3 Years of the Merit Money System, a Revolution on the Recognition Methods Proposed by Cláudio Pires
Back in 2014, Cláudio Pires, a CEO in the healthcare business, implemented an alternative employee recognition method, the Merit Money System. Three years later, InfoQ challenged him to talk about the wins, the pitfalls and the lessons learned so far.
InfoQ: Thanks for accepting to share some ideas with us about this topic. Can you please summarize what the Merit Money System is?
Cláudio Pires: The Merit Money System involves employee recognition done by the employees themselves. It is a collaborative mindset process development.
InfoQ: In which year was it first implemented? What were the problems you were trying to solve at the time?
Pires: It was in 2014. Back then, we were trying to minimize minor concerns that were bothering and being dealt with by top management, like hours at lunch, hours at work consumed by personal problems, morning arrival delays, etc.
InfoQ: Three years later, can you tell us the main achievements so far?
Pires: It started with surprisingly prompt results, on a full-collaboration mode. Afterwards, the circulating money started to increase and people got more ambitious. Then, the original system backfired, starting to raise newer relationship problems needing to be solved by the top management. The system was off for the whole of 2016 and, in 2017, it got a new formula to be tested.
InfoQ: And about the pitfalls, did you find some along the way? Did you perform many changes?
Pires: Our original solution described an additional monthly payroll to be distributed amongst employees during the year; then top management could compare its formal distribution to the employees’ point of view. It worked as a game, as a stock market, led by the CEO... fun for everybody and also financially controlled. But when the stakes went higher, the values of monetary collaboration were corrupted. So, we forced less circulating money, but at that time people were already used to higher amounts. The system was temporarily canceled and, one year later, it revived to a new approach: integrate itself into the distribution of the company's profits. A portion of the quarterly profit is assigned to the employees’ Merit Money distribution.
InfoQ: How do you avoid cheating, for example having people making agreements and so on? Are there any rules or limits in place?
Pires: No concern about that: the system regulates itself. This kind of behaviour gets immediately recognized by everyone and raises shame and avoidance. The real problem is when someone finds it normal to not collaborate and not earn any reward, probably because this person has some other forces to count on. This behaviour is really dangerous, because it diminishes the intended solution.
InfoQ: In your experience, how do you see people reacting on having a responsibility that is typically assigned to the management?
Pires: Again, no problem, no big deal. Just tell them sincerely that everyone is a manager of their own work and results; management is just about performing with limited resources...any resources. Top management is the only management worth paying for...and it has totally different assignments.
InfoQ: How does this bonus system work together with other compensation policies? Do you still keep periodical performance reviews? How do you treat salary increases and how do they relate to reviews and bonuses?
Pires: 360 degrees is a totally messy policy; we tested it before Merit Money. It is heavy, time-consuming and also confusing. We even included some statistical measurements, inside a normal curve distribution...useless. But Merit Money do force top management to review salaries and correct injustices.
InfoQ: Have you heard about (agile) team rewards? Could your system work together with a compensation policy oriented to the teams?
Pires: Yes, I came from the IT world and have once been an agile manager. But dealing with isolated team compensation brings more competition, instead of the desired collaboration. Working in silos, with sectors, is different from working with processes and a united team mindset: the client is the goal, the company is the team.
InfoQ: Do you have any specific advice for the those who want to give it a try? For example, would you start with a pilot team or two?
Pires: Do not start with much money! Aim to build a collaboration framework, not a rewarding system. Pretend it is a game! Empower the premises and let it flow. Adapt. It is supposed to be fun.
Merit Money is now part of the Management 3.0 Practices.
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