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You Might Learn Something from a Pirate

Posted by Alex Drexel on October 4, 2009


BlackbeardAn article by Caleb Crain in the September 7th New Yorker provides a fascinating look into the business of being a pirate in the 17th century.  They were in some respects, quite forward thinking for their time when it came to keeping the crew aligned and motivated.  Most of us wouldn’t associate pay equity, performance based compensation and incentives, healthcare, democratic/bottom-up approaches to decision making, and racial tolerance with pirates, but research suggests otherwise.  Most of those practices came from the necessity of circumstances, rather than the existence of any higher ideals.

Before anyone was accepted into the crew, they had to agree to articles that dictated how booty, power and responsibility were shared on the ship – it created an at-will association that provided order.  Crew members knew in advance of any activity exactly what share they would receive and any add-on incentives they would be awarded for specific accomplishments.  Furthermore, an attempt was made to balance the shares paid out to the internal worth of each job – this included pegging the share the Pirate CEO (lead captain) received relative to the average man on deck.

For example, before the buccaneers, led by Captain Morgan, attacked Panama in 1670, it was agreed that Morgan would get 1/100 of the loot, while the rest would be divided in shares among the men.  Captains under Morgan got 8 shares, while each man got a single share. Those with specific skills received additional amounts; each participating surgeon got 200 pesos and any carpenters got an additional 100.  And there was incentive pay; anyone who captured a Spanish flag received 50 pesos, and the act of throwing a grenade into a fort got you 5 extra shiny pesos.  The agreement provided insurance against disability where the loss of an eye would yield 100 pesos and 1500 would be received in the unfortunate event of losing both legs!

Risk taking behavior was further encouraged through a crude form of estate planning (called matelotage), where two pirates agreed to keep the loot of whoever died first and distribute a portion to the dead man’s friends and family.

The system of paying out shares made every crew member an owner-operator which provided some alignment around the primary goal.  The democratic nature of decision making helped create buy-in and a sense of fairness among those who voluntarily served on the ship.  All decisions were voted on, including determining who would fill the role of captain.  The captain would have the authority to make executive decisions only in the heat of battle, otherwise, the crew members would have their say.  The captain could be deposed at any time by a vote, and was more or less seen as like any other crew member – the captain slept on deck with the rest of the men.

So while no one would agree with their profession, you might start to wonder if your organization is run as well as a pirate ship.  Is it?

5 Responses to “You Might Learn Something from a Pirate”

  1. Excellent post, Alex. One can imagine the process by which these incentive systems were developed over time – truly survival of the fittest. Your mention of matelotage also reminded me of the Sherlock Holmes story, “The Sign of Four” by Sir Arthur Conan Doyle. Of course, it’s obvious there is no parallel in investment banking, is there? ;-)

  2. Amy Wilson said

    Fun post, Alex! I’ll have a whole new appreciation for the Pirates of the Caribbean ride at Disneyland :)

  3. I loved this post. Thanks for sharing this information on Pirate organizational behavior. I’m pretty sure that most organizations are not run as well as a Pirate ship. :)

  4. Meg Bear said

    I feel like Milo Minderbinder in Catch-22 must have modeled his business [everyone has a share] after pirates!

  5. Anitha Raghavan said

    What a nice post Alex!!! Thanks for sharing this.

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