Show Me The Money

How to Pay Employees in an Agile Organization

Christof Braun Manage Agile! Network

Why do you work?

Would you work without pay?

If you won the jackpot in the lottery?

If you received a monthly allowance to cover your basic needs?

Why is an agile organization different regarding salary?

Teamwork rather than individual contributions. Flat hierarchy. Transparency. Embracing change rather than following a plan. Trust rather than control.

Basically – it‘s a trade:

But instead of goods for goods

It‘s compensation for work.

com·pen·sa·tion noun \ˌkäm-pən-ˈsā-shən, -ˌpen-\ : something that is done or given to make up for damage, trouble, etc. : something good that acts as a balance against something bad or undesirable : payment given for doing a job -- Merriam-Webster Dictionary

Three categories of "compensation"

Fixed and unconditional salary.

Variable and conditional salary.

Bonus pay (variable).

Fixed salary is Contractually assured.

Generally guaranteed.

Stays the same unless contract is changed (e.g. pay raise).

Unconditinally payed.

because….

Pay is not a motivator. -- W. Edwards Deming

but:

If you don‘t pay enough, people won‘t be motivated. -- Daniel Pink

Pay enough to take the issue of money off the table. -- Daniel Pink

… then do everything in your power to help them put money out of their minds. -- Alfie Kohn

How much is enough?

Who is the judge? Ask her!

Consult available stats for your region and the position.

You must achieve fairness across your organization.

Do it now: Promises for later are risky and mostly feel contingent.

Consider: Age. Tenure. Role. Family / social obligations. Contribution to value generation.

To assume that fairness always requires that people should get what they earn, that the law of the marketplace is the same thing as justice is a very dubious proposition indeed. -- Alfie Kohn

Who decides how much?

(Line)Manager

Employee

Peers

Experiment!

Mock It!

Game It!

Transparency creates Trust

Salary Groups / Ranges

Complete Transparency

Variable Salary

Incentivizing: using extrinsic motivation

Do this – get that

"Do this and you'll get that" makes people focus on the

"that", not the "this“.

Merit pay kills intrinsic motivation.

The work to be done is an impediment to getting the money.

Doing something in order to receive an extrinsic motivator makes us less interested in what we are doing. -- Alfie Kohn

Control

Merit pay is for the benefit of the person who pays, not the recipient: It is easy. It makes people do what the payer wants. It fortifies hierarchy. Its purpose is to manipulate.

Threat

There is a stick in every carrot.

Abolish pay as incentive!

If you can‘t…

Use small amounts of variable salary.

Involve employees.

Use company, department or team goals NOT individual.

No competition.

Frequent adjustment (agile).

No incentives on learning/self-development.

Bonus pay

Lets employee participate in success of organization.

Celebrate success

What about Failure?

Celebrate that too! It helps you learn!

Make it unexpected

Make it frequent and small

Make sure it is not a reward

Consider:

Participate in organizations earnings.

Participate in organizations ownership.

Summary

Transparent, fixed salaries, ideally determined by employee or peers, take the money issue off the table.

Merit Pay/Incentives should be abolished if possible.

Let employee participate in success of organization via bonuses.

Christof Braun christof @ manageagile.com www.manageagile.com

@christofbraun