In the current issue of Inc. Magazine, Joel Spolsky discusses something that many businesses face: how do you measure and reward performance.
He discusses in the article the young intern who came up with an idea that brought in a million dollars (almost all profit) for 4 weeks of work. Pretty good ROI for sinking 4 weeks of salary.
But even in the shadow of this obviously huge feat, Joel still struggled with whether to compensate the developer. He writes:
How do you properly compensate an employee for a smash-hit, million-dollar idea? On the one hand, you could argue that you don’t have to – a software business is basically an idea factory. We were already paying Noah for his ideas. That was the nature of his employee agreement with us. Why pay twice?
And what about everybody else at Fog Creek? Those people were doing their jobs, too. Simply because one programmer’s idea translated visibly and directly into a lot of money didn’t mean that the other team members weren’t adding just as much value to the business, albeit in a less direct way.
In the middle of the page (in the printed magazine), is another quote from the article:
The very act of rewarding workers for a job well done tends to make them think they are doing it solely for the reward.
When I first read the article, I was going to write a blog post around some ideas I had relating to the topic. But as I read it, and re-read it, I got angrier. Not at Joel specifically…in fact I applaud that he was so open about his experiences and views on employee compensation and rewards. No, my issue is with the software industry in general and how the employee/employer relationship is viewed.
The issue of how to compensate employees shouldn't be the question business owners need to answer. Why are your employees asking for compensation for their exemplary work is.
This wouldn’t even be an issue in our industry if businesses took more time to evaluate how they view their staff. Many organizations try to attach the same models found in other industries. Those models don’t work.
Example: I used to work for a guy who previously had been a manager at a car dealership. He tried to apply the same tactics used to motivate sales people with the developer staff. Unfortunately, developers have a lower tolerance for bullshit and the entire desktop division that I was part of (nine staff) eventually left the company within a year.
I suggest two areas that need to be addressed by businesses to help them realize exactly how they view their staff and the relationship between ownership/management and their workers.
First, be real about how you view your employees. You have two options really, which is what I describe below under ‘Employees Don’t Exist’.
The second is to be honest about how your business views itself in relation to its employees. I give some examples of that in ‘Employers Are In Denial’ further below.
Employees Don't Exist
You are either a Wage-Slave or you are a Partner. There are no employees in IT.
Wage-Slaves are those that get hired by a company for a set amount of money as compensation. They are then tasked with doing whatever they can to help further the company including sacrificing their own lives when the company requires their time, accepting any directive or command from the company, and coming up with million-dollar ideas. They are promised yearly reviews and raises, and office amenities are usually pointed out as other perks for working (drinks in the fridge, treat days, etc.). While companies will talk about the importance of keeping talent, many see their wage-slaves as replaceable - burn one out, you can just get rid of them and replace them. Wage-Slaves are expendable.
Partners are mythical. I hear they exist, and I know of one company that actively tries to make their staff true "partners" in the business. But by and large, you have a better chance of seeing a unicorn then a Partner. Partners live in an environment where the success of an individual is shared by all, through shares in the company or profit sharing or some other means. Their thoughts and opinions are valued in forming the course of the company and everyone has a seat at the board room table, not just listening in through the door. Partners also have responsibility in ensuring the work environment is one that fosters trust and cooperation. Partners have a vested interest in seeing the company succeed because it means direct gains for them beyond continually getting a paycheck.
Employers Are In Denial
Maybe you're an employer reading this and you think "Well, I don't treat my employees as wave-slaves!" This is a common response...nobody wants to feel like they really, deep down, view their employees as nothing more than resources. Many businesses try to mask reality by applying different archetypes to their business:
The Family
Companies that claim that they are a "family" without anything beyond a salary binding their employees to the company are simply trying to cast the Manson family as the Brady Bunch.
Families love each other. Families are there for each other through trying times. Families go out of their way and sacrifice for the oldest, the youngest, the dumbest, and the poorest, even if its at a personal cost. Businesses DON'T.
Businesses care about profit, and if you aren't helping with that, then your spot in the "family" can be easily replaced. Don't call your business a family unless it literally *is* your family...and even then, I'm sure there are some businesses that really would fire grandma.
Personal Jesus
Oh if only I had a dollar for every time I heard a business owner say "You don't have as much vested in the company as I do...my house is on the line...I took a second mortgage out...blah blah blah". Why, people in their employ should be *grateful* that they stuck their necks out on the line so that the opportunity to work for them was even created in the first place! Of course, the trade off for that gratefulness is total and complete loyalty and submissiveness.
Look, there is always a risk involved with starting a business...but there's also more REWARD for those that do and succeed. People who choose to be in your employment are doing YOU a service by agreeing to help pay off your house, your car, or put your kids through college. The IT industry is a pantheon, and there's more than one saviour that we can choose to serve.
The Government
Secrecy is king in the Government business. Staff are always praised for the work that they do and thanked for their commitment and service, but all discussion surrounding the company are done behind closed doors. Information is sanitized and structured, delivered as part of some yearly kick off meeting where employees aren’t part of the process of forming goals, policies, or vision…they’re just the ones tasked with carrying out what “the government” has decided.
Staff may be able to have a say, but only by approaching the decision makers and making a case for their stance. Opinions are rarely collected.
What Next?
You’re probably thinking its just easier to answer the original question about how to properly compensate an employee for good work. But its not, its just covering up the bigger issue of employer/staff relationship. Joel even states in his article that formalized pay-for-performance programs don’t work.
As always, the right thing to do…the thing that will make your organization better in the long run…is also the toughest, painful, messy thing to do. It means being honest about your business’s deficiencies and committing to change not just company policies or guidelines, but how you…as a business owner, as a person…view your staff and their role in your organization.
If you make your staff partners in the business, if you can get them to buy into the idea of your company and give them a true stake in its success, then you won’t need to worry about your staff wanting something “over and above” their paycheck for a job well done. They’ll want to do an exemplary job because the success of the company will mean as much to them as it does to you.
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