead them by simply being at the top of the leaderboard? Besides, if you are so good that you will get almost all the problems right, is your time better spent getting an extra problem correct or helping everyone on the team get an extra problem correct?”

Lest you think this has nothing to do with company building, we faced a similar problem years later at Zappos. We wanted to build the most efficient fulfillment center in e-commerce. We broke this problem down into smaller problems of picking, packing, and shipping. Initially, picking was the bottleneck, so we incented fast, accurate, and efficient picking. We used software to create the most efficient routing algorithm for pickers, but some pickers would have more picks per hour than the rest. We created leaderboards and recognition around top pickers to increase speed and accuracy in picking, which helped tremendously. We then moved to bonuses to the fastest picker, but at some point, the fastest was the same person, and that person couldn’t pick any faster. Even worse, the second and third fastest started to slow down because they weren’t bonused. Since there was an incentive to be the fastest, the fastest pickers wanted to keep their secrets private. Our efficiency plateaued.

The lessons from Ms. Petosa started to percolate in my head. What if our fastest pickers managed a team of pickers and had those teams compete across a leaderboard? There was a huge productivity gain from changing the incentives and making it team-based. We keep iterating on individual vs. team performance, team structure, competition among teams, learning within and across teams, recognition for top individuals and teams, and compensation for overall performance. So many of the impactful results had little to do with compensation, so long as everyone felt fairly compensated. At the end of this journey, when Amazon acquired Zappos, we discovered that the Zappos fulfillment center was 30% more efficient than an Amazon fulfillment center. To be fair, Zappos had a more limited selection of merchandise than an Amazon fulfillment center.

Sales compensation plans are modified almost yearly to incent and change for the desired behavior. We do this because we deride salespeople as being coin-operated, but all of us are coin-operated. The incentives around individual recognition, team recognition, titles, and bonus structures around team and individual performance can dramatically affect the outputs you want to achieve.

As we close out the year with reviews across company, department, team, and individual goals, we ought to think about next year’s goals and how we use all the tools in our arsenal to incent the behaviors to help us achieve and exceed next year’s goals.

Thank you to Ms. Petosa for the impactful life-long lessons you didn’t know you imparted.