In his recent essay "Growing a Tokenized Community," Louis Albiverse developed a framework called "The DAO Community Growth Cycle," where he argues that to grow a DAO, community leaders have to Attract, Recruit and finally Engage potential contributors. While this model is highly insightful, I think a fourth step is to add to this growth cycle: Retain.
Indeed, Crypto is 100% an employee market today. There are more job offers than good candidates. It is already extremely challenging to attract high-quality Talent to your DAO, but it might even be more complicated to engage them in the long term.
DAOs are unlike traditional companies. DAOs enable fluidity of collaboration and provide flexibility. But the fluid nature of DAOs also makes it hard to retain consistent talents that drive an important amount of impact on the DAO**.** Plus, this fluid nature of work comes with the risk that the most active contributors get frustrated by the level of engagement of the less active ones.
That's why today, contributor retention is one of the most critical metrics for a DAO, and one of the most pressing problems those new decentralized organizations have to tackle. Growth, scaling, and mass adoption will follow only if DAOs solve the current problem of contributors' engagement. By solving this problem, more DAOs will grow thanks to their long-term contributors, which will make their community more attractive to people outside of Crypto, attracting more new contributors and reinforcing this positive feedback loop.
The million-dollar question now is, how can DAO leaders retain the best contributors and create a community strong enough to keep them engaged in the long term? How can they leverage the new tools at their disposal to tackle this problem? How can the paradigm shift in the way individuals collaborate in DAOs be a strength, not a weakness?
This essay will explore how Culture, Tools, and Ownership might be the perfect recipe for high retention in a DAO.
1 - What do contributors want?
Many researchers have conducted studies to investigate retention, productivity, and supportive cultures in traditional organizations in recent years. The key knowledge and models that organizational psychologists have developed can give great insight into the essentials of a great DAO.
While there are many ways to contribute positively to employee well-being, three specific elements seem to have a consistently strong influence over the retention of employees in an organization:
- CULTURE - The organization can create a strong culture and share a long-term vision and values with contributors.
- TOOLS TO SUCCEED - The organization can provide contributors the tools they need and makes the collaboration easy.
- AUTONOMY / OWNERSHIP - The organization gives enough flexibility to contributors along with Ownership over the projects.
Let's dig more into each of these three elements.
1.1 - Tell me what is expected of me... (Culture).
Recent research from McKinsey shows two reasons why employees in traditional companies are leaving: a lack of sense of belonging at work (51%) and lack of feeling their work is valued by the organization (54%). In short, to retain employees, give them a sense of purpose and community.
And that's exactly what DAOs and the Web3 ecosystem can provide.
Traditional companies have, for long, tried to create a strong culture and foster belonging. But the primary purpose of a company, by definition, is to make a profit. Culture is often a second layer serving the purpose of making a profit and acquiring new market shares.
On the other end, DAOs are firstly virtual places where people passionate about the same things decide to join forces to hang out and achieve high-ambition goals. It's not about work. It's first and foremost about culture, about vibing together and creating, with others, what you've always wished to create. In DAOs, culture comes first, products and projects come second. Not the other way around.
Because of its intrinsic structure, because, by design, DAOs lack the traditional hierarchy of a physical organization, they've focused on providing support through the culture and the goals they maintain.
The most successful DAOs have all created a strong culture through 5 key elements.
- They share a common vision with their contributors - Community leaders have to find that one theme that people are aligned with and that brings people together in their community. They then have to articulate a strong vision around this common passion and clearly share this vision with community members. By creating a place where people with common interests can come and find their tribe, learn and grow together around a shared vision, you'll make sure to create the foundations to a great culture.
- They provide Ownership to their contributors - Those successful DAOs made their contributors feel accountable for the success of the project and the culture. By giving them ownership, they've made sure to attract the best talents and assured good retention of their best contributors.
- They know their community - DAOs who have succeeded understand their typical "community member persona deeply" and creating relevant experiences that suit them. Understanding what kind of profile DAOs have in their community will make it easier for them to design incentives, develop values, and create events and specific group chats.
- They create trust - Creating a strong culture is also creating trust. It is important to build trust between members but also with people outside of the community. To create this trust, having a public face behind the project has shown its efficiency. Another good practice is to hire a scribe to facilitate communication between teams.
- They have strong values - The clearer they are on what they want to achieve and their values, the easier it is for them to incentivize people to work with them. People will contribute in the long term only if they intrinsically believe in the project and share the same values.
These five elements have shown their efficiency in harnessing the cultural energy of DAOs, and help DAOs retain their most valuable contributors.
But creating a great culture is only the first element to better retention of employees. Without the right tools and enough flexibility, it won't be sufficient to retain active community members.
1.2 - …And give me what I need to meet those expectations… (Tools to Succeed).
For contributors to keep working for a DAO, they need to have the right tools at their disposal to do great work.
Luckily, Social tokens, the virtual currencies fueling DAOs, have the significant advantage of facilitating the coordination between contributors through a large set of tools. Indeed, many new tools allow community leaders to manage the daily needs of their contributors and leverage the power of Social Tokens to make the whole process easy and trustworthy.
Indeed, by leveraging crypto mechanisms, many actions can now be taken "on-chain," meaning secured on a blockchain, facilitating the whole process.
One example of those tools that make the life of DAO contributors is the "Multi-Signature Wallet." A Multi-Signature Wallet is a Crypto Wallet that allows you to manage your community crypto assets, with the option to require a predefined number of signatures to confirm transactions. It is necessary to have multiple team members to ensure every transaction to execute it, which prevents unauthorized access to the fund in this wallet. No one can leave with all the money as it would require the authorization of all the other members. It gives Ownership to contributors and an open vision of the DAO's treasury.
But it's not the only new tool that can really simplify the daily life of contributors. While it was complicated, for example, for leaders in traditional companies to make their employees vote on future strategic decisions for the company in a reliable way, its exists today now solutions such as Snapshot. Snapshot is a platform that allows DAO leaders to set up governance power easily, giving the chance to vote on proposals to only certain people.
There is a large ecosystem of DAO tools, and to retain high-value community members, it seems essential to dig into them and implement those who make the most sense for your community.
Communication tools such as Discord, Telegram, or Geneva are essential. Indeed, Research by McKinsey suggests that town hall meetings and immersive, small-group sessions are effective at helping employees align their day-to-day work with the organization's broader mission. DAOs have to face this problem of asynchronous communication even more than traditional companies. In DAOs, contributors are often spread out worldwide, and most of them don't work full-time for the DAO. To avoid this lack of communication, it's important to think thoroughly about the channels that need to be created in the Discord, set up weekly meetings, hire scribe responsible for taking notes at these meetings, etc…
Along with communication tools, because there is no strong hierarchy in DAOs, it's also essential to implement Workflow tools. Indeed, in many DAOs today, there's a weird loop of DAO leaders wanting members to start initiatives, but members not knowing what makes sense to start for the community and then end up in an impasse. Without robust workflows, potential contributors will quickly be discouraged and end up not contributing at all.
To overcome this, it's essential to create guilds (or Working Groups) with accessible docs of what's needed within each guild. For a DAO to work, it needs weekly meetings, an easily accessible list of missions, easy access to a doc with the name of the contributors from the guild (with a person to contact in case of a problem) etc… Most DAOs are still using the Google suite (created for Web2 use-cases), and there is room for improvement in this space.
DAO leaders can also set up tools to boost employees' sense of confidence or to encourage gestures of kindness and support, two critical elements for contributors' well-being at work. For example, this can be achieved by allowing anyone to send tips to other contributors through the Discord bot Collab.land.
1.3 - …And then leave me to it... (Autonomy/ flexibility/ownership)
Lastly, a DAO must provide autonomy and flexibility to retain its contributors with the right tools and a great culture.
Few people enjoy unwarranted scrutiny, and plenty of research supports the positive outcomes that autonomy inspires. Autonomy relates to feelings of voice and control. DAOs are fluid by nature and provide ownership and a lot of independence.
The flexibility that DAOs offer is also a great advantage as DAO leaders can provide contributors with the flexibility to work only on the tasks they like. Contributors can work on a project and leave. The goal is not to involve them in every project but to have a strong enough culture and workflows to make them come back.
The downside of the DAOs structure is that, with no proper hierarchy, contributors have to put some work into the project without receiving specific orders but delivering on time because they believe in the long-term goal and are immersed in the culture.
There's a thin line between allowing too much flexibility and not enough, and this line can vary between DAOs, depending on their contributors and culture.
With flexibility should also come Ownership. The core team should give ownership over the projects to contributors by letting them vote on important decisions and future missions, and Ownership over the company by allowing contributors to invest in the DAO and have shares in it. Aligning incentives is everything in Web3.
Lastly, I would encourage DAO leaders to overcompensate their contributors with their native Token. With Tokens come Ownership and skin in the game. By doing so, DAO leaders will bootstrap contributor retention with more significant ownership stakes and scale back when it's time.
2 - Structural Models
On top of all those good managerial practices, some good structural models can be put in place to help retain contributors. In the second part of this essay, we'll explore the two main models and how they can help DAO leaders.
2.1 - The reward model (PUSH MODEL)
The reward model aims to push advantages and rewards to contributors to convince them to stay.
One great example of this model is what the Nouns DAO is doing. Nouns are an experimental attempt to improve the formation of on-chain avatar communities. There's a new noun every day, and you need to win the auction to get it.
Because 100% of noun auction proceeds are sent to Nouns DAO, Nounders have chosen to compensate themselves with nouns. Every 10th noun for the first five years of the project (noun ids #0, #10, #20, #30, and so on) will be automatically sent to the Founder's multisig to be vested and shared among the founding members of the project (which represents 10% of supply for first five years). This incentivizes the founders of Nouns' Nounders' to work on this project as a long-term initiative.
This model also provides long-term contributors stability, which is a great advantage in an uncertain space like Web3.
Another great example is what the Forefront leaders have done. Through a Liquidity Mining Program, they've allowed their core contributors to invest in the DAO, with a vesting period of 1 year, which means contributors can't withdraw their money before one year. By doing so, they incentivize their contributors (now investors) to work hard and make the project grow.
One last example of this model is what the Global Coin Research community is doing. The community is divided into three tiers (pioneer - Alpha - Gold), with the minimum of Token to access each tier increasing. Every month, they reward their members proportionally to their tiers, incentivizing them to be gold members and hold their Token for the long term.
This structural model is also good to increase the speed to Ownership, meaning "how quickly can you put a meaningful amount of tokens in the hands of high-value contributors." With this model, DAO leaders also increase the Ownership of their contributors and decentralize their community a bit more.
As Jess from Seedclub said: The scarce resource in web3 is Talent. Ownership is a competitive advantage.
2.2 - The membership model (PULL MODEL)
On the Pull model, instead of giving out rewards to incentivize people to stay, you incentivize the community members to become contributors and put in some work to make the DAO grow.
That's the model the Friends With Benefits community has chosen. They have put a Membership in place to access their community. Membership focuses on the community's longevity and health, ensuring FWB remains a place we all continue to call home. Each season, they increase the minimum number of tokens someone should have to access the community, creating an active push for members to engage with a team of their choice, become a contributor, and be rewarded in Token for their work.
Some other models and initiatives need to be explored. For example, I haven't seen any DAO keeping some grants for long-term members. A portion of the treasury is allocated to the long-term onboarded members, not part of the core team. Another good way to ensure retention is also to pay the contributors higher than the market price. That's what Cabin DAO is doing, paying more than standard market rates where possible because they're in a high-risk environment. If your token payouts have high volatility, the pay should be much higher than a FAANG basic salary.
In a recent essay, Packy McCormick explains that "Human mixing" is one of the four components of a Scenius. As he argues: "If past clusters of genius were all local commercial trading centers, the internet is the world's trading center. It's hard to overstate or even understand the impact of pulling people from around the globe onto one big playing field."
And I would go even further. We can't underestimate the impact of pulling people from around the world to work together in a completely new way, facilitated by a set of new tools and Social Tokens. DAOs have the potential to change the world by facilitating collaboration and accelerating innovation. But this bright future will only be possible if those DAOs can retain their high-quality Talent in the long term.
To retain these high quality talents, it's essential to put in place the managerial and structural elements that we've explored in this essay and continue to explore new good practices applied directly to this new way of collaborating.