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Does Agile Limit Financial Rewards for an Individual?

by Vikas Hazrati on Dec 22, 2010 |

Tom Reynolds mentioned an interesting comment, that he had heard about the reluctance of people to move to Scrum. The reason quoted was that Scrum would have a direct impact on their financial rewards as it places a lot of emphasis on the team and not the individual.

Tom seemed to agree that determining the financial rewards is quite difficult in Scrum. According to Tom, if the rewards were based on the individual performance, then it could lead to a hero mindset and people would be more concerned about their own work rather than helping the team. On the other hand, if the financial rewards were distributed in the team based on the team performance, then on the positive side, it would lead to workload sharing, information sharing and people willing to support and help each other. Does it also lead to weaker team members hiding away? According to Tom, that is not the case,

This in fact may draw them out more quickly, people will need to be on the top of their game and be adding value to the team in the best way that they can for the team to succeed and in fact may breed higher performing teams.

Tom, acknowledged that though rewarding the team might sound simple but it is not. Tom suggested a combination of team and individual rewards,

Will we ever get to rewarding by team as opposed to individual? I don’t know, maybe there is some aspect of this already with team bonuses and maybe they need to co-exist along with individual reward as opposed to individual rewards being replaced. Maybe we need to find a happy medium that recognizes and rewards the team, with team work being paramount but can also recognize and reward individual excellence as long as it is not to the detriment of the team or encourages hero behavior.

On the extreme programming group, Eliga Repoleved had a real life situation quite close to the scenario described above. Eliga had a question about the best way to ask for a salary raise in a Scrum team. According to him,

I've recently been promoted from Sr. Software Engineer to the lead position --but without an increase in salary -- despite successfully helping the team reach a high level on most of the agile practices. [...] Any tips on convincing the manager on helping me get a raise?

Dave Rooney suggested that though Eliga might have been instrumental in introducing helpful practices, the team could have refused to use them. Hence, if there is a financial reward, it should be equally distributed within the team. He also suggested a democratic alternative where the team decides the payout.

Tim Ottinger suggested that Agile teams are breeding grounds for learning, growing and becoming more valuable. He suggested that if a person is making enough his value would increase in an Agile team irrespective of whether he is rewarded as an individual or as a member of the team.

D.André Dhondt suggested that one should do a market research to see if he is in the correct salary bracket.

Asking for a raise is touchy, especially in a team environment--but if you're not in the right ballpark salary-wise, you may be feeling unfairly treated. Fix that or it's bad for the team too.

Ilja Preuß suggested that though defining payouts on team performance is much better than individual performance, however, this could also lead to a situation where internal teams in the company are competing with each other. According to Ilja,

I agree that it’s good to emphasize team performance over individual performance. What I’m saying is that *company* performance is even more important, and therefore probably should be the primary factor for determining salary.

Thus, there does not seem to be 'the one right way' to financially reward an individual. It is a delicate issue which needs to be handled in a similar way. As Tom put it,

Individuals still want to be paid for their job and generally speaking have been conditioned into thinking that if I’m good and do a good job my salary will increase and will increase more than someone who is not perceived to be as good so people clearly have fears about moving to a more team motivated environment and how this personally affects their salary review, this was the comment that I heard so needs to be addressed in some way.

How are you addressing this issue in your organization?

Read a related post “Distributing Bonus to Agile Teams is Like Playing with Dynamite

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Financial reward is detrimental by Alexander Yap

According to Dan Pink's science of motivation, people doing creative work are not motivated by financial rewards, as long as basic needs have been covered. In fact, studies have shown that financial reward have a detrimental effect on creative output.

Therefore, I think financial rewards should be scrapped for agile teams. If there is extra money laying around, use it to buy some new hardware, or send people to training, conferences, or organize workshops, etc.

Re: Financial reward is detrimental by Dave Rooney

Yes - Dan Pink's book "Drive" highlights this. He also did a great TED talk that was later animated - here are the links:

www.ted.com/talks/dan_pink_on_motivation.html

www.youtube.com/watch?v=u6XAPnuFjJc

Dave Rooney
Westboro Systems

Re: Financial reward is detrimental by M Bishop

the notion that "people doing creative work are not motivated by financial rewards" is ridiculous. It might apply when we are fresh out of college, unmarried, no kids, and basically in party-mode. Obviously our priorities and motivations change as our lives pass thru different stages. Now that I am married with two kids and a mortgage, and am trying to save for retirement and my kid's college (while still trying to pay off my college loans) ... money has definitely become a PRIMARY motivating factor for me. This should not come as a shock to anybody, and companies that don't recognize this fact of life will continue to lose their best people, who will leave for another company that DOES reward performance with TANGIBLE benefits, rather than with artsy feel-good rewards like stuffed animals or team outings to the palm reader.

"Agile" implies "change" by Dave Nicolette

This topic strikes me as another in a long line of examples of ways in which people try to label whatever they do with the cool buzzword of the moment (in this case, "agile") without actually changing what they do.

Changing what you do means that you work differently today than you did yesterday. It doesn't mean that you bend over backward to redefine buzzwords so that you can qualify for a badge without actually changing anything about the way you think, work, or are assessed and rewarded.

People are comfortable with an individual rewards system because they are accustomed to it. I've worked on some (very few) agile teams that used a team-level reward system. It seemed to work very well. Everyone who had been on the team at any stage during the project received the same monetary reward at the end for early (and acceptable) delivery. It tended to create a strong sense of comeraderie and team unity.

You might disagree, but I think one of the basic mindset shifts in agile thinking is to regard the team, rather than the individual, as the "unit of labor." Since teams are supposed to remain intact over the long haul, they perform together and can be rewarded together. "Weak" team members can't hide; instead, they are encouraged to find another spot in the organization (often by peer pressure, not necessarily by management directive). If a team member is blocking the whole team from receiving a good bonus, that team member will have to do something about his/her performance. That's part of the model. Yes, I know it isn't "easy." So what?

Many have noted (and some have complained) that there is a de-emphasis of the individual in agile practice. Yes, that's right. It's part of the model. There are other models. It isn't necessary to try and shoe-horn everything into the "agile box." If team-level rewards don't work in your organization, use a different model. There's no law that says you have to be "agile."

If you are "afraid" (or simply prefer not) to "move to a team motivated environment," then don't. It will be better for you, and better for those teams and organizations that really want to operate in a way different from the past. There are many more individually-oriented jobs than team-oriented jobs, after all. That will probably remain true for the foreseeable future.

Most of the technical practices we typically associate with the buzzword "agile" are actually orthogonal to process or methodology. If you find some of the "agile" ideas useful in your environment, you can use them in the context of any process or methodology. It isn't necessary to try and warp everything to fit the "agile" model, or any other model. All that accomplishes is to muddy the definitions.

Re: Financial reward is detrimental by Alexander Yap

"money has definitely become a PRIMARY motivating factor for me"

The fact that some individuals are not being paid sufficiently to cover basic needs (for family and mortgage) does not invalidate the results of the original study. Here is the link to the paper (PDF) referred to in the Dan Pink video.

management.ucsd.edu/faculty/directory/gneezy/do...

Unless there is a better study that refutes this finding, I think this is the best theory we have right now to explain motivation for people doing creative work, and financial reward is definitely not the way to do it.

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