Crowdsource Your Company’s Bonuses
blog.idonethis.com
blog.idonethis.com
They've taken what was essentially a way to make their work into a game and... made it into a game.
Making work into a game is an idiotic idea. Make work into work. Pay people a fair salary that gets their minds off of their salary. Align the goals of the employee with the goals of the company, not their own selfish instincts to game whatever system you put in place to try to "reward" them. Make the success of the company be their reward, whether that be with equity or simple fair across-the-board raises.
I worked for a company a few years ago that used to be full of politics and internal conflict. One year they did extremely well and decided to simplify and give everyone a straight $10,000 bonus, from the janitor to the CEO. There was no way to game this: everyone knew how much everyone got. Everyone was proud of the company and each other. Instead of secretly discussing how much bonus other people got behind their back, everyone was excited and happy and asking each other "so what are you going to do with your 10 G's?" It was the best day at that company.
You can argue against this all you want, but I experienced a level of alignment there that was unparalleled. The people who get off on doing all they can to advance their own paycheck and get a bigger bonus only ended up hurting the company through their politics and game-playing. They were invariably working in a self-centered direction tangent to the company's goals. When that was removed, the dynamic changed completely and it was remarkable how much improvement the company saw not just in the workplace but across the board. New products were released that year that were better than the last, quality improved, efficiency improved.
These fears that in order to achieve high performance, we must reward the high performers with carrots and hit the slackers with sticks are a bastardized religious fiction.
So the guy that watches YouTube videos for 3 hours, and the guy that takes 2 hours worth of smoke breaks a day got the same as the gal that works 50 hours a week and fixes the majority of the product issues?
Contributions are not equal so please don't treat them that way or you will only disenfranchise your BEST employees.
And remember, your best employees are the ones that have the most options elsewhere....
The problem is one of statistics. Your employees will always, no matter how hard you try, fit on a bell curve.
Here's the hilarious way most people think about this bell curve (just imagine this defines the set of employees actually working at a company, not just new hires; because it does): http://www.intellectcorp.com/images/bell-curve-hiring.jpg
Say you have 100 employees. There will always be 4-5 who will be exceptional—the upper quintile. There will always be 4-5 who are at the bottom—the lower quintile. The problem is, this will always be true. If you fire the bottom 5, then there will be a new "bottom 5". People will always be worried about their job, the pressure of not being fired will be a negative-feedback motivator (or that's the idea), and the top people at the company will continue to be rewarded.
Two questions:
1. Do you truly think that the top employees are working harder because you reward them? How much harder?
2. What about the other 90 employees?
Your top employees aren't what you should be worried about. Firstly, if you depend on them and (as you say they have the most options elsewhere) heaven forbid they leave, where does that leave you? Fucked, that's where. Second, even if you think the top employees are doing the work of 2 people each, or even 3 people (which is a lot to expect of anyone), 80-90% of your work output is still being done by the thickest part of that bell curve.
What's the answer?
Improve the system. Making systematic, broad improvements will help everyone do better work. This is the true reason the straight 10k bonus worked so well: it was a systematic reward. But other things work even better: provide free lunch and your employees won't leave the office as much. Provide free dinner and they'll stay late. Bam, systematic across-the-board improvement in working hours and efficiency that no bonus would ever come close to. Allow frequent employee skill-improvement days, make them focus on honing their skill sets for 1 day a month without the stress of real work. Bam, everyone gets better, not just the top 5%. There are countless others.
Figure out how to make the 90% in the middle work the hardest—and trust me, it's not by promising them bonuses if they can make it into the top 5%. That might be motivating for the upper 10% or maybe 15%, but not the rest. Improvements to the system they're in are the only good answer. The antiquated structure of bonuses and rewards and the punishment of firing is a religious myth left over from protestant and catholic beliefs in punishment and shame. They're not based on behavior, they're not based on science, and they're simply not true.
Are monetary rewards entirely bad? No, of course not, people should be rewarded for doing good work. I personally think that this reward should be in the form of simple, understandable fair compensation, with as few barriers to that as possible. Other reward systems may work too. But they should not be the focus—the focus should be on improving the system your employees work in, as it will result in gains an order above what's possible with carrot and stick.
Again, please read http://en.wikipedia.org/wiki/W._Edwards_Deming
Something that I hadn't considered is that the largest gains in productivity could/would come from your "average" (so to speak) employees .
I incorrectly assumed that money is the most important carrot...like you say, possibly for the top 10%, but everyone else may be motivated in other ways.
After reading the Wikipedia article I'm honestly compelled to learn more about this man and his methods.
I think you may have just made me less dumb ;-)
Deming was a fascinating guy. His ideas (mostly applicable to factories but easily applied to all companies) helped bring Japan out of its post-war recession and give it the respected reputation for high-quality goods they have had for some time. His concepts have been largely ignored since (partly due to his horribly dry writing style) but I think they're very valuable to our current economic situation in the west as well.
The focus is on quality, and the path is through process-based management. You have to realize your employees are a system just like your software is: mostly understandable, and statistically predictable. You can shape your system of people just like you can a manufacturing line, and traditional beliefs about punishments and rewards simply do not apply if you look at what's truly effective in improving quality and improving production.
It was remarkably successful in Japan partly because their philosophical backgrounds are so completely different: it is easier for someone brought up with ideas of Zen buddhism or other eastern religions to think of the whole rather than the individual; the process rather than the part.
In the US, where we're very much an individual and self-focused society, we track immediately to individual motivation without thought to how it affects the whole company. The unsubstantiated belief that "what's best for the individual is best for the whole" is embedded in us and very difficult to shake. Indeed, it's fairly core to our democracy and has ties to political beliefs as well. Deming himself had the breaking of this habit as one of his prerequisites (his System of Profound Knowledge): that everyone in the entire company must understand this holistic way of thinking, not just the management. Surely there is a balance to be struck, but Deming covers that as well, focusing on the psychology of personal motivation and work quality rather than belief systems. And it's all backed up by great process engineering and experience.
Honestly I think it's better if you completely ignore the monetary rewards and simply focus on what makes people work the best; the process of work. Here's another great TED talk on the subject: http://www.ted.com/talks/dan_pink_on_motivation.html
Claim: in software or engineering, your top employees are doing the work of a thousand people, or an infinite ratio of some of their fellow employees. No combination of administrative assistants at Google is going to program Google Chrome or even a sorting algorithm. No combination of HR people is capable of calculating structural loads.
Claim: (more arguable on Hacker News). Successfully managing a medium or large organization is likewise a skill shared by very few people. Managing humans is like programming on the most testy and finicky AWS nodes you could ever imagine. They don't do what they're told, they do other things, and they may return wrong results. You are responsible for making sure the group performs as a whole. This is engineering of a different sort.
There is a fundamental impedance mismatch between the amount of dollars required to sustain life (outside of serious health issues, this does not greatly vary from person to person) and the dollar productivity of each individual.
Arguably every great tech organization (commercial or non-commercial) has a few people who are 1000, 10000, or 1 million times as productive as others. People like Linus Torvalds, Richard Stallman, Jeff Dean, Urs Holzle, Guido van Rossum, or DHH. That is how they became great tech or engineering organizations.
The Bell Curve may describe the population distribution of intelligence (though ability on any given trait may be different). But as a manager or recruiter your duty is to select highly nonuniformly from the right tail of that curve. Your ability distribution should be as radically right skewed as possible, and should not really resemble a bell curve.
In short, "equal bonuses for all" -- with the same amount going to both the guy who didn't do much work and the guy who picked up after him -- is a great way to demotivate your best people. And this will cost you a lot more than 2-3 of your medium employees, it will cost you a guy who did 1000X their work, and perhaps it will cost your whole business. All that matters are your best, with them you can rebuild anything.
I agree with some of your ideas, but in my humble opinion, this attitude will cost you your business faster than anything.
If those guys have jobs at your company, you have bigger problems than your bonus structure. Unless they are doing more work than they appear to be doing, which is entirely possible.
It's cool to hear that, too many people forget that the janitor's, maintenance crews, and other misc jobs that most people would see as beneath them are all extremely important.
How much work would get done if every day you had to go dump your own trashcan? Getting you out of whatever grove you might have been in before? Or how demoralizing it would be to go to a workplace that has sticky floors?
(to anyone who might think I'm being sarcastic, I'm being sincere. Too often these positions aren't looked at as important to the working of the whole company, when it couldn't be farther from the truth.)
The point is to incentivize everyone with the carrot, and forget about the stick. Getting a small bonus or no bonus is not a punishment because a "bonus" is precisely that....a bonus is the reward/carrot.
Not being rewarded with a bonus is not the same thing as being punished.
My main issue with the bonus structure is that by motivating everyone with a bonus you turn the workplace into a social game where the focus is on the bonus or reward itself, and frankly, only 10-15% of people really care about it or think they have a shot at it, and those who do are more into the game than the work itself.
Point being, I don't really want my employees chasing carrots, I want them writing software. The negative effects of the game playing and misdirected goals outweigh the positive motivation effects for the tiny percentage of the workforce who cares.
I'd rather bring the whole company up.
If I can accomplish something in 2 hours that takes someone else 16 hours....I could very likely go unnoticed. But if I bring donuts for everyone every Friday I bet I get a bigger bonus because people really like me.
My concern is this exchanges reward for actions highly visible to your boss, to reward for actions highly visible to your peers. A combination of the two would be preferable to me
Actually, this already exists in many companies and it's known as "360 feedback" where your co-workers (in and out of your dept) are asked their opinion of your performance before your review. This feedback is factored in to your review.
My concern is that not all actions are equal, but the recognition seems to be.
My question is do I get more "points" for fixing the thread dispatcher in the kernel...or do I get just as many for helping you understand how to upload a file to Sharepoint?
That's where you can disenfranchise people. However, I like the idea and to me it is a good step in implementing 360 feedback as part of a review and bonus allocation.
IMHO, combine peer feedback as an equal component of bonus allocation along with management assessment and I think then you have a winner.
"Everyone in the company sees [your] plaudits and can pile on more unicorns if they agree that [you] did an awesome job."
The only person who will be impressed by you helping Bob upload to SharePoint is Bob. Total score: 1-3 unicorns.
Every engineer will be impressed that you fixed the thread dispatcher. Total score: 1-3 unicorns * # of engineers.
I've worked Unicorn in to my daily workflow. I can't say everyone (or even anyone) else uses my system, but Unicorn is my first stop of the day when I sit down at my desk. I look over all the unicorns from the previous day, distribute points as I see fit, and move on with my day. Rinse and repeat daily.
It takes all of ~2-3 minutes out of my day. I can see how this technique wouldn't scale well once employee numbers get too big, but it seems to work well at ~100 employees.
Votes are also private, including how many votes something has received (except to the person being rewarded). I really haven't noticed any gaming of the system.
The biggest part of the reward is recognition. The money is nice, but as I said, no one is retiring based on it.
There’s an email/newsletter that’s auto-generated every few weeks that summarizes what’s going on and makes it easy to remember to spread some unicoin around.
If you are performing well and delivering results, to then have this annual review process which gives you a big list of all of the extraneous areas that you 'need to improve on' can be a complete sap on the old motivation.
Especially if it's accompanied by the typical 1-2% pay increment. That can really be a drag....
I've quoted this article on the topic a number of times, but it's spot on IMO - http://headrush.typepad.com/creating_passionate_users/2006/0...
If you're going to do them, performance reviews should be about identifying the areas where people are great, and working out how to extract more of that....
Good managers find out what each employee is awesome at and get them doing it. If you hire someone and what they love to do and are great at isn't what you need at your company, then you've hired the wrong person. But I know lots of people who left a job because they kept asking to be moved to a different role, different team, etc, and nothing happened.
Managers: focus on what each person is great at and loves to do.
Unfortunately, most companies and people don't design and execute performance reviews well.
Similarly the results should influence compensation in a meaningful manner? You blew your results out of the water and only get a 1% raise? That's crap. Management's performance sucks in this case (that's why upward reviews are also key).
We anticipated the need to see this kind of behaviour, so there's clear auditing trails for everything that HR and Accounting can see where the bonus money's going.
Having said that, we haven't seen this problem appear yet.
Anyway. I like the idea of crowdsourcing a bonus, but think it needs to have a lot more nuance in it than it appears exists in Shopify's approach in order to actually be a fair and robust tool for bonus determination. Love the unicorn touch, though!
From the comments, it seems like no one has tried to game the system but I'm wondering if in a large corporation, anyone would try to game it?
The owner Steve made something like a request for bonuses for his employees and any extra money sent went straight to the employees.
I thought it was a nice gesture. Not exactly what the article is talking about, but it does seem to literally be crowdsourcing bonuses.
This bonus/props thing is really just for fun and recognition more than anything else. Performance reviews and salary adjustments have their own separate process.
Looks like this is the tool that shopify uses. See the comment from the CEO.
me: vomit and close browser
The job market will sort things out in most cases over the long term.