
Incentive Pay Considered Harmful - raganwald
http://www.joelonsoftware.com/articles/fog0000000070.html
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trominos
This article didn't talk about incentive _pay_ , it talked about incentive
superficialities. Which are of course generally degrading.

IMX, incentive pay isn't the same way—provided that it's actually significant,
as opposed to a largely-meaningless couple hundreds of dollars or something of
the sort—because it's so useful that it's an end in itself. "Don't make your
employees feel like they're jumping through hoops" is a good point, and
companies would do well to remember it, but when rewards are substantial in
and of themselves that problem doesn't come up that much. (Real incentives can
still have a bad effect on morale, but in my experience their positives
outweigh their negatives.)

~~~
timr
What makes you think that rewarding someone with a cookie of actual, monetary
value avoids the morale problems inherent in rewarding someone with a cookie
made of polished lucite? You've still singled someone out as different,
created jealousy and division, and alienated the team members who weren't
equally rewarded.

The problem Joel is describing is inherent to rewarding _individuals_ ,
instead of rewarding _teams_. Ratcheting up the value of the award doesn't
solve the underlying problem.

Not incidentally, Google found this out the hard way with their Founders'
Award program (<http://members.forbes.com/global/2007/0702/028.html>):

 _"Early on Page and Brin gave 'Founders' Awards' in cash to people who made
significant contributions....but it backfired because those who didn't get
them felt overlooked. 'It ended up pissing way more people off,' says one
veteran."_

~~~
trominos
Right. It's vital that incentives are not made to feel like "awards," but are
instead seen as part of the compensation structure. (I think that the
"incentive pay" Joel's talking about really means "public awards, possibly
with cash associated.") "Incentive pay" in the simple sense of "pay tied to
performance" is not necessarily divisive if it's handled tactfully and can be
a substantial motivational force. I mean, that's what PG's always writing
about in his essays—the power of a startup is that it harnesses pay very
directly to performance.

~~~
timr
If you keep it secret, then I suppose that incentive pay is less harmful. The
thing is, do you really want to go that way?

I think that the only way that incentives are not harmful is if they're spread
evenly across teams and tied to product success in the market. Most people can
grasp why the team behind a successful product is paid more. Even then,
though, you risk alienating the teams that don't do quite as well for reasons
that aren't in their control.

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jobeirne
Joel isn't considering the right incentive: cash. The way to get someone to
perform is to give them a stake in the yield of their performance, i.e. a
profit share.

~~~
aston
Joel has also elsewhere that he's a big believer in paying salesmen incentives
in cash (via commissions), so I don't think he'd disagree with you there.

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timr
See also:

The Pmarca Guide to Big Companies, part 2: Retaining great people:

<http://blog.pmarca.com/2007/07/the-pmarca-gu-1.html>

 _"Don't do arbitrary large spot bonuses or restricted stock grants to try to
give a small number of people huge financial upside....It sounds like a great
idea at the time, but it causes a severe backlash among both the normal people
who don't get it (who feel like they're the B team) and the great people who
don't get it (who feel like they've been screwed)."_

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goofygrin
So uh... what's the alternative?

~~~
tptacek
Increased project responsibility, less micromanaging, team-based recognition,
fair and consistent compensation, and companywide profit sharing.

~~~
steveplace
And the underlying article would be much more valuable if any of the solutions
you give were mentioned.

~~~
tptacek
Um, thanks? This is one of my favorite Joel articles. Highly recommended.

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ojbyrne
Edward Deming (<http://en.wikipedia.org/wiki/W._Edwards_Deming>) is probably
the original proponent of this idea. He believed that the best motivator is
essentially pride - a job well done is its own reward - and that good
management means eliminating anything that gets in the way of that, including
incentive programs.

~~~
ojbyrne
Just to expand on my own point, his theories owe a lot to Maslow's Hierarchy
of Needs (<http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs>). You
have to satisfy more "base" needs (shelter, salary, self-esteem) but the key
motivator for intelligent people is opportunity for "self-actualization."

------
oz
The point Joel is making is that it is hard to objectively quantify individual
contributions to a group effort in software development. The points about the
'team glue' and the 'researcher' are especially poignant. It's hard to put a
value on those soft skills.

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andreyf
The Kohn article he tries to link to is available here:
[http://www.msubillings.edu/BusinessFaculty/larsen/MGMT452/HR...](http://www.msubillings.edu/BusinessFaculty/larsen/MGMT452/HR%20Articles/Why_rewards_fail_byKohn.htm)

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raganwald
...almost as harmful as "considered harmful" essays:

<http://meyerweb.com/eric/comment/chech.html>

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jeroen
Interesting article, but hardly news 8 years after publication.

~~~
yan
Granted that many of news.yc's readers are in their early twenties, it would
put them at an age where they probably wouldn't have been reading j.o.s. 8
years ago. Plus this is still relevant to readers' interests and would have
made just as much sense as if it was written twenty minutes ago.

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magus_pwnsen
I worked in finance, where incentive pay is substantial, and it has benefits
as well as problems. Salaries in finance are low-average by NYC/Chicago
standards, while bonuses are high-- starting at 25-75% for junior positions,
and rising to 1000+% at a senior level.

Good bonuses have a positive effect on morale, but the real kick finance gets
out of the system is in recruiting. The possibility to take home a $1 million
bonus check as a fifth-year employee, brings in a lot of bright, young people
who don't know what else to do with their lives but are willing to work very
hard. Finance's rather unique compensation system certainly stokes people to
put out a lot of effort.

The downside is that, since everyone is after the same things, politics come
more into play-- if someone feels shortchanged in project selection, like he's
not being groomed to be a future rock star, he's going to do shitty work. In
tech, people are after interesting work, and everyone has a different opinion
about what's interesting, so the game is not zero-sum; in finance, they're
mostly looking to advance their careers and make money... which approaches
zero-sum as the size of the company increases.

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gaius
They can consider it whatever they like, so long as they pay me :-)

