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Mini on team performance incentives

by Brandon on March 10th, 2007

Mini-Microsoft has been back on the scene, and among his most recent post he had this little gem:

Post Stack-Ranked Future First Step: something that I think would be a significant first step from unhealthy peer vs. peer performance ranking: Team Compensation for Performance. I was talking with a friend who used to work at big hardware manufacturer. He said their main bonus budget and dispersion was directly attached to the goals their team’s leadership put together to deliver for the upcoming year and how well they did on those goals. Regular updates through the quarter were shared with the employees. The goals were S.M.A.R.T. and aggressive and directly tied to business results.

The better the whole team performed on delivering those results, the better all of their bonus was. Stock and raises were used for distinguishing individual performance.

I’ve heard of this kind of system at competitors, and I think it would be a fantastic addition to the new myMicrosoft system. As Mini has said, even in the “post stack ranking era” the more savvy employees will be aware of “calibration” and at some level concerned with how they’ll stand up (or stand out) when compared with their peers. This does little to encourage overall success for the team, and in extreme cases could even hinder team productivity by encouraging individuals to put their own careers ahead of the team’s priorities.

What’s more, a system like this would encourage peer groups to identify and deal with “dead weight” on the team, as opposed to keeping it around as “buffer” to insulate their more productive colleagues.

Truthfully, I don’t think that’s been a problem for my team at any point. But I have seen it elsewhere, and think it’s a natural effect of the current system. Kind of like the token ugly girl in a sorority – you know the one I’m talking about.

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