Why We Should Get Rid of Bonus-Based Pay
Here’s the problem with bonuses in a team-based organization (agile or not): How can you tell who has done which work? Who actually knows who has contributed what?
The team does. The team always knows who has done great work, who has done whatever, or if someone is hiding. It’s easier to know if someone is hiding in agile, but this is all true regardless of whether or not the team is agile.
The manager can try to know by asking for statuses and accomplishments. But the team always knows exactly who has done what.
That’s the first problem.
The second problem is a question about the inherent system. Why is any knowledge worker’s pay based on a bonus? This smacks of management by objectives. You know the kind: “We’ll increase our sales by x percent over this year.” All other objectives flow from that. By the time they get to you, your bonus is supposed to be based on your completing a specific project your managers were supposed to fund at the beginning of the year.
Did you read all of those “supposed to's" in the previous paragraph? That’s what happens with traditional project portfolio management and big-bang funding. That’s part of the reason you end up with multitasking, which makes everyone crazy. People are trying to fulfill their personal bonuses—or optimizing at the lower levels—instead of doing what the organization needs.
How many of you missed out on a bonus because some salesperson screwed up? (My hand is up.) We completed our technical projects. Sales sold stuff we didn’t have. Sales didn’t sell stuff we did have. Management didn’t decide on a reasonable strategy, even though we completed our projects. And somehow this was supposed to be our fault as technical people? Come on. We did our parts, but we got no bonuses. That is not fair.
When you provide individual bonuses, you do not guarantee better results. Read Daniel H. Pink’s Drive: The Surprising Truth about What Motivates Us; Jeffrey Pfeffer and Robert I. Sutton’s Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management; and Jeremy Hope and Robin Fraser’s Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap.
If your company is basing your compensation partly on a bonus, it’s because the people in charge are cheap. They are trying to tie part of your compensation to something over which you have no control: revenue. Revenue sharing is fine for retirement funding, but it's not so fine for regular compensation.
Do you agree with getting rid of bonuses as part of a knowledge worker's pay? Why or why not? What are your experiences with striving to get a bonus? Tell us in the comments below.
