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Implementing a Peer-to-Peer Bonus System

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Writing for Forbes Jurgen Appelo, CEO at Happy Melly and author of the book Management 3.0, describes a peer-to- peer bonus system. He says that in a business that depends on collaboration, you should receive your bonus from your colleagues (not from your manager) with a peer-to-peer bonus system.

Jurgen mentions that his team members are supporting, evaluating and crediting each other continuously.

I know of only one kind of observer that can give you a reasonable assessment of everyone’s individual performance, with a good chance of keeping people happy. It’s not the manager; it’s not the person himself; and it’s definitely not some complicated scorecard of metrics that, in any kind of creative job, is always easy to manipulate.

The best assessor is the collective intelligence of the crowd.

John Quinn on Bonusly, wrote about Google’s peer-to-peer bonus system.

Google employs multiple award systems to motivate employees and perhaps the most notable is their peer-to-peer recognition program. This program allows Google employees to proactively recognize their peers for doing something big or small that goes above and beyond the call of duty. Peers often reward an activity that would have gone completely unnoticed by managers.

According to the Zappos blog, In the Zappos Family, peer-to-peer employee rewards programs help build a positive team spirit. Zapponians have the chance to acknowledge others who are excellent examples of the culture and have done a super awesome job.

As per Appelo's model, the main principles of peer-to-peer credit system are:

  • Management takes care of the budget, but not the individual distribution.
  • Workers take care of the distribution, but they cannot credit themselves.
  • Evaluations happen at a micro-level, so there’s opportunity to iterate and adapt

I use merit money as a catch-all term for all variants of iterative crowdsourced bonuses, because the money that people earn is a direct result of their merits, from the perspective of their peers.

Four of Zappos’ employee reward programs are:    

  1. Zollar Program  - Employees can earn Zollars or "Zappos dollars" for participating in training by answering questions or volunteering to help out. This play money can be used to redeem Zappos branded schwag, such as a gym bag, desk fan, or water bottle, which is only sold through the company’s internal Zollar Store.
  2. Master of WOW Parking - Another way to recognize a Zapponian is to award them the “Master of WOW Parking.” "It’s hot here in Vegas," the blog post explains, "and getting a covered parking spot closest to the entrance at one of our three buildings for a week is a treat."
  3. Co-worker Bonus Program - Employees can reward each other with a $50 co-worker bonus. 
  4. Hero Award - The Zappos HERO Award works in conjunction with the Coworker Bonus Program. A Zappos HERO is an employee who embraces the core values to the fullest and lives to deliver wow to their fellow Zapponians. Heroes are nominated by employees and chosen by the leadership team which is made up of all the heads of departments along with the CEO, CFO, and “no title.”

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