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RE: Why salary bonus and other incentives fail to meet their objectives

21 replies on 2 pages. Most recent reply: May 31, 2004 8:53 AM by Prince Chellarajan

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Dale Asberry

Posts: 161
Nickname: bozomind
Registered: Mar, 2004

RE: Why salary bonus and other incentives fail to meet their objectives (View in Weblogs)
Posted: May 18, 2004 7:01 AM
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Summary
I'm posting this entry to address what I believe are some of the most interesting misconceptions that have surfaced in conversations regarding my original post.
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I'm posting this entry to address what I believe are some of the most interesting misconceptions that have surfaced in conversations regarding my original post
Vincent O'Sullivan airs his concerns:

> Firstly... get rid of bonuses and at-risk pay.

OK, you've removed my primary incentive for anti-social work activities (e.g. overtime, weekend work, pushing for deadlines, etc.). Um, well at least I can spend more time with my family.

> Secondly, get rid of employee evaluations.

Fine. I now know I won't be taken to task for not pulling my weight and doing any of the above when problems occur.

> Finally... the best thing a manager can do is treat employees with respect.

Er? That's it! Instead of the propect of more money for more work, the best I can hope for is that my manager will now respect me?

Sorry mate, I've already got respect. We're in a trading situation. I give my employer work, I get money.

After a bit of discussion, Michael Feathers says:

I'm not Dave, but I'll tell you, from my point of view going around and visiting many teams, people either like to program or they don't. When they don't, they and everyone else would be better off if they found something else they liked.

If a programmer has that spark it can still be obscured by morale problems, management issues, lack of clear goals in the organization etc. But, when people have that spark, that internal reward mechanism, and the organizational context is right, they either will improve continuously or they aren't cut out for the work.

Promising people a bonus or a toaster at the end of the year doesn't change this a bit.

Keith Ray believes that behaviourism should work with people because it works with animals:

In training killer whales and other (pretty intelligent) animals (including dogs and people), you try to enhance the behaviors you want, and reduce the behaviors you don't want.

Since you could get your head bitten off if you tried to punish a killer whale, you reduce undesirable behaviors by trying to refocus the animal's [or person's] attention on the good behaviors. To reinforce good behaviors, use praise and recognition and *small* rewards. [You also have to establish trust.]

Check out "Whale Done! : The Power of Positive Relationships" by Kenneth Blanchard (Author), Thad Lacinak (Author), Chuck Tompkins (Author), Jim Ballard.

I responded with:

The problem is that behaviorism doesn't work with people. People (including very young children) are smart enough to detect when another person is trying to manipulate them (def: to change by artful or unfair means so as to serve one's purpose). This leads to the situation where people will get very good at lying to avoid the stick and cheating to get the carrot.

From the article: Peter Scholtes, has observed, "People don't resist change, they resist being changed." With my children, I've found that scolding (or rewarding) them will likely stop the behavior at that very moment. The problem though is that over time they will grow to resent me and the advice that I give. This leads to a situation where I will need to be more and more directly manipulative to get what I want. In response, they will get more and more secretive, combative, and anti-"whatever it is that I want". My solution: talk to them about the consequences of their choices. Did that behaviour enable you to succeed or cause you to fail? Did you hurt another person in the process? Think before you act. Poor decisions then become teachable moments. Over time, my children have grown to respect some of my wisdom while openly questioning and discovering that which they don't yet understand. They are wonderfully unique, independent, courageous, and self-confident.

Although my example is specifically related to my children, I've seen analogous behaviour in the workplace. People resist being manipulated more than anything else. This means that the best you can do to get another person to do what you want is to appeal to their logic, feelings and experience.

The remainder of this post is dedicated to issues that Mike Spille brings up:

>> Dale, this post and your original blog entry both repeatedly use variations on the word "manipulation". And you tie mechanisms like bonuses in with this, saying that bonuses are a form of manipulation - in fact you are very close to saying "coercion" but just manage to avoid it :-)<<

Coercion:
1 : to restrain or dominate by force
2 : to compel to an act or choice
3 : to bring about by force or threat

Incentives are not coercive. They are manipulative:
1 : to treat or operate with the hands or by mechanical means especially in a skillful manner
2 a : to manage or utilize skillfully b : to control or play upon by artful, unfair, or insidious means especially to one's own advantage
3 : to change by artful or unfair means so as to serve one's purpose

The important distinction being the use of force versus the use of subtle, crafty techniques to get what you want.

>>For the life of me, I don't see how you manage to tie bonuses to some form of manipulation. In places where bonuses are used effectively, like financial firms on Wall Street, bonuses are not a tool of manipulation. They are a very realistic form of quid pro quo - do well and you will get a good bonus; do exceptionally well and you will get an exceptional bonus. Don't do so well, you will get little or no bonus.<<

Study after study after study have conclusively shown that doing nothing is more effective than "paying for performance". I would strongly recommend that you read my original reference - it will point you to the quantitative evidence.

>>You mention children and "teachable moments". The implications behind your words are that children should expect neither rewards nor punishment.<<

Let me clarify then: children should neither be punished nor rewarded. Ibid.

>>In fact, what you're saying is that the best system is one where performance has no impact on rewards or punishment.<<

That's correct.

>>You're removing physical feedback (firing someone or rewarding them with a good bonus are physical feedback mechanisms) and saying that psychological feedback is better.<<

To be clear, I have no issues with firing someone. On the other hand, (strangely/amazingly) I've never had to - simply suggesting that the individual is not a good match for the project, team, company, etc has been enough to get them to leave on their own volition. I got them to leave and they got to do it on their own terms. Did they learn a lesson? I hope so, but ultimately, that's up to them.

Regardless, "firing" and "bonus" are not physical feedback beyond being tossed out the door or being handed a check. They are both psychological power-plays that make the person doling the punishment/reward feel like they are in control.

>>In my experience, removing physical feedback is exceedingly dangerous.<<

I've never suggested, even remotely, that feedback should be removed. My managerial success has come from building trust and respect with my reports. I evaluate their abilities and assign them tasks. We negotiate deadlines and I hold them responsible.

Over time, I've realized that most feedback is from them to me: technical problems they encounter, frustrations with coworkers, and interference caused by business processes. My job (as a manager) is to provide direction, eliminate roadblocks, and just listen.

>>People lose a connection between the real world and their jobs. Many people in this environment grow slack, even get depressed - they realize that it makes no difference _in the real world_ whether they work hard or work just hard enough to maintain steerage. They see that applying their all to a project is no difference then just being mediocre.<<

Here are some more exerpts from an interview with Peter Scholtes in Human Resources, June 1996, pp 11-13 by Richard Rudman:

"The major criticisms, says Scholtes, is performance appraisal's assumption that the problems of an organisation are attributable to the individual performance of individual employees. It also assumes that the way to improve an organisation is to improve each individual employee."

...

"Scholtes argues that performance appraisal is based on a false premise about why things go wrong in organisations, and how those things should be fixed."

"It's a false theory about problems, and a false theory about solutions. It ignores entirely the existence of systems and, by and large, most managers don't understand systems... If you want to improve what you're doing, you have to improve your systems."

"Scholtes defines a system as a sequence of interdependent steps or a set of interactive factors which lead to the outputs of the organisation."

...

"Scholtes contends that the objective should be to have outstanding systems which will function well with the ordinary efforts of ordinary employees. Performance appraisal, in contrast, assumes that organisational success depends on the heroic efforts of outstanding individuals and that at the heart of any failure, is an individual worker who has screwed up."

"The fact is that an organisation employs individuals and then puts them into a system where they can perform no better than the system allows. The mistake then is to assume that any problems with the system are the fault of the individual - in other words, the system is okay but you're not doing your job right."

...

"Feedback is necessary too, but performance appraisal is feed-down rather than feed-back. Feedback is a systems word - one part of a system gives data to an antecedent part of the system so it can do its work to serve the subsequent part of the system better. Performance appraisal is not part of the organisational system but it is part of the organisational hierarchy. I am the boss - you are the subordinate. I don't give you data for system improvement - I give you judgment."

In my words, people lose that connection, not because of punishment or rewards, but because the environment strips them of the power to do their job.

>>Much of your thesis relies on psychology and psychological rewards, the rewards of teamwork and people working together synergistically. The problem is, that this isn't enough. The satisfaction of working on a good team and doing good work isn't enough. In this sort of environment, since there's no feedback, people start to build up resentments and to drift.<<

How did you come to this conclusion? Also, you're stuck on rewards and punishment again.

I've led some amazingly productive teams. When people feel like they are respected, they will bend over backwards to take care of the people they trust. Showing people that they matter by making their job easier or by simply listening are rare skills practiced by precious few managers. I'm hoping that this article will give one manager the ability to take one step toward this goal.

>>Physical rewards, and physical punishments, are a way to keep people tied into the real world - most often, the real corporate world and the realities of the corporation's current context. They are critical adjustment mechanisms for companies.<<

As Deming, Scholtes, and Kohn have researched and shown, this assertion is simply not true. "The realities of the corporations's current context" rarely has anything at all to do with it's employees. As I stated above, "the fact is that an organisation employs individuals and then puts them into a system where they can perform no better than the system allows. The mistake then is to assume that any problems with the system are the fault of the individual - in other words, the system is okay but you're not doing your job right."

>>You also ignore the fact that morale and psychology can go terribly, terribly wrong.<<

In what ways? The examples you give are hardly "terrible".

>>No matter how much you work with them and praise them, it doesn't sink in.<<

You're right, it won't sink in -- "praise" is another form of reward. The particular problem you mention is more related to that other person's feelings of low self-worth. They repeat the mantra of "woe is me" solely to troll you into continually stroking their ego.

>>Likewise, I've known people who thought they were doing great things when they weren't. And no matter how much you talked to them, either gently or harsh, they live in their own world believing they're great.<<

And you've encountered the fundamental difficulty in working with an egomaniac: there is no amount of feedback, punishment or reward that you could ever give them to change their perspective.


The most important and telling issue is how ingrained these concepts are in our society. I think it also goes to show that investing in training of basic psychology relative to individual and group dynamics would go a long way in giving managers at least introductory psychological and emotional skills. I again point the interested reader to Six Seconds.

I'm hoping that what I've said has bugged You enough to go and do the research for Yourself. Regardless of what the "best" solution is, hopefully we will all learn good answers to these questions and our little corner of humanity will make the steps to become better than what it is today.


Jonathan Dodds

Posts: 464
Nickname: jrdodds
Registered: Mar, 2004

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 11:09 AM
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Dale,
Are you hiring? I want to work for you, or someone like you.

I long ago recognized that I am a software engineer because I enjoy it and that the respect of my peers and colleagues matters more than traditional corporate rewards and punishments.

Thanks.

David Ramsey

Posts: 34
Nickname: dlramsey
Registered: Apr, 2002

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 2:39 PM
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Dale, feedback is just feedback, regardless of its form. You can have positive and negative feedback. Bonuses are just a kind of feedback. So are employee appraisals.

And so is you telling an employee that he's not cut out for this line of work.

If you abstract these things far enough, they all look the same. What's more interesting is the question of which kinds of feedback work better than others and why they do. I think that is at the heart of your blog entry but you never say that, instead taking issue with "rewards and punishments" when all that these things represent are kinds of feedback, no different at a sufficiently abstract level from you listening or talking to employees.

In that sense, I think that your blog entry obscures rather than clarifies the issue, which remains one of choosing the right feedback rather than the wrong feedback.

Mike Spille

Posts: 25
Nickname: mspille
Registered: Nov, 2002

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 3:20 PM
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> Dale,
> Are you hiring? I want to work for you, or someone like
> you.
>
> I long ago recognized that I am a software engineer
> because I enjoy it and that the respect of my peers and
> colleagues matters more than traditional corporate rewards
> and punishments.
>

Good - I take it since respect is paramount in your job that you're willing to work for free. Correct?

No? Hmmm...I guess I could throw in $30K a year. Does that suffice?

No? Geeze, you're a tough nut!

Maybe then "respect" isn't the only part of the equation here. Maybe money does play some role in your job. It may not be the _only_ role but I think it's still a fairly important part of it.

Mike Spille

Posts: 25
Nickname: mspille
Registered: Nov, 2002

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 3:40 PM
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As an aside to Dale - perhaps you should read the <i>negative</i> reviews on Amazon and elsewhere of some of the references you supply. For your most frequent reference in particular, note several people pointing out that the author has selectively pulled material from a minority of peer research - and that the <i>majority</i> of peer reviewed research in this area <b>directly</b> contradicts that of the author.

To quote from one negative review:

"While it is true that under particularly contrived and artificial conditions there may be a detrimental effect on a person's motivation to engage in an activity if some form of "reward" is dangled, there is a wealth of peer-reviewed studies that show the beneficial effects of rewards when positive consequences are properly arranged following specific behavior".

A further troubling aspect is that so much of the book is about children's education, and trying to draw parallels between children and adults in the work place. Do you honestly believe you should treat a professional who makes a six figure salary the same as you would a 10 year old?

Think about it, Dale - are you really quoting and referencing definitive research, or are you citing a minority of research which is in fact directly contradicted by a much wider body of research? And how much of the research you're citing is really related to professionals, and how much is extrapolations from unrelated research?

Jonathan Dodds

Posts: 464
Nickname: jrdodds
Registered: Mar, 2004

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 6:00 PM
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> > Dale,
> > Are you hiring? I want to work for you, or someone like
> > you.
> >
> > I long ago recognized that I am a software engineer
> > because I enjoy it and that the respect of my peers and
> > colleagues matters more than traditional corporate
> rewards
> > and punishments.
> >
>
> Good - I take it since respect is paramount in your job
> that you're willing to work for free. Correct?
>
> No? Hmmm...I guess I could throw in $30K a year. Does
> that suffice?
>
> No? Geeze, you're a tough nut!
>
> Maybe then "respect" isn't the only part of the equation
> here. Maybe money does play some role in your job. It
> may not be the _only_ role but I think it's still a fairly
> important part of it.

Mike,
I don’t understand your reaction. A personal attack was unwarranted and it doesn’t reflect well on you..

The amusing part is that your comments are completely off the point. Salary wasn’t part of the discussion. I value respect and workmanship. That doesn’t mean I don’t want or need fair compensation for my work.

Dale discussed merit based bonuses. When I’m working on a project I don’t second-guess my actions by trying to evaluate whether my merit bonus rating will be positively or negatively influenced. I do consider how my actions will impact my team and my direct manager.

Being the go-to guy for my team for a particular problem domain is more rewarding to me than being singled out for praise by a high ranking executive who has little understanding of what I actually do.

I understand that not everyone is wired the way I am. That’s fine.

I think I would prefer to work for a manager that practices some of Dale’s ideas because I think I would be happier and more productive in such an environment. And if I’m happier and more productive, I am also more valuable.

Mike Spille

Posts: 25
Nickname: mspille
Registered: Nov, 2002

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 9:23 PM
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Jonathan, it wasn't meant as a personal attack, sorry if you took it that way.

I was trying to illustrate that money is part of a job, and money is a reward mechanism. You say "Salary wasn?t part of the discussion" - actually, it is. Salary, and the larger idea of "compensation" is a large portion of Dale's arguments - and of people's jobs.

You say "Dale discussed merit based bonuses. When I?m working on a project I don?t second-guess my actions by trying to evaluate whether my merit bonus rating will be positively or negatively influenced". Bonuses don't work that way. You don't think every minute of every day "workin' for the bonus, workin' for the bonus". It becomes part of the background of working. It's part of your contract (written or not) with your employer.

Now, it is interesting when you say "Being the go-to guy for my team for a particular problem domain is more rewarding to me than being singled out for praise by a high ranking executive who has little understanding of what I actually do". That tells me that you haven't worked in a company with a good bonus structure. When I worked at Bear Stearns, I unfortunately got out just as the market started recovering and going into boom in '97. Putting that aside, the prior year I got a decent bonus for the times and my effort - it was about $30K. This amount was not determined by "a high ranking executive who has little understanding of what I actually do". This amount was secured by my direct boss. It had to be approved by higher ups, but he made a convincing case for it.

This kind of bonus, and it's not pariticularly high, is the type of bonus you can get in certain environments. I got it because I did my job very well, and my boss respected me and my abilities and contribution enough to go get that bonus for me. And as you can guess, a $30K bonus can make an astounding difference in your life, in particularly when you already make a very good salary.

This is what I'm talking about - real bonuses given by managers on the front line. _And_ coupled with respect and motivation and cooperation that Dale talks about - _and_ not being afraid to give someone a $100 bonus and not being afraid to tell them they were lucky to get that.

So I'll ask you - do you want to work for Dale's manager that has all these warm fuzzies and good team dynamics, or do you want to work for my old manager who had exactly the same qualities - and who could also get you a wheelbarrow full of money at the end of the year?

This mistake in Dale's assertions is that he thinks all rewards are bad, and that giving rewards somehow ruins the intangibles. It doesn't. He's seeing places that have bad reward systems and none of the intangibles, and is making a leap of faith concluding "Hmmm, rewards must be causing the lack of respect/motivation/etc". It's a conclusion not based on cause and effect - and in my experience, a wrong one.

Dale Asberry

Posts: 161
Nickname: bozomind
Registered: Mar, 2004

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 10:10 PM
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> Mike,
> I don’t understand your reaction. A personal attack was
> unwarranted and it doesn’t reflect well on you..

One thing that I've learned is that when a person is having their world view challenged they will often times react angrily like Mike has. Something about my article has put Mike into a position where he feels he has to protect himself.

>
> The amusing part is that your comments are completely off
> the point. Salary wasn’t part of the discussion. I value
> respect and workmanship. That doesn’t mean I don’t want or
> need fair compensation for my work.
>

Accepting a position based on compensation, work environment, or whatever other factors are important to the individual, empowers that person because they completely own that choice.

Accepting a position is a negotiation between equals. Performance bonuses and appraisals are edicts from on high.

Dale Asberry

Posts: 161
Nickname: bozomind
Registered: Mar, 2004

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 18, 2004 10:59 PM
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> I was trying to illustrate that money is part of a job,
> and money is a reward mechanism. You say "Salary wasn?t

Salary, flexible hours, location (whatever) are not a rewards. I will take these things and in exchange I will give forth my time and effort.

> part of the discussion" - actually, it is. Salary, and
> the larger idea of "compensation" is a large portion of
> Dale's arguments - and of people's jobs.

Not once have I mentioned "compensation". I have focused solely on merit bonuses and appraisals.

>
> You say "Dale discussed merit based bonuses. When I?m
> working on a project I don?t second-guess my actions by
> trying to evaluate whether my merit bonus rating will be
> positively or negatively influenced". Bonuses don't work
> that way. You don't think every minute of every day

It's a good thing that you are so self-aware of how bonuses affect you, however, I'm not buying it. The use of "you" in this last sentence indicates that you are projecting your own perceptions onto the reader.

Again, I can point to the evidence: people put significant effort into getting the carrot and avoiding the stick. Unfortunately, you've dismissed the evidence as being in the minority because of some anonymous reviewer who, like you, also disagrees with the conclusions of the book. I'm also assuming that you've read the book and are not just taking the reviewer's word (or mine) at face value.

Ok, here's the challenge to you: stop the rhetoric and produce that majority evidence.

I am completely flabbergasted by your insistence that removing power plays and focusing on treating people with dignity and respect is flawed.

Geoff Burns

Posts: 2
Nickname: geoffburns
Registered: May, 2004

Re2: Why salary bonus and other incentives fail to meet their objectives Posted: May 19, 2004 1:05 AM
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Mike Spille says

> Do you honestly believe you should treat a professional who makes a six figure salary the same as you would a 10 year old?

My answer would be yes. I think there is an unquestioned assumption in the above statement about how you treat children and who is deserving of respect.

I have had good results by talking to children as if they are adults. They will chat to you honestly and earnestly about what matters to them for extended periods. It does not seem to matter to them whether you understand them or not. The act of actively listening to them draws them out. You can learn a lot about them by listening even if you can't understand a word they are saying.

In my experience people will respond positively when actively engaged and treated like a "Real Live Person" instead of an extension of someone else's ego or a Rubik's cube that needs to be twisted in several directions to reach the desired state.

This positive response is age independent. It does not matter if we are talking about 2 year old or a 77 year old.

To me rewards are largely irrelevant. I always get the maximum allowable bonus's by doing exactly the same thing that I would be doing if the were not any bonuses at all. If the bonus was not given I would be more likely to interpret it as a problem with the bonus giver than a problem with my work.

And no I have never turned down a bonus. However I regard it a test of my evaluator rather than a test of myself.

Vincent O'Sullivan

Posts: 724
Nickname: vincent
Registered: Nov, 2002

Re: RE: Why salary bonus and other incentives fail to meet their objectives Posted: May 19, 2004 3:02 AM
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> One thing that I've learned is that when a person is
> having their world view challenged they will often times
> react angrily like Mike has. Something about my article
> has put Mike into a position where he feels he has to
> protect himself.

In what way was Mike's reply angry or an attempt to 'protect himself' and from what? It looked to me like a humourous response. I can't see any him making any personal comments about the motives or emotions of the person he was responding to.

Vince.

Neil McEvoy

Posts: 3
Nickname: neilmcevoy
Registered: May, 2004

Re: Re2: Why salary bonus and other incentives fail to meet their objectives Posted: May 19, 2004 3:05 AM
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Hi folks

Here's a perspective I think you might enjoy, because at its heart is the same model that makes Jini powerful.

I don't think your main issue is with compensation and incentives, I think your issue is with hierarchical organisation.

Incentives are a perfectly natural function, essential in the realities of the commercial world resources are engaged within. Presumably you wouldn't work for nothing, your employer has to offer an incentive (salary) for you to turn up at work each day otherwise you likely wouldn't. Similarly, if an alternative employer offered to pay you $1m for the same job, it's likely you and many others would take it. So we can conclude that programmers like all other people are quite rightly money oriented to a degree; they have to be to function in the real world like the rest of us. It doesn't mean they are defined only by money, but it's one dimension of what motivates them to work.

I would actually propose that a culture that emphasises incentive-oriented structure _more_ is the key. I'd suggest the root issue that is narking you is more to do with command and control hierarchical organisation and the culture it engenders, particularly when it attempts to define superficial level incentives that don't address the real interpersonal issues, rather than the incentives programs themselves.

Hierarchical organisation is defined as a centralised system, and has two core problems: An appetite for highly rigid, top-down specification of the system, and an unhealthy and unnatural relationship between the members of the system. Without going into too much detail because I'm sure I don't need to, human beings basically have a primal level problem with the idea of superiors and even subordinates. It means that personal agendas and business objectives can become inseperable, resulting in some people using a management position to implement personally oriented desires and beliefs independent of their impact on the business.

In general it is the source of toxicity that can make working life particularly unpleasant, and its primary weakness is that it is activity-oriented (input) rather than results-oriented (output). E.g. It focuses on what you wear, where you work, what hours you do, independent of whether these are relevant to the results it seeks from you, e.g. a piece of software that does XYZ.

The rigidity comes from the fact it is artificially defined from the top down, 'hard-coding' people into job descriptions oriented around activity rather than result. Org charts, departments and job descriptions can be thought of as humans desiring to perceive order when actually the real-world is far more fluid, and people are needed to contribute dynamically to different projects in different area, independent of rank or job description. Creating all this structure is the equivalent of inflexible, hard-coded software, and has the same impact in people terms as it does software agility. It's both fragile and hard to change.

Where there is an interesting twist I think you guys will like, is that there is an alternative; there's no rules that says hierarchy is the only way, and it's highly likely it will be abandoned over the next few years as the alternative becomes more mainstream: The Network.

A Network is a de-centralised organisation structure, and is identical in operation and architecture in people terms as Jini is to software systems. It's enabled by distributed systems; self-organising federations that assemble bottom up, rather than hard-coded top down.

Think of everything about Jini, from how it works to its benefits to software agility, change IT resources to people and bingo, you're there. Neato huh. :-)

Cheers, Neil.

Neil McEvoy

Posts: 3
Nickname: neilmcevoy
Registered: May, 2004

Re: Re2: Why salary bonus and other incentives fail to meet their objectives Posted: May 19, 2004 3:13 AM
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Oh and I meant to add a point about incentives, the original thesis of the post.

Networks are results-centric rather than activity, and thus inclined towards natural forms of incentive to encourage appropriate input. The main point is that people are 'loosely coupled' from the organisation, not hard-coded into a specific job description on a fixed salary. Instead you'd define the results you want and what you'd pay for them, and not care how they go about delivering them. This is entirely flexible and as such you could, for example, define that as well as $xx for result Z, they also have an equal share in the profits that the project generates; in fact everyone involved in it, from sales to admin, does so. That way you define a peer to peer system where everyone is naturally and totally aligned and incentivised around the real needs of the business (to generate profits). Teamwork would then be natural rather than enforced.

However they are freed to be innovative and self-defining in how they go about delivering the required results.

Cheers, Neil.

Paul Denby

Posts: 1
Nickname: rugbyman
Registered: Apr, 2003

Cost of networking Posted: May 19, 2004 6:31 AM
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> Instead you'd define the results you want and what
> you'd pay for them, and not care how they go about
> delivering them. ... That way you define a peer to
> peer system where everyone is naturally and totally
> aligned and incentivised around the real needs of the
> business (to generate profits).

The trouble is that setting up, monitoring and enforcing these 'mini-contracts' isn't easy and certainly isn't free. This probably explains why firms go to the trouble of existing at all - it's cheaper to pool the outcomes of the low-level activity and find some other more or less fair way of dividing the spoils.

That most people still choose to work for firms also suggests that they would rather live with this than face the risk of a constant marketplace.

Thanks to everyone for an interesting discussion.

Paul

Neil McEvoy

Posts: 3
Nickname: neilmcevoy
Registered: May, 2004

Re: Cost of networking Posted: May 19, 2004 9:03 AM
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> The trouble is that setting up, monitoring and enforcing
> these 'mini-contracts' isn't easy and certainly isn't
> free. This probably explains why firms go to the trouble
> of existing at all - it's cheaper to pool the outcomes of
> the low-level activity and find some other more or less
> fair way of dividing the spoils.

It's worth noting that:

- Software automation can be used to streamline anything, including mini-contracts

- It's no more difficult nor expensive than an employment contract. Indeed, because of the state of HR and 'compo culture' now, you'll find that direct employment legalities are far more expensive, and expose the company to far more risk. Hiring a person directly is a far heavier, costlier and riskier endevour than contracting services from them. It's simply a habit we've yet to break.



> That most people still choose to work for firms also
> suggests that they would rather live with this than face
> the risk of a constant marketplace.

I agree, in that there is virtually no liquidity for 'mini-contract' yet because it's a new and thus alien way of working not yet mainstream. Going self-employed is mainly all risk at the moment. However this can and likely will be changed.

Part of this approach is that you can define security into the equation too. You don't have to make it month on month re-negotiations, you could factor in a 3 or 6 or whatever monthly retainer as well as results-oriented on top. You can define it to be whatever you want.

It's a change that will likely come from the corporate strategy world as much from the bottom up changing perspective of quality of life over fixed employment. Given the above about risks and costs, many companies are starting to move in this direction. They gain nothing from direct employees for the same reasons it causes angst for workers. In their case they struggle to allow the best to rise to the top and have difficulty in purging the deadwood. A marketplace system takes care of all that for them with zero effort, thereby reducing costs further.

It's an ideal natural selection, because you naturally prune out those that are only interested in doing the minimum 9-5, want minimum risk and comfort etc., and thus aren't really concerned about the performance of the business. These people are of least value because they're not advancing themselves and thus not advancing the business.

Cheers, Neil.

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