I've come to the conclusion that there is no good way to solve the compensation problem -- of how to reward outstanding performers and teams without the unintended consequences that the article talks about -- inside standard corporate structures. Besides, the compensation offered under these schemes is almost always so tiny as to be nearly a joke. I think many people here would agree, though, that there is a simple solution: if you want greater compensation, make something and let the market decide. Markets don't have the limiting beliefs that middle managers do.
Markets, on the other hand, have a nasty habit of paying people nothing at all for failures. It's hard to feed a family in that kind of risk environment. I'm all for startup fever, but we have to be realistic here. The libertarian ideal of paying people the precise market value of their labor would lead to an awful lot of starving IT workers...
Hacking might be all or nothing because the marginal cost of software is zero, but marginal costs in most other industries are a lot higher. Just compare software to working toilet. Selling another copy of software is essentially free. Selling another working toilet is not really free. In the libertarian world you describe, plumbers would have no trouble making a living off the precise market value of their labor. This is especially true for credence goods of all kinds; wages are very similar for different plumbers and mechanics, because nobody pays high prices for high quality (since it's impossible to recognize), and nobody buys the low-priced option because it's perceived (in the absence of other information) of being of lower quality.
Your theory is interesting, but not hard and fast.
The firms that hire them are mediators between the raw market and the labor market. And those firms almost always pay for the expected average productivity for that position. Which leads to ... the Team Compensation issue.
I think that attending meetings and writing memos are work. Startups do eventually grow beyond the startup phase, and nobody has figured out a better way to manage large companies than bureaucracy. Middle managers, memos, interminable meetings...
You're right, organization and management are important.
It's just that there are so few good managers; at all the large companies where I worked, it was an open secret who was contributing and who was just taking up space.
Ain't that a good thing for human race? In history when kings hired incompetent generals, disloyal subordinates, bullying common people, they paid the price with their own lives. Farmers who failed to tend their crop and bad luck due to harsh climates died of famine. Vikings, pirates who pillaged wrong targets got annihilated. Why should we put ourselves as a special caste?
There is also the case with the good surgeons and the bad surgeons....
Well a good surgeon would always take a safe & sure case, where he would almost succeed.
A "bad" surgeon would take the impossible (to save life, limb, etc.) cases, and he would fail way more...
Now really - who's good and who's bad?
If your child or you has something really terrible that's almost impossible (but still there is chance) to cure, whom of the "good" surgeons is going to help you?
Am I to assume that you are volunteering to be the test pilot for our new "if the deadline is missed or there are too many bugs the dev team is executed" zero-defect policy?
Not to mention the principal/agent problem where people working independently have different incentives than people who are part of the firm.
I had to explain this to my boss the last time I had a full time job. He came up with the brilliant idea of using only contractors. The sad thing is that he majored in economics.
Generally, if you make things people want and value, monetisation often occurs naturally, and the rewards derived from being excellent on the open market often out weights that of being excellent within a company environment.
I remain dubious of "don't pay people extra who perform better" because that's simply not my value system. You describe your problem, I name a price, we negotiate, then I go fix your problem. There. I am paid based on our mutual understanding of the merit of the work.
But I'm a hired gun, so I have a slanted view.
Let's try another analogy. I love start-ups, in which the marketplace rewards those products it finds most meritorious. You make things people find merit in, you get more money.
Looks to me that is two strikes against the views represented in the article. I guess you could make the case that there are full-timers who are interested in lots more besides money. In this case, the marketplace still rewards the meritorious work, it's just that management gets to keep the extra money and screws over the little guy.
There has to be some kind of middle ground. If my team invents the next google while working at company XYZ, I don't want a T-shirt and an opportunity to become senior muck-slucker. I want a cut of the action.
> There has to be some kind of middle ground. If my team invents the next google while working at company XYZ, I don't want a T-shirt and an opportunity to become senior muck-slucker. I want a cut of the action.
I'm not sure what the solution would be in this case, but Google used to give out Founders awards, were by if you created a cool new technology or product they would try to compensate you as if you were a startup they had to buy.
They ended up scrapping this as it, in their estimation, caused more harm that good with in the company.
The article described a situation like this (well, not quite Google maybe), but the company wanted to single out 1-2 team members for reward, while ignoring the rest. I'm all for being paid better for performance, but when working as a team, there's something to be said for rewarding the successful team, not just an individual or two.
Definitely a different story if you're a hired gun, and I've been on both sides of the table there.
I think you're right, but I don't think that the merit-based pay described in this article is simply based on the total contribution. The problem was that not everyone on the team could "exceed expectations".
For good developers, the only motivation you need is already intrinsic to them, that is the desire to do awesome work and be recognized for this by their peers. Just facilitate this, sit back and enjoy the show.
Lame rewards confuse the picture and (a) piss off the guys who are bound to feel slighted, and (b) dilute genuine motivation with a perceived need to look good to managers.
Her message is results based compensation doesn't work in the domain of software creation. I wonder if it applies to other areas, where it's widely used (e.g. sales or waitressing)?
Pooled tips in a restaurant environment definitely fosters good service for the team as a whole... servers are more likely to help each other out, versus more greedy behavior/gaming of the system in a competitive environment.
Apparently management-targeted material has to read like it is written for grade schoolers: "Here's Sandy and Sue. They are great friends! Don't forget the StickyNotes at the end of the lesson!"
Merit compensation is OK. Comparative ranking cooworkers causes all kinds of problems, such as everything in the article. Comparing workers to each other doesn't mean much if all of the workers are excellent or if all of the workers suck.
I hate to break it to you, but that's no typo. The word in the phrase is, in fact, "deserts", which means "that which is deserved". It has nothing to do with arid zones, or after-meal snacks (although it is spelled like the former, and pronounced like the latter.)
