00:28:30 · David Senra, Scott Kupor
[00:28:30] S1: Before you move on, let's describe this. Why is the incentive structure completely screwed up from your perspective? [00:28:36] S2: A couple of things. Number one is it is an incredibly legal regulatory compliance related culture, basically, and so everything that happens basically in government is for fear of doing something wrong. We do the same thing we've been doing all along, so the idea of innovation, any kind of innovation, is very much difficult to do, because the better thing to do is keep doing what you're doing, don't take risks. You know, when I first came in, one of my, you know, reports said, Look, our job is to keep you out of the news, basically. And I was like, Well, okay, well tell me more about that. And they said, Well, we don't want you to get hauled in front of Congress for doing something that they don't want you to do. We don't want you to get a report from the GAO, which is basically like this compliance organization. We don't want the inspector general, you know, doing stuff. [00:29:22] S1: I was like, okay. Like Okay. So then let me just send her and be
00:29:24 · Scott Kupor
[00:29:24] S2: That's easy. Yeah. Like, it's pretty easy how to solve that. Right? Which is okay. Like, we will just do nothing. Right? It's exactly right. That's what I said. Was like, that's not your job. Like, your job is to help us figure out, like, what can we do that's good? And, if we have a good reason for doing something and we screw it up, like, I'm fine getting hold in front of some congressional committee and explaining that to them. Obviously, if we're if we're... Our process was crappy, that sucks. We gotta fix that. But what it means is basically it doesn't allow for any innovation. Right? So, look, I come from, as you know, come we from this crazy world in venture capital where we take like obscene amounts of risk, which is fine because you've got like upside that potentially is uncapped, right? And like that's a good thing to happen, and that can cover a lot of mistakes. We don't have that in government, but instead what they've had is basically the answer is like take zero risk, but that also means therefore no consideration of upside potential for anything. So part of the incentive structure that I think we have to put in place and we're trying to put in place is, I've been using this term permissioned risk, which is deliberately different from the permissionless risk that I think exists in Silicon Valley, which is we gotta have this conversation, and we gotta be willing to let people take some risk, and that risk needs to be appropriately sized for the organization. So if you're in Department of War and the risk is people die, okay. Like, maybe we ought have a really, like, low tolerance for that. But, look, what I do and what most people in government do, it's not life or death. Yes, we want to get people their Social Security checks. We want to get people their IRS refunds. If it happens plus or minus a day or two from when we expect it, most cases nobody's going to die. But if we could actually, like, automate a system and figure out, like, how do you make it dead simple for people to get their Social Security checks or their retirement checks or anything like that, that has masked upside potential, but the incentive system has never allowed that.
00:30:57 · Scott Kupor, David Senra
So that's part of number one, that's part of the reason why the system's screwed up, is like there is zero, zero opportunity for innovation as a result, therefore you have slow and plotting, and not great customer service from a lot of these organizations. [00:31:07] S1: Well, not only that, if there's zero possibility for any kind of innovation, like, kind of talent are you going to attract?
00:31:13 · Scott Kupor
[00:31:13] S2: Yeah, so here's the other side of this, right, which is then you have a performance management system that's also screwed up. So, I'll give you a story, I think you and I may have talked this a long time ago when we first met. Everybody gets ranked generally one through five at the end of the year in terms of their employee rating. Some organizations have a four point rating, but say one through five. One is the worst. Like, you definitely, like, should not be here. Five is, you're not gonna cover off the ball. And three means, hey. Like, you know what? Like, you're good. You're doing what we asked you to do. That's all fine. And and every organization, quite frankly, needs a lot of people like that. Historically, in government, 99.7% of people are a three or above, meaning literally 0.3% fall below expectations. Now, in a population of 2,000,000 people Is that even possible? Not even mathematically possible. It's not. So you have one problem, which is we don't do anything on low end accountability in the government. I'll tell you about how we're gonna change this in a minute. So that's a serious problem to your point, which is, look, how do I attract and retain great people when I'm sitting here, you know, busting my ass and you're, like, dialing in, and everyone knows you suck, but, like, nobody actually wants to do anything about it. Like, that's a terrible place for high performing people to be. They'll leave. Yes. Exactly. And then on the other end, so four and five, right, those are the top ratings mean not just you're doing your stuff, but, like, you're extraordinary or you're outstanding. You're doing great stuff. In the senior... Just give me example. In, like, the most senior side of government, which is, like, 7,000 people that are, like, senior executives, something like 90% of people get ranked a four or a five, meaning, like, literally everybody's awesome.
00:32:40 · David Senra
[00:32:40] S1: And, again, an organization of 7,000 people are Yeah.
00:32:42 · Scott Kupor
[00:32:42] S2: It's not... Again, it's not it's just not possible. Right? What it means is, like, we game the system. And as a result, again, if I'm a high performer, like, you know, I wanna be a high performer, and there ought to be smaller numbers of people who are high performers. And by the way, I ought to disproportionately get money for that. So when you have a system where 90% of the people get ranked at the top of the class, that means the bonuses make no sense, right? I give you a thousand bucks, and it has no incentive value, it has no retentive value. Instead, like, we should have a system where, which was what we're doing, is we've put a rule in place which is no more than 40% of the population can be at that top ranking, and 60 plus percent of the compensation pool needs to go to those 40% of the people. Now, personally, I'd like to do even more extreme than that, but, like, we've gotta crawl before we walk and run on this stuff. But, like, if you wanna attract great people, you have to hold people accountable on the bottom end, and you have to allow for differentiation. And then the third thing you have, by the way, just here, you got me on my soapbox, is almost every promotion opportunity in government is gated by tenure. So you have to be in the job for a certain period of time, typically at least a one year minimum, before I can even consider you for promotion. Now again, if I'm gonna hire some person who's awesome in software development, and they knock the cover off the ball, and within six months, they demonstrate that they're better than