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Here's a question to which most people experience revulsion, but must be thought of and answered honestly: Why not give everyone the same bonus based on compan

Here's a question to which most people experience revulsion, but must be thought of and answered honestly: Why not give everyone the same bonus based on company performance? Make it collective good. You'll probably think of reasons, like "good people should be rewarded," or "people who do things wrong need to have consequences," but you must realize the alternative is this vile demotivational anti-pattern with even worse consequences. The right way is to align the company goal with the individual goal, and do it simply and clearly. American companies need to understand and follow Deming's principles (http://en.wikipedia.org/wiki/W._Edwards_Deming#Key_principles http://en.wikipedia.org/wiki/W._Edwards_Deming#Key_principle...), or we'll continue falling into the soul-sucking black hole we're already halfway into. He already knew all of this, every bit of what we're experiencing, and our objection to his ideas is nothing more than an ideological almost religious belief that the most effective way to motivate individuals is to rank, rate, measure, and reward them accordingly. In fact, those archaic methods of management only serve to demotivate and systemically destroy culture and productivity alike, and reduces the quality of whatever you produce, be it innovation or physical products. We know this. Deming's ideas work. They are truth in writing, and knowledge in practice. He pulled Japan out of a post-war recession and made them legends of quality production for pete's sake. Why can't we learn?

forkandwait 13y ago
I am currently reading a bunch of the Toyota Way books, Deming, etc. and sometimes I wonder if one of the most basic assumptions in the West is that the individual is the root and the system is a derived thing. This assumption starts, maybe, with Christianity which tells us that we stand alone before God judged on our individual character, not on our wealth or social position. Buddhism, on the other hand, tells us that even our perception of selfhood and autonomy is an illusion to be rooted out and discounted. To toss out an assumption as fundamental as these would require a huge realignment of all sorts of things -- how we punish and reward, our sense of self worth, who is good and who is bad, etc. So we don't really want to go there. I think the West could benefit from a swing to the Systems/ Wholeness side of the dichotomy, but I wouldn't want to discount how powerful and what a creative force our individualism has been throughout the last 2000 years. (EDIT, PS: Deming is the real deal, and the Toyota Way/ Lean books and movement tries to take some of his surface ideas and implement them without challenging their readers in the way Deming wanted to.) (EDIT, PPS: Toyota / Buddha says "You see a problem? Change the system." Microsoft/ Jesus says "You see a problem? Roast the culpable individuals, reward the virtuous individuals.") (EDIT, PPPS: Hegel and his philosophical descendants have the best take on the dynamic movement between individual and collective, without discounting either of the two viewpoints.)
- calinet6 13y ago
  Completely agree, I think you have the roots of the different paradigms entirely correct. It's also the same dichotomy that produces the bisected political extremes in the US. I disagree that we don't want to go there. One of these seems to produce better results, companies, and societies, while the other produces effectively dysfunctional ones, like the example we just read. I seek realignment. This can be improved.
- curiouscats 13y ago
  For more on Deming's ideas see http://blog.deming.org/ http://blog.deming.org/2013/09/online-resources-for-w-edwards-demings-management-ideas/ http://blog.deming.org/tag/performance-appraisal/ "The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise." W. Edward Deming - see: http://blog.deming.org/2013/02/the-idea-of-performance-rating-to-capture-merit-is-alluring/ http://blog.deming.org/2013/02/the-idea-of-performance-ratin...
- nevster 13y ago
  Minor point... I'd say Christianity goes along with the original poster's idea of everyone getting the same reward - ie grace - nothing you do can merit it - it's a gift. The parable of the vineyard workers explains it - it doesn't matter how late in the day the workers start working - they all get the same reward.
  - andrewflnr 13y ago
    Also, if Jesus was interested in "roasting" people, he wouldn't have bothered coming here.
    - CamperBob2 13y ago
      And if His old man weren't interested in roasting people, He'd have used industry-wide best practices such as two-factor authentication and salted password hashes on the root server, to keep Satan from hacking into the source repository.
macspoofing 13y ago
>Why not give everyone the same bonus based on company performance? Make it collective good. Company performance is not dependent on the performance of any one single individual. That is, I can be the laziest, most incompetent developer or middle manger, and it would have no bearing on quarterly earning. So if you're using company-wide performance bonuses to stimulate productivity, in a company of thousands of employees, you're doing something wrong. The incentive in that case is for each individual to do as little as possible because why exert yourself if you're just going to get as much as the next guy anyway, and the result is everyone loses. This is a classic "tragedy of the commons" scenario, where the incentive is to be a cheater. So the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one. That's what you need to do, and that's how you properly set up the incentives. The problem is that in a company of thousands of employees, creating a ranking system that works perfectly is pretty darn hard, especially since metrics are usually ambiguous and subjective. So you're not going to get it right 100% of the time.
- forkandwait 13y ago
  I wonder if the individual reward versus collective reward approaches have any actual data for their respective sides? I am pretty sure Toyota gives collective bonuses or not, and they are kicking the shit out of American auto, but I don't really have the background in this to cite data on either side. Maybe someone on HN does?
  - macspoofing 13y ago
    >I am pretty sure Toyota gives collective bonuses There's nothing wrong with collective bonuses. I just don't see them as a boost for productivity. It's a nice perk. I probably overstated their negative effect. You're not going to not do 'nothing' since your team will know if you're not pulling your weight, and social pressure plus threat of being fired will keep people in line. But yeah, generally collective rewards just don't work as expected, else communism would work.
- calinet6 13y ago
  You'd think that, but in fact, statistically and scientifically speaking, the opposite is true. This is the disconnect. "the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one." No, it isn't. This creates a company in which people are constantly afraid of the stick and fighting for the carrot. This generates in-fighting, corporate politics, ladder-climbing, game-playing, and a demotivated base (people not being motivated by either end of the bell curve). Your measurements become focus targets (as with standardized testing in schools) instead of your actual product. You lose cohesion, destroy culture, create a network of jealousy, secrecy, and fear. You lose employee loyalty, cause resentment, and lose productivity and effectiveness. Quality is adversely affected. You're not going to get it right 100% of the time because you're not going to get it right ever. You're generating a dysfunctional culture, only held in place despite itself. The answer is to remove it all; enable true pride in work, fair compensation, leadership, continual improvement, education and self-improvement. This works better. Not just in theory, but in practice. When you remove all the unpredictable negative consequences of the carrot-and-stick system, you enable an order of magnitude better company. Read it again, try to understand it better. There's a disconnect, and you're the perfect example of what's fighting this exponential improvement.
squidi 13y ago
> Why not give everyone the same bonus based on company performance? Make it collective good. I wholeheartedly agree. Apart from niche examples, like measuring sale people on sales, there is no good reliable way to measure employees based on performance/outputs. IO Psychologists have been looking at this for years and even mathematicians (like Leonard Mlodinow in The Drunkard's Walk) agree.
- jdlshore 13y ago
  And measuring salespeople on sales has demonstrable negative effects as well, such as the popular "salesman will promise the world in order to make a commission, leaving the developers to hold the bag" trope.
abraxasz 13y ago
I did experience revulsion, but I think that you're right, it's an important concept to think about. I perused the link you provided, and here are some random thoughts: - The article lists as a deadly sin: "Evaluation by performance, merit rating, or annual review of performance" But then the question remains: how do you make sure your best employees don't get poached by other companies who are willing to acknowledge the fact that they are superior, and pay them accordingly? - Another point listed as a deadly sin: "Mobility of management" I can agree with that, only if we also agree on the fact that management is just an administrative position, like at Fog's Creek or Jane Street. In other words, salaries and positions in the hierarchy are decoupled. If not, then the system you mention doesn't solve the problem of: "how are we going to promote people?" I admit that I didn't read the entire Deming article, so please correct me if I'm missing something.
- calinet6 13y ago
  It's more about producing a quality culture in order to produce a quality product. You can still recognize people for performance, but not by an unverifiable and arbitrary rating scale. You can still promote people, but do it in the open by agreed upon skills, merits, and experience. Your goal shouldn't be to demotivate people by negating all forms of reward, but to motivate them by rewarding in the clear based on agreeable reasoning. The key is in the culture: enable people to take pride in their work. It turns out from 10,000 feet, what most people want isn't, in fact, simple monetary recognition, that this is a by-product of the dysfunctional reward-seeking individualistic culture, looking for any way to find self-worth and recognition in a system devoid of true value. Any port in a storm. What people really want is autonomy, mastery, and purpose from their work, and a culture that enables them to love what they do while being fairly compensated and challenged. Deming's ideas are meant to enable this type of business, and entirely remove the type of childish game playing over simplistic rewards you're talking about. You go from a simplistic carrot-and-stick reward-seeking and punishment-avoiding mentality (and all the complex structures of negative reinforcement and behavior avoidance built around it) to a functional culture, devoid of fear, enabling people to do work that they can feel proud of. If you have people who really are superior, they'll want to be challenged, to work with other great people, and to be fairly compensated. If you have sub-par people, work on raising them to another level: Point 13, "Institute a vigorous program of education and self-improvement." Furthermore, your top performers are your outliers: the tiny sliver on the end of your bell curve. You need to start by realizing that statistically, improving your entire culture is going to improve your company more than desperately keeping hold of your top 2 rockstars using methods that are demotivating everybody else. It turns out, the things you do to improve your systems and culture are the same things that top performers want. They'll leave if they're not feeling fulfilled—if bonuses and money is all they want, screw 'em, they're culture thieves anyway. But what they probably really want is work that is real. Easier said than done, but Deming gives an excellent prescription for how to do it, and it's fully backed up. The key is to realize that you cannot do these things in isolation. That was his last point: "Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job." You can't just remove part of your existing system because of one suggestion: you need to replace it with another, better one. PS: Here's another writeup I did on this subject recently, delving into much more detail: https://news.ycombinator.com/item?id=6704645 https://news.ycombinator.com/item?id=6704645
walshemj 13y ago
Works for John Lewis in the UK
- takluyver 13y ago
  To expand on this: John Lewis is a chain of department stores and supermarkets (Waitrose), which is owned by its employees. Each year, a sizable fraction of its profits go to a bonus distributed in proportion to salary (17% on top of each salary last year, according to Wikipedia).
  - walshemj 13y ago
    Sorry I was being a bit UK centric there John Lewis is a effectively a worker coop - even though they dont use the term and there are a few issues with how the internal democracy works.
tsotha 13y ago
>Why not give everyone the same bonus based on company performance? Make it collective good. Because like all collective goods you suffer from the tragedy of the commons. If you work for a large company your individual contribution is so small it has a negligible effect on your bonus. Unless you're interested in moving up the management ladder the smart thing to do is just work hard enough to avoid getting fired. Of course not everyone will adopt this attitude, but enough will to affect the overall performance of the company. Also your top performers will leave. People who are passionate about their jobs and put in long hours expect to be rewarded for their efforts. If you give them the same bonus as the guy in the next cubicle who's out the door at 5:00 PM sharp they're not going to like it very much. My company used to have two bonuses - one based on individual performance and one based on company performance. A few years back the individual performance bonus went away and the results have been disastrous. Once you get a significant percentage of people slacking off the entire character of the office changes.
- w0rd-driven 13y ago
  If you make the same as someone that leaves at 5pm sharp, you don't have to like it. If monetary compensation is your motivation for staying later, you're likely making the wrong choice. Bonuses in those instances do set the wrong tone, though. I would consider getting the same as a non-performer just expected salary increases but its still a kick in the nuts either way. Your last line is crucial and one my experience can echo. If you strip away incentives, ones that attracted people to your place to begin with, you can expect turnover. You might as well be walking then to the door. You can fool new hires to a degree until they hear that there were performance bonuses at one point and then the same resentment starts to grow inside them too. You're only real recourse is to have every one of the "old guard" leave so you can continue your downward spiral into cheapness.
rayiner 13y ago
> Why not give everyone the same bonus based on company performance? Make it collective good. I don't know whether this is common in other industries, but at top American law firms, salary raises and bonuses are lockstep. That means everyone gets paid based strictly on seniority. At many firms, this even carries through the partnership ranks. There are benefits and disadvantages to such a system. The benefit is that it reduces competition between workers, and reduces unproductive credit-seeking. When you rank people against each other, the focus ultimately shifts to optimizing to the ranking metric, which is inevitably different than actually optimizing job performance. Such systems favor people who are good at taking credit, not people who get the best results. Lockstep systems also increase cooperation: nobody avoids helping someone else or avoids working on a stronger team for fear of the zero-sum nature of rankings. The downside is that strict lockstep systems keep you from giving superstars extra compensation. This can be a liability if you don't have a uniformly high quality of employee, because superstars will leave for companies that offer individualized compensation. That being said, the advantages of individualized compensation decrease as it becomes more difficult to achieve true measures of individual performance. Nobody complains about individualized performance ratings on Wall Street, because it's easy to compute how much money a trader made for the firm or the value of the deals an investment banker worked on. The relevant metrics are objective and hard to game. It's much more difficult to evaluate a programmer's contribution to a development team. The most troubling thing to me about stack ranking is not ranking per se, but the fact that stack ranking is applied by HR departments. This issue has come up before in the context of hiring, and what I said then is the same thing I'll say here: HR should not be involved in hiring, or firing! It's perfectly okay to identify weak performers and fire them, but it should be an organic process that happens based on the decisions of technical leadership. HR folks are administrative people. They're there to fill out W-2 forms and keep you from getting sued by disgruntled employees. They do not have domain expertise and do not know what makes for an effective technical employee. This is an area where tech companies need to take a page from Wall Street rather than traditional Big Corps. At an investment bank, a banker decides who to hire and who to fire, not some HR person who has no understanding of banking. To make this system tractable, firing decisions are made at a low level, early and often. That prevents getting into a situation where the organization builds up a glut of weak performers that need to be fired in some comprehensive and systematic culling.
aaronetz 13y ago
I agree. Having worked in the military, where there were no bonuses whatsoever, and salaries were based on a standard scale, I found that what made the good employees good was that they were proud of / enjoyed their work, and not money (a different problem was that people could not be easily fired (to say the least), which did lead to some slacking). I personally believe that people whose main motivation is the bonus are not the employees one should look for.
- w0rd-driven 13y ago
  I think this only works in a situation like the military, where the "industry standard" as it were, states there are no bonuses. The introduction of bonuses are a perk, but in our culture of software development its also par the course at most places. From the company perspective, this can be seen as a somewhat salary cap. Instead of requiring I pay all workers x + 5%, I can get them to gladiator it out for that bit of money I don't really want to pay them. I can also correlate this to our US tip culture where its expected to pay people abysmal hourly rates and let the stack ranking of good tippers make up the difference. I do think the military system would be preferable but it requires a huge industry shift and divorcing the idea that x gets a bonus so company y is more attractive, which seems near impossible. I'm also for abolishing our tip culture to replace it with Euro's but there would be some in that culture that make good money and would balk because their employer would never make up the difference in a million years. Its definitely hard not to see either as a form of extortion but some play the game really well in spite of it all. You can still enjoy the work you do and play the game though, but it just becomes that much more difficult due to outside pressure.
AnthonyMouse 13y ago
This is the basic cooperation vs. competition problem. If you have competition then people spend a lot of resources fighting because what matters most is being faster than your friends, even if that means working to slow them down. Whereas if you have cooperation then you get complacency because then nobody has to be faster than anybody, so everybody can sit on their duff. It seems to me the solution is to rate people against absolute standards, never against each other. The article seems to think this doesn't work because you can't give a large bonus to everyone, but that smells like BS to me. If everyone is legitimately doing an outstanding job then the company as a whole should be doing outstandingly well, which means you should have plenty of money to pay everyone a large bonus. (Unless the metrics you're using are bunkum, in which case there's your problem.) The key is to make it absolutely without individual benefit to sabotage one's coworkers while still creating the incentive to excel personally. Along similar lines, if you want to deal with the quarterly results bias, average it out. Publish numbers quarterly (or even more often than that) but set compensation based on an employee's five year average, not what they did just now. If you do poorly this quarter then you don't lose $1000 from your bonus this quarter, instead you lose $50/quarter for the next five years. At the same time, you still get a ~$1000 bonus this quarter, and you still want that number to go up next quarter, so you're keeping an eye on that average -- just not doing it this quarter at the expense of next quarter, because the psychological instant gratification of doing that goes away.
- potatolicious 13y ago
  > "The article seems to think this doesn't work because you can't give a large bonus to everyone" Indeed. Why can't you simply measure people against a consistent, externally-defined bar, and reward them based on their share of their performance group? e.g., Employees who hit the bar are in group C, employees who exceed it are in group B, employees who are extraordinary are in group A. Each group has a portion of the bonus pool, and each member of a group gets the same as every other member of their group. You can still get rewarded for better work, but now you're no longer working against an arbitrary bar defined by your peers. If you, hypothetically, have a team full of rockstars then everyone shares the bonus pool equally. Done. Also, what's up with tying raises (not bonuses) to performance rankings? At the end of the day people will leave if they can get paid more elsewhere. The best/only way to ensure your employees don't leave is to keep paying them at or near what they can get on the open market today. That guy may be the weakest engineer on your team, but he's still a good engineer and can do a lot better than the shitty 2% raise you've stuck him with.
dworin 13y ago
Equally shared bonus pools were fairly common in top-tier professional services firms until the late 1990s, and even when they changed, most kept fairly equal distributions of profits between partners and to associates. However, almost all of those firms used a stack ranking system that was even more aggressive - those at the top got promoted, those in the middle got worked out over time, and those at the bottom got fired. Shared bonus pools work when a company has an aggressive performance management culture, but this doesn't become visible as long as the company is doing well. When things are good, everyone is getting an extra lump of cash, even if it has nothing to do with their individual performance. But when the market changes, top performers flee because they realize they can make a lot more money someplace else, and that they'll never hit their goals until the company gets rid of the stragglers at the bottom and stops settling for mediocrity among everyone else.
JulianMorrison 13y ago
"The American Dream" is meritocracy, and meritocracy is basically a lie, any which way you slice it. Measures don't discover merit, merit doesn't correlate to rising,and rising is only available to the few.
frozenport 13y ago
Its called stock options.

forkandwait 13y ago

I am currently reading a bunch of the Toyota Way books, Deming, etc. and sometimes I wonder if one of the most basic assumptions in the West is that the individual is the root and the system is a derived thing. This assumption starts, maybe, with Christianity which tells us that we stand alone before God judged on our individual character, not on our wealth or social position. Buddhism, on the other hand, tells us that even our perception of selfhood and autonomy is an illusion to be rooted out and discounted. To toss out an assumption as fundamental as these would require a huge realignment of all sorts of things -- how we punish and reward, our sense of self worth, who is good and who is bad, etc. So we don't really want to go there. I think the West could benefit from a swing to the Systems/ Wholeness side of the dichotomy, but I wouldn't want to discount how powerful and what a creative force our individualism has been throughout the last 2000 years. (EDIT, PS: Deming is the real deal, and the Toyota Way/ Lean books and movement tries to take some of his surface ideas and implement them without challenging their readers in the way Deming wanted to.) (EDIT, PPS: Toyota / Buddha says "You see a problem? Change the system." Microsoft/ Jesus says "You see a problem? Roast the culpable individuals, reward the virtuous individuals.") (EDIT, PPPS: Hegel and his philosophical descendants have the best take on the dynamic movement between individual and collective, without discounting either of the two viewpoints.)

calinet6 13y ago
Completely agree, I think you have the roots of the different paradigms entirely correct. It's also the same dichotomy that produces the bisected political extremes in the US. I disagree that we don't want to go there. One of these seems to produce better results, companies, and societies, while the other produces effectively dysfunctional ones, like the example we just read. I seek realignment. This can be improved.
curiouscats 13y ago
For more on Deming's ideas see http://blog.deming.org/ http://blog.deming.org/2013/09/online-resources-for-w-edwards-demings-management-ideas/ http://blog.deming.org/tag/performance-appraisal/ "The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise." W. Edward Deming - see: http://blog.deming.org/2013/02/the-idea-of-performance-rating-to-capture-merit-is-alluring/ http://blog.deming.org/2013/02/the-idea-of-performance-ratin...
nevster 13y ago
Minor point... I'd say Christianity goes along with the original poster's idea of everyone getting the same reward - ie grace - nothing you do can merit it - it's a gift. The parable of the vineyard workers explains it - it doesn't matter how late in the day the workers start working - they all get the same reward.
- andrewflnr 13y ago
  Also, if Jesus was interested in "roasting" people, he wouldn't have bothered coming here.
  - CamperBob2 13y ago
    And if His old man weren't interested in roasting people, He'd have used industry-wide best practices such as two-factor authentication and salted password hashes on the root server, to keep Satan from hacking into the source repository.

macspoofing 13y ago

>Why not give everyone the same bonus based on company performance? Make it collective good. Company performance is not dependent on the performance of any one single individual. That is, I can be the laziest, most incompetent developer or middle manger, and it would have no bearing on quarterly earning. So if you're using company-wide performance bonuses to stimulate productivity, in a company of thousands of employees, you're doing something wrong. The incentive in that case is for each individual to do as little as possible because why exert yourself if you're just going to get as much as the next guy anyway, and the result is everyone loses. This is a classic "tragedy of the commons" scenario, where the incentive is to be a cheater. So the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one. That's what you need to do, and that's how you properly set up the incentives. The problem is that in a company of thousands of employees, creating a ranking system that works perfectly is pretty darn hard, especially since metrics are usually ambiguous and subjective. So you're not going to get it right 100% of the time.

forkandwait 13y ago
I wonder if the individual reward versus collective reward approaches have any actual data for their respective sides? I am pretty sure Toyota gives collective bonuses or not, and they are kicking the shit out of American auto, but I don't really have the background in this to cite data on either side. Maybe someone on HN does?
- macspoofing 13y ago
  >I am pretty sure Toyota gives collective bonuses There's nothing wrong with collective bonuses. I just don't see them as a boost for productivity. It's a nice perk. I probably overstated their negative effect. You're not going to not do 'nothing' since your team will know if you're not pulling your weight, and social pressure plus threat of being fired will keep people in line. But yeah, generally collective rewards just don't work as expected, else communism would work.
calinet6 13y ago
You'd think that, but in fact, statistically and scientifically speaking, the opposite is true. This is the disconnect. "the idea of rewarding high achievers (carrot) and punishing under-achievers (stick) is a good one." No, it isn't. This creates a company in which people are constantly afraid of the stick and fighting for the carrot. This generates in-fighting, corporate politics, ladder-climbing, game-playing, and a demotivated base (people not being motivated by either end of the bell curve). Your measurements become focus targets (as with standardized testing in schools) instead of your actual product. You lose cohesion, destroy culture, create a network of jealousy, secrecy, and fear. You lose employee loyalty, cause resentment, and lose productivity and effectiveness. Quality is adversely affected. You're not going to get it right 100% of the time because you're not going to get it right ever. You're generating a dysfunctional culture, only held in place despite itself. The answer is to remove it all; enable true pride in work, fair compensation, leadership, continual improvement, education and self-improvement. This works better. Not just in theory, but in practice. When you remove all the unpredictable negative consequences of the carrot-and-stick system, you enable an order of magnitude better company. Read it again, try to understand it better. There's a disconnect, and you're the perfect example of what's fighting this exponential improvement.

squidi 13y ago

> Why not give everyone the same bonus based on company performance? Make it collective good. I wholeheartedly agree. Apart from niche examples, like measuring sale people on sales, there is no good reliable way to measure employees based on performance/outputs. IO Psychologists have been looking at this for years and even mathematicians (like Leonard Mlodinow in The Drunkard's Walk) agree.

jdlshore 13y ago
And measuring salespeople on sales has demonstrable negative effects as well, such as the popular "salesman will promise the world in order to make a commission, leaving the developers to hold the bag" trope.

abraxasz 13y ago

I did experience revulsion, but I think that you're right, it's an important concept to think about. I perused the link you provided, and here are some random thoughts: - The article lists as a deadly sin: "Evaluation by performance, merit rating, or annual review of performance" But then the question remains: how do you make sure your best employees don't get poached by other companies who are willing to acknowledge the fact that they are superior, and pay them accordingly? - Another point listed as a deadly sin: "Mobility of management" I can agree with that, only if we also agree on the fact that management is just an administrative position, like at Fog's Creek or Jane Street. In other words, salaries and positions in the hierarchy are decoupled. If not, then the system you mention doesn't solve the problem of: "how are we going to promote people?" I admit that I didn't read the entire Deming article, so please correct me if I'm missing something.

calinet6 13y ago
It's more about producing a quality culture in order to produce a quality product. You can still recognize people for performance, but not by an unverifiable and arbitrary rating scale. You can still promote people, but do it in the open by agreed upon skills, merits, and experience. Your goal shouldn't be to demotivate people by negating all forms of reward, but to motivate them by rewarding in the clear based on agreeable reasoning. The key is in the culture: enable people to take pride in their work. It turns out from 10,000 feet, what most people want isn't, in fact, simple monetary recognition, that this is a by-product of the dysfunctional reward-seeking individualistic culture, looking for any way to find self-worth and recognition in a system devoid of true value. Any port in a storm. What people really want is autonomy, mastery, and purpose from their work, and a culture that enables them to love what they do while being fairly compensated and challenged. Deming's ideas are meant to enable this type of business, and entirely remove the type of childish game playing over simplistic rewards you're talking about. You go from a simplistic carrot-and-stick reward-seeking and punishment-avoiding mentality (and all the complex structures of negative reinforcement and behavior avoidance built around it) to a functional culture, devoid of fear, enabling people to do work that they can feel proud of. If you have people who really are superior, they'll want to be challenged, to work with other great people, and to be fairly compensated. If you have sub-par people, work on raising them to another level: Point 13, "Institute a vigorous program of education and self-improvement." Furthermore, your top performers are your outliers: the tiny sliver on the end of your bell curve. You need to start by realizing that statistically, improving your entire culture is going to improve your company more than desperately keeping hold of your top 2 rockstars using methods that are demotivating everybody else. It turns out, the things you do to improve your systems and culture are the same things that top performers want. They'll leave if they're not feeling fulfilled—if bonuses and money is all they want, screw 'em, they're culture thieves anyway. But what they probably really want is work that is real. Easier said than done, but Deming gives an excellent prescription for how to do it, and it's fully backed up. The key is to realize that you cannot do these things in isolation. That was his last point: "Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job." You can't just remove part of your existing system because of one suggestion: you need to replace it with another, better one. PS: Here's another writeup I did on this subject recently, delving into much more detail: https://news.ycombinator.com/item?id=6704645 https://news.ycombinator.com/item?id=6704645

walshemj 13y ago

Works for John Lewis in the UK

takluyver 13y ago
To expand on this: John Lewis is a chain of department stores and supermarkets (Waitrose), which is owned by its employees. Each year, a sizable fraction of its profits go to a bonus distributed in proportion to salary (17% on top of each salary last year, according to Wikipedia).
- walshemj 13y ago
  Sorry I was being a bit UK centric there John Lewis is a effectively a worker coop - even though they dont use the term and there are a few issues with how the internal democracy works.

tsotha 13y ago

>Why not give everyone the same bonus based on company performance? Make it collective good. Because like all collective goods you suffer from the tragedy of the commons. If you work for a large company your individual contribution is so small it has a negligible effect on your bonus. Unless you're interested in moving up the management ladder the smart thing to do is just work hard enough to avoid getting fired. Of course not everyone will adopt this attitude, but enough will to affect the overall performance of the company. Also your top performers will leave. People who are passionate about their jobs and put in long hours expect to be rewarded for their efforts. If you give them the same bonus as the guy in the next cubicle who's out the door at 5:00 PM sharp they're not going to like it very much. My company used to have two bonuses - one based on individual performance and one based on company performance. A few years back the individual performance bonus went away and the results have been disastrous. Once you get a significant percentage of people slacking off the entire character of the office changes.

w0rd-driven 13y ago
If you make the same as someone that leaves at 5pm sharp, you don't have to like it. If monetary compensation is your motivation for staying later, you're likely making the wrong choice. Bonuses in those instances do set the wrong tone, though. I would consider getting the same as a non-performer just expected salary increases but its still a kick in the nuts either way. Your last line is crucial and one my experience can echo. If you strip away incentives, ones that attracted people to your place to begin with, you can expect turnover. You might as well be walking then to the door. You can fool new hires to a degree until they hear that there were performance bonuses at one point and then the same resentment starts to grow inside them too. You're only real recourse is to have every one of the "old guard" leave so you can continue your downward spiral into cheapness.

rayiner 13y ago

> Why not give everyone the same bonus based on company performance? Make it collective good. I don't know whether this is common in other industries, but at top American law firms, salary raises and bonuses are lockstep. That means everyone gets paid based strictly on seniority. At many firms, this even carries through the partnership ranks. There are benefits and disadvantages to such a system. The benefit is that it reduces competition between workers, and reduces unproductive credit-seeking. When you rank people against each other, the focus ultimately shifts to optimizing to the ranking metric, which is inevitably different than actually optimizing job performance. Such systems favor people who are good at taking credit, not people who get the best results. Lockstep systems also increase cooperation: nobody avoids helping someone else or avoids working on a stronger team for fear of the zero-sum nature of rankings. The downside is that strict lockstep systems keep you from giving superstars extra compensation. This can be a liability if you don't have a uniformly high quality of employee, because superstars will leave for companies that offer individualized compensation. That being said, the advantages of individualized compensation decrease as it becomes more difficult to achieve true measures of individual performance. Nobody complains about individualized performance ratings on Wall Street, because it's easy to compute how much money a trader made for the firm or the value of the deals an investment banker worked on. The relevant metrics are objective and hard to game. It's much more difficult to evaluate a programmer's contribution to a development team. The most troubling thing to me about stack ranking is not ranking per se, but the fact that stack ranking is applied by HR departments. This issue has come up before in the context of hiring, and what I said then is the same thing I'll say here: HR should not be involved in hiring, or firing! It's perfectly okay to identify weak performers and fire them, but it should be an organic process that happens based on the decisions of technical leadership. HR folks are administrative people. They're there to fill out W-2 forms and keep you from getting sued by disgruntled employees. They do not have domain expertise and do not know what makes for an effective technical employee. This is an area where tech companies need to take a page from Wall Street rather than traditional Big Corps. At an investment bank, a banker decides who to hire and who to fire, not some HR person who has no understanding of banking. To make this system tractable, firing decisions are made at a low level, early and often. That prevents getting into a situation where the organization builds up a glut of weak performers that need to be fired in some comprehensive and systematic culling.

aaronetz 13y ago

I agree. Having worked in the military, where there were no bonuses whatsoever, and salaries were based on a standard scale, I found that what made the good employees good was that they were proud of / enjoyed their work, and not money (a different problem was that people could not be easily fired (to say the least), which did lead to some slacking). I personally believe that people whose main motivation is the bonus are not the employees one should look for.

w0rd-driven 13y ago
I think this only works in a situation like the military, where the "industry standard" as it were, states there are no bonuses. The introduction of bonuses are a perk, but in our culture of software development its also par the course at most places. From the company perspective, this can be seen as a somewhat salary cap. Instead of requiring I pay all workers x + 5%, I can get them to gladiator it out for that bit of money I don't really want to pay them. I can also correlate this to our US tip culture where its expected to pay people abysmal hourly rates and let the stack ranking of good tippers make up the difference. I do think the military system would be preferable but it requires a huge industry shift and divorcing the idea that x gets a bonus so company y is more attractive, which seems near impossible. I'm also for abolishing our tip culture to replace it with Euro's but there would be some in that culture that make good money and would balk because their employer would never make up the difference in a million years. Its definitely hard not to see either as a form of extortion but some play the game really well in spite of it all. You can still enjoy the work you do and play the game though, but it just becomes that much more difficult due to outside pressure.

AnthonyMouse 13y ago

This is the basic cooperation vs. competition problem. If you have competition then people spend a lot of resources fighting because what matters most is being faster than your friends, even if that means working to slow them down. Whereas if you have cooperation then you get complacency because then nobody has to be faster than anybody, so everybody can sit on their duff. It seems to me the solution is to rate people against absolute standards, never against each other. The article seems to think this doesn't work because you can't give a large bonus to everyone, but that smells like BS to me. If everyone is legitimately doing an outstanding job then the company as a whole should be doing outstandingly well, which means you should have plenty of money to pay everyone a large bonus. (Unless the metrics you're using are bunkum, in which case there's your problem.) The key is to make it absolutely without individual benefit to sabotage one's coworkers while still creating the incentive to excel personally. Along similar lines, if you want to deal with the quarterly results bias, average it out. Publish numbers quarterly (or even more often than that) but set compensation based on an employee's five year average, not what they did just now. If you do poorly this quarter then you don't lose $1000 from your bonus this quarter, instead you lose $50/quarter for the next five years. At the same time, you still get a ~$1000 bonus this quarter, and you still want that number to go up next quarter, so you're keeping an eye on that average -- just not doing it this quarter at the expense of next quarter, because the psychological instant gratification of doing that goes away.

potatolicious 13y ago
> "The article seems to think this doesn't work because you can't give a large bonus to everyone" Indeed. Why can't you simply measure people against a consistent, externally-defined bar, and reward them based on their share of their performance group? e.g., Employees who hit the bar are in group C, employees who exceed it are in group B, employees who are extraordinary are in group A. Each group has a portion of the bonus pool, and each member of a group gets the same as every other member of their group. You can still get rewarded for better work, but now you're no longer working against an arbitrary bar defined by your peers. If you, hypothetically, have a team full of rockstars then everyone shares the bonus pool equally. Done. Also, what's up with tying raises (not bonuses) to performance rankings? At the end of the day people will leave if they can get paid more elsewhere. The best/only way to ensure your employees don't leave is to keep paying them at or near what they can get on the open market today. That guy may be the weakest engineer on your team, but he's still a good engineer and can do a lot better than the shitty 2% raise you've stuck him with.

dworin 13y ago

Equally shared bonus pools were fairly common in top-tier professional services firms until the late 1990s, and even when they changed, most kept fairly equal distributions of profits between partners and to associates. However, almost all of those firms used a stack ranking system that was even more aggressive - those at the top got promoted, those in the middle got worked out over time, and those at the bottom got fired. Shared bonus pools work when a company has an aggressive performance management culture, but this doesn't become visible as long as the company is doing well. When things are good, everyone is getting an extra lump of cash, even if it has nothing to do with their individual performance. But when the market changes, top performers flee because they realize they can make a lot more money someplace else, and that they'll never hit their goals until the company gets rid of the stragglers at the bottom and stops settling for mediocrity among everyone else.

JulianMorrison 13y ago

"The American Dream" is meritocracy, and meritocracy is basically a lie, any which way you slice it. Measures don't discover merit, merit doesn't correlate to rising,and rising is only available to the few.

frozenport 13y ago

Its called stock options.