Compensate Success

When I was in fourth grade (about 9 years old), we had a spelling test every Friday. Our teacher told us that if everyone got a perfect score on a spelling test, she would bring each of us a candy bar the following Monday. We were excited about the prospect, but as time went on, it seemed that it might never happen. There were always some who just couldn't seem to spell. Jimmy was probably the worst speller of all. He typically missed about half the words. There was no hope with him inthe class.

But one week the words were particularly easy. In the practice test on Wednesday, everyone except Jimmy got all the wordsright. And Jimmy missed only four words. The anticipation in the class was electric, as we all gave special help and encouragement to Jimmy. On Friday, when everyone got a perfect score, it was hard to tell whether we were more excited about the upcoming candy bar or for Jimmy's success.

...a group of developers is striving to meet tight schedules in a high-payoff market. It is important to reward individuals in a way that motivates them to do things that achieve business objectives in line with the value system of the enterprise.

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Successful projects remain successful by rewarding behaviors that lead to success.

Schedule motivations tend to be self-fulfilling: a wide range of schedules may be perceived as equally applicable for a given task. And schedules are poor motivators.

Some organizations count on altruism, but altruism and egoless teams are quaint, Victorian notions.

Companies often embark on make-or-break projects, and such projects should be managed differently from others.

You need both to reward teams and outstanding individuals. Yet disparate rewards motivate those who receive them, but may frustrate their peers.

You need both to reward solid workers and risk-takers; yet from an economic perspective, you need to manage the risk of any investment into speculative work. And if speculative work fails, and the contributors are rewarded according to performance, it will disincent the organization from embarking on future risk-taking projects.

Some contributions are difficult to quantify, such as those of TheCatalyst (see Peopleware by DeMarco and Lister) who facilitates communication between team members and perhaps helps morale.

Therefore:

Establish lavish rewards for individuals contributing to successful make-or-break projects. The entire team (social unit) should receive comparable rewards, to avoid de-motivating individuals who might assess their value by their salary relative to their peers. "Very special" individuals might receive exceptional awards that are tied les strongly to team performance.

A celebration is a particularly effective reward [BibRef-ZuckermanAndHatala1992].

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As a result, you get an organization that focuses less on schedule (but see SizeTheSchedule) and more on customer satisfaction and systemic success.

In most enterprises you do not want to reward risk-taking in a way that encourages people to take risks that don't serve the long-term viability of the enterprise. The reward should always be more focused on meeting the organization's goals than on how the goals are met. If the organization's job is to produce a product, then reward people for what they do in support of delivering the product. Sometimes this includes an element of risk-taking, and to that degree risk-taking should be rewarded. However, you want to remove obstacles to risk-taking. That will allow people to take appropriate risks motivated by meeting organizational objectives, rather than for the sake of having taken a risk. See more about this in the pattern SkunkWorks.

Similarly, most software development organizations shouldn't encourage people to seek crisis situations as opportunities for the contributions that will receive the highest reward. That almost guarantees that the project will become crisis driven. There are some jobs that are legitimately built around a hero culture, such as (real-world) fire fighters and their figurative namesakes inside software projects, but these are the exception rather than the rule. Be sure to reward what the organization values, knowing that people will tend to do what they are rewarded to do.

Similarly, it can be problematic to reward those who work for the sake of the work ethic alone. Reward working smart more than working hard; there should be no prize for the most hours worked. Paul Bramble relates:

Working for stock options that could be expected to turn into $12 million was a horrible experience. And having peers with similar expectations only made it worse. It clouded their judgment and they stopped using DomainExpertiseInRoles. Instead, they started giving the more difficult assignments to the perceived "gung-ho" crowd rather than to the people most likely to be able to do them. ... Some of the fanatics were regularly working 80-hour weeks and used the reward system as leverage to exact punishment against those who tried to work reasonable hours and balance work and family life.

The liability of high rewards for meeting key corporate objectives is that people who take on those responsibilities can over-extend themselves, leading to personal stress with potential risk to the project. This is particularly problematic for rewards to management staff who run the risk of developing a burnout culture in their subordinates to meet the objectives (see "The Psychology of Burnout" in TheOpenClosedPrincipleOfTeams).

There are factors that lead to success that are difficult to measure or even identify, so it's best to orient the rewards around the organization's shared value system of what is important to achieve. Scoping the concern of "organization" in this context is key to the long-term success of the enterprise; a closed group can't sustain values that are inconsistent with those of the enclosing organization or the next higher level of management.

Success makes it possible to build up the work environment infrastructure, making it a more attractive place to work. This is a form of long-term compensation or of recognition of success and is particularly important in team settings. In one organization we used windfall funds to buy an interactive terminal which, in that era (about 1974) was a treat for the staff. On a broader scale you can buy an espresso machine (for which Bell Labs computer science research was famous), just a coffee machine, or a water cooler--or build an entire culture of food. See the pattern TheWaterCooler.

High rewards to some individuals may still demotivate their peers, but rewarding on a team basis helps remove the "personal" aspect of this problem, and helps establish the mechanism as a motivator, in addition to being just a postmortem soother. On the other hand, see the discussion in TheRoleOfManagement that puts individual contributions in a broader perspective: are individual successes really just team success in misleading packaging?

The grounding for this pattern is empirical. There is a strong correlation between wildly successful software projects, and a lucrative reward structure. Cases include QPW, cases cited at the Risk Derivatives Conference in New York on 6 May 1994; see Pay and Organization Development, by Edward E. Lawler, Addison-Wesley, 1981. The place of reward mechanisms is well-established in the literature [BibRef-Kilmann1984].

Dennis DeBruler noted at the PLoP review of this pattern, that most contemporary organization culture derives from the industrial complex of the 1800s, which was patterned after the only working model available at the time: military management. (One common model of military management is: RewardIndividuallyPunishCorporately, which leads to fear of failing and resentment towards those who fail.) He notes that most American reward mechanisms are geared more toward weeding out problems than toward encouraging solutions. A good working model is that of groups of doctors and lawyers, where managers are paid less than the employees.

Paul Bramble adds, "The trick is to be discerning — sometimes it's the quiet plodders who generate the success, and you have to be able to see past the self-promoting employees to see who really gets the work done."

See also CompensateResults [BibRef-Beedle1997].