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What's the alternative to performance reviews?

While I agree that many of the incentive pay programs in companies are silly, I don't know what the alternative is.  Clearly everyone doesn't contribute at the same level (well not in most places), so it doesn't make sense to give everyone the same increase during performance reviews.  At the same time, as Joel mentions in one of his articles, what's written in performance reviews is generally ignored anyway and increases are doled out to fit some sort of bell curve.  Also management is often in a horrible position to give an accurate review anyway.

Anyone have a solution to such conflicting results or are we doomed to be "damned if we do and damned if we don't"?

Monday, July 15, 2002

I like Joel's idea of a professional ladder

You get paid a set amount at each stage of the ladder. Better workers can then be rewarded by having a higher level, and pay.

Matthew Lock
Monday, July 15, 2002

How about if salary changes were determined by your peers, my wouldn't we all be nicer to each other. This would also reflect our real standings in the group.

Tuesday, July 16, 2002

>How about if salary changes were determined by your peers, my wouldn't we all be nicer to each other.

In theory, yes. But this is flawed. IMHO, if you are secure with your work-role, you can handle working with better, or same-level guys as yourself and be happy about learning new stuff every day. As time passes, you will probably be on par with the best guys you are working with. Everybody happy.

Problem, many people  are insecure in their work-roles and see other solutions and people as  a threat to their current position.

There goes being nice.

>This would also reflect our real standings in the group.

Yes. Until some office-politics dude came along and decided he wanted me out of the group. You would have the environment of "reality-tv-shows" which possibly makes for good entertainment, but not a good work environment.

Tuesday, July 16, 2002

A good start is to not tie salary increase to performance reviews. Performance reviews in them selves are not a bad idea, only not for the purposes they are (ab)used for.

You can increase everyone's salary yearly based on inflation rates, which is only fair. And you can reward people for exceptional performance when it occurs (by which ever means that fits you and the one being rewarded, which is not necessarily money).

But don't use performance reviews for (personal) goal setting, or salary increases. There are better means for those. And start by not calling it a performance review, because it isn't or shouldn't be.
Once you realise that, you may also save your company most of the costs that go with a performance review system.

Erik van Linstee
Tuesday, July 16, 2002

I've never been a big fan of formal processes like performance reviews or code reviews, mostly because they don't really work (i.e. people learn to work the system) and much prefer more informal ways of doing things.

If you're leading a team, just because you don't sit down with each person once every 12 months to talk about how they've been going doesn't mean that you're not monitoring their performance. I keep an eye on all the team members and their work and give feedback on an on-going basis (and ask them to do the same for me).

As far as salary raises go, I've never been involved in that side of things but if I were, I would perhaps start with a flat increase for everybody (depending on the company's performance over the past year, perhaps?) and then increase or decrease it for each person as I saw fit. Pretty arbitrary, I s'pose, but unless you have some specific way of measuring performance e.g. sales revenue it's always going to be like that.

Tuesday, July 16, 2002

The company needs to listen to the employee much more than the employee to the company. As the old saying goes, "What you do speaks so loud I cannot hear what you say."

A company has one primary method of motivation: hiring. It hires an employee because of what he has or is or can do for the company, not for the "hidden potential" it sees in him/her (with very few exceptions).

A company only has one real disciplinary measure: firing.

Everything else is only smoke.

Pay raises should be connected primarily to group or team performance (after all, you want everyone to work well together, not for people to backstab). Invite those that aren't satisfied with payment to talk to you about it by having an open climate. If they really weren't satisfied with money, they wouldn't have taken the job. But no one is satisfied with stagnation either. People need to have the feeling that things improve in their lives. For this reason, most are happy with simple cost-of-living increases every year. If they are not, and you are giving raises in proportion to the true value of the group to the team, then, sorry, find something else.

Talk is cheap.

Tuesday, July 16, 2002

I think the main problem is the reductionist view of people, mostly to do with the market economics.

The idea is that an individual finds work a disutility.  An unenjoyable necessity.  In order to get people to work it is therefore necessary to offer a utitlity - money.

The financial reward is given to compensate the work for the unpleasant task of working.

This means that the person does not want to work.  Given the choice he will just sit their all day doing nothing (like Wally in the Dilbert cartoosn).

The holes in this reasoning are obvious.  If programmers hate to work, then what drives Open Source?

Individuals are motivated by a number of factors, and it varies strongly from person to person.

The best alternative to performance reviews is to know the workers, to understand what drives them, and to then make sure that they are well motivated.

Therefore, a manager must know his workers.  As pointed out in another post, this makes the maximum size of a team 7.  I think XPs Pair Programming approach also pays dividend in this regard.

Also, they must have the authority to reward his workers.  In too many companies the manager is more of a spy than manager.  They are there to keep an eye on the filthy slaves, cracking the whip when necessary.  They don't have any authority to do anything else.

Ged Byrne
Tuesday, July 16, 2002

The way I see it, it's a manager's job to pay attention to the group dynamics and to know who is productive and who is not.  The performance review is just a ceremony.  It's a ritual designed to replace the skill of making difficult, subjective decisions with a mindless, objective process.  A competent manager has no need of a process, and an incompetent manager cannot possibly benefit from one.  So why bother?

The only way performance reviews could possibly be useful is if you are starting a paper trail in preparation for terminating a problem employee.  But there are better ways to handle this -- for instance, documenting problems as they arise.  This gives the employee immediate feedback, not a sudden suprise at the end of the year.  It also avoid the embarassing situation of giving an employee four years of laudatory reviews, and then suddenly terminating them on the basis of performance -- as happened recently with a friend of mine.

If I were a manager, I would give two raises: a modest cost-of-living adjustment once a year, and a performance raise to selected group members after successfully meeting major deadlines (such as product shipping, for example).  I'd select employees whose achievements are  be held in high regard by their peers and whose performance is not in line with their current salary (for example, if they make 50K and they do the same work as someone else who makes 60K, I would try to bring them up to the other's level).  And they would be bona fide raises; not bonuses -- since employees have a way of amortizing bonuses across the overtime they put in, which turns out often to be an insultingly small hourly rate.  Raises are more forward-looking.

That's Alyosha`s management philosophy in a nutshell.  Someone wanna hire me as their manager?  =-)

Tuesday, July 16, 2002

Oh, by the way, the alternative is The One Minute Manager.

Tuesday, July 16, 2002


Well it's all very good and well to talk about what you're gonna do to the workers and if they don't like it tough. Glad I don't work for any of you.

I expect and receive a favorable performance review and a nice raise each and every year. This lets me know me efforts are appreciated and I'm not wasting my time squandering my talenst for a bunch of losers who don't know a goodthing when they got it.

It's sort of a 'heartbeat' of employment like the daily build is the heartbeat of the project.

So sure, if you don'th mind loosing all your best people, eliminate performance reviews and merit based pay.

And good luck on your project.

Sarain H.
Tuesday, July 16, 2002

I have no problem with merit based pay... since by definition it is based on merit - what you did and what you produced.

But no one is entitled to automatic cost-of-living raises or annual raises just because their butt warmed a chair for a year.  This is the area where only the whiners abound.

Joe AA.
Tuesday, July 16, 2002

Good thread.  There is always the question of how to deal with overachievers.  IMO, there is the need in any compensation system for the concept of a "market adjustment".

If someone comes in at a low salary and performs at a high level, what do you do?  They may not be satisfied with a metric of COLA + Bonus Pool / Team Size.

I like Joel's "ladder system", although in small companies it may be difficult to put into place.

On the flip side, our industry as a whole might be served by the concept of "supply and demand" based salary reductions.  If you payed a premium to hire people with skill X and two years later, skill X is dead, should you still have to pay the premium?  Cold, but isn't it better than having to turn over your staff to reduce costs?

If the real IT market problem (according to some folks) is that developers don't keep their skills up, maybe there's some merit to this.  I've known a couple highly paid UNIX guys that got layed off and went "oh, crap" when they saw what they we're able to make "on the outside".

A system like that would never fly, but it's interesting to contemplate.


Bill Carlson
Tuesday, July 16, 2002

Teams who do complete their goals can get a nice bonus or something-cooler-than-a-bonus.  Liking occassional candy doesn't turn you into a Pavlovian dog.

Wednesday, July 17, 2002

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