New Microsoft Reward System
Okay, I’m still busy inventing but I had to comment on this one since I’ve written so much about it previously. So the complaint was that Microsoft’s previous reward system based on stack-ranking employees was demoralizing and “unfair” causing internal politics and gamesmanship. Thus a NEW reward system is required that doesn’t cause these problems. The solution is to place more emphasis on rewarding teamwork and to give managers more freedom in allocating rewards… but apparently NOT to change the SIZE of the total reward budget. So what does it mean when you reward “teamwork” and make the direct manager responsible for allocating compensation? Rewards are distributed more uniformly across the team and rewards for “exceptional” contributors shrink. Now the managers have no excuse for being disempowered about how they allocate rewards and they don’t want to be unpopular so they will tend to spread rewards more uniformly. Exceptional performers will no longer be exceptionally rewarded, the politics and gamesmanship will move towards manipulating your manager for better compensation and the entire system will reward mediocrity over excellence. Will everybody be happy now? Of course not because the only people who bitch about the “unfairness” of any given compensation system are the people who are NOT getting exceptional compensation. What they really want is a rewards system that will reward THEM MORE. Basically Microsoft is announcing that they are giving up their famous culture of demanding competitive excellence in favor of rewarding people for getting-along better… as though ambitious people are actually motivated by being incentivized to get-along MORE than is necessary to achieve maximum productivity.
Why is Microsoft making a change like this now after so many successful years on the stack-rank system? Probably to try to improve retention during a leadership transition.
One of the most interesting and successful management tricks I ever witnessed was a former VP of engineering who worked for me who would identify the people on his team that were most “looked up to” by their peers and privately offered them an individual bonus if a particular project was completed on schedule. They would work harder and others seeing them working harder would also step-up resulting in much higher overall productivity. The technique also had the beauty of not producing an on-going compensation expense in the form of a raise for people who didn’t consistently perform exceptionally on their own. It turned out to be a very cost efficient and measurable way to improve productivity. I’m still ambivalent about how I feel about it… but it worked… I suspect that if it ever became a widely “known” practice within an organization, people’s productivity would drop to zero until they were bribed to do anything but for hitting critical milestones, it was effective.
In general employees on teams have an unspoken social-pact NOT to show one another up at work by overtly outperforming one-another. People outperforming one another on a team also results in discord by embarrassing their peers and demonstrating to their management that they could ALL be more productive. Without a specific incentive to reward exceptional performance teams will converge on doing the least work necessary to collect paychecks and incremental raises. Exceptional performer’s ( people who take pride in being the best at their jobs regardless of compensation ) will quickly be recruited away by companies that recognize their value at much higher compensation levels.