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>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

>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.
- sokoloff 13y ago
  > The answer is to remove it all; enable true pride in work, fair compensation, leadership, continual improvement, education and self-improvement. This works better. A key question in the idea of "fair compensation" is what do you mean by "fair"? If one of your superstar outliers is contributing 5x, 10x or more business value than the average, what does fair compensation look like? Is it 100% of the compensation of the average? 110%? 150%? 250%? In my experience, few firms have compensation structures so flexible as to reflect the true range of contributions of different employees. As a result, their compensation philosophy tends more towards "equal compensation" than "commensurate compensation". The question is whether fair lies closer to "equal" or to "commensurate" on the spectrum. (I obviously understand the argument that equal might result in a more cooperative workforce and a stronger company, all other things being equal. But the very strongest performers, assuming their strength is portable to another firm, will have an incentive to migrate to a firm willing to compensate them more commensurately to their contribution, again, all other things being equal. Once one of these firms springs into being, they may become a magnet for talent as great people like to work with and for other great people. If one can do that to a greater extent at this magnet firm AND have a higher income, enabling more retirement and family financial security, better vacations, etc, those will be powerfully aligned forces.)

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.

sokoloff 13y ago
> The answer is to remove it all; enable true pride in work, fair compensation, leadership, continual improvement, education and self-improvement. This works better. A key question in the idea of "fair compensation" is what do you mean by "fair"? If one of your superstar outliers is contributing 5x, 10x or more business value than the average, what does fair compensation look like? Is it 100% of the compensation of the average? 110%? 150%? 250%? In my experience, few firms have compensation structures so flexible as to reflect the true range of contributions of different employees. As a result, their compensation philosophy tends more towards "equal compensation" than "commensurate compensation". The question is whether fair lies closer to "equal" or to "commensurate" on the spectrum. (I obviously understand the argument that equal might result in a more cooperative workforce and a stronger company, all other things being equal. But the very strongest performers, assuming their strength is portable to another firm, will have an incentive to migrate to a firm willing to compensate them more commensurately to their contribution, again, all other things being equal. Once one of these firms springs into being, they may become a magnet for talent as great people like to work with and for other great people. If one can do that to a greater extent at this magnet firm AND have a higher income, enabling more retirement and family financial security, better vacations, etc, those will be powerfully aligned forces.)