performance based pay

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I am looking for any insights as to how to implement a performance based pay
system for software developers.

I am taking on a couple of new people and want them to be paid 50 / 50 (with
a higher than market rate pay if they make all 100%)

But I am unsure how to quantify the deliverables in a way that is fair to
the company and the employee.

Has anyone worked in or set up a system like this that worked well (or
badly?)

Can anyone recommend and literature?

Thanks for any ideas
Ralph



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Offer them a low salary and one or more of the following:
 a) non trivial royalties based on sales
 b) non trivial equity in the company
 c) non trivial cash bonuses at mutually agreed upon milestones (eg, end of
feature add, end of test phase, first customer ship, etc)

Or, you might might give them a decent salary up front and let them know
that you'll fire them if you aren't delighted with their performance.

Kelly



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to

So the salary of the hardworking developers will be dependent on management
and sales and how they screw up the company......

Meindert



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management

Exactly.  Isn't this always the case for engineers who aren't independent
contractors?

The original poster wants to implement "performance based" pay.  This could
mean the performance of the company in general, the performance of the
product in particular, or maybe the work-performance of the engineer
themselves.  I thought I did a good job of suggesting monetary ways to
reward any of these performance criteria (ie: company equity, product
royalties, or milestone bonuses).

Kelly



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Not a good idea because a) it is too far away in time and b) because it
relies on the efforts of others (sales) whom the developers have no
influence over.

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Good idea.  Works extremely well.

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Not so good as there is no means to ensure continued effort.

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You might get away with that in the US but it would be illegal in the UK.

Ian


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of

Every approach has good and bad aspects.  The problem is that the owner
wants the worker to work hard and "do the right thing" for the product and
business, and the major tool the owner has is money, or sometimes, just the
promise of money (eg, stock and stock options).  Money is a great motivator,
but it isn't perfect.

How do you reward a worker today or tomorrow for making a decision that
might only show its value years from now?

Kelly



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end
know
UK.
the
motivator,

Ms Hall has a good point there...



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I'm male and I don't recall ever hearing any complaints about my point.

Thank you for the easy lob...
Kelly



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Sorry dude.. dated chicks by that name.. assumed you where female..!   :o





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You can't fire someone whose performance you are unhappy with?  Or you
can't let them know up front that you will do so?  Or is it just illegal to
give someone a decent salary up front?

--
Richard

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No.  You have to give them several verbal and written warnings that
their performance is not up to scratch, explain what they are doing
wrong and what they must do to meet the required performance.  If they
then still do not perform THEN you can sack them.

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You can tell them what the grievance procedure is (which may result in
their being sacked).

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Not illegal but pretty rare.

Ian


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In the UK you may sack someone, for any reason, during the first 12
months (well actually it's 11).  Any manager who hasn't discovered that
he has employed a donkey in this time deserves to have the right to
fire someone taken away from him.  FWIW in Germany you put
someone on an initial three month's probation at the end of which you
must either confirm their permanent status or dispense with their services
(an extencion to the probation period is not an allowed option) AIH many
UK companies work a probation period, but it has no status in law.

Tim


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Re: performance based pay
After 20+ years in the computer industry, with several start-ups, I do not jump
with joy at the offer of stock or stock options. Kind of funny/sad. Employers
(or potential ones) will lower their voice when offering it to you like they
are doing you a Big Favor. I kind of shrug and try to move the discussions past
that point. They are genuinely perplexed that I am not salivating or swooning.

I'd rather be paid decently. Of course, my needs are small so I don't look for
the six digit salary I'm allegedly supposed to be making.


Re: performance based pay
I worked for a company that offered sizable stock options. What a carrot
that was! It also created a quite bizzare curture. In design or code reviews
it seemed that many felt that if their ideas were not used, the stock price
would suffer. Resulted in the most hostile arguments I have even experienced
in all my years as a programmer/enginner. Not a happy place to work.

Doug

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jump
Employers
they
past
swooning.
for



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Tom Peters, a management guru of the 80's suggested
that rewards should be large enough to actually reward,
but small enough that they don't cause a lot of resentment
amongst those not receiving one.

We've tried cash awards of $100 - $500 for projects
well done, and notebook computers to recognize years
of service.


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Pay them a bit more than they are worth. Then they will owe you. You get
your money's worth.

You don't want a situation where they think you owe them.

Don't play little games and tricks with people's pay. You want your
developers worrying about your problems, not theirs. Give your employees a
straight deal and they will return the favor.

It's also easier to deal with, as evidenced by the fact that you are now
clueless about how to quantify their work, and are asking Usenet about it.
Under these circumstances I highly doubt you will ever reach a system that
they believe is fair.

Performance-based pay is basically the employer saying "We think you can't
do as well as you say, and we're betting *your* paycheck on it." Just give
them a salary and get to the real work at hand.



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I agree.  If you can't tell how good a job your employees are
doing, then you've got bigger problems than how much to pay
them.  Decide how bad you want to keep them and pay them enough
that they're not going to want to leave.

--
Grant Edwards                   grante             Yow!  The PINK SOCKS were
                                  at               ORIGINALLY from 1952!! But
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That doesn't work with a lot of engineers. I tried it. Paid the guy 50%
more than current market rate. End result? he overvalued himself, took a
side job in breech of contract, delivered my job late because he
underestimated the effort required on his private work (which I only
found out about after he left) blamed it on poor everything but him,
demanded a payrise to compensate for all the extra hours he claimed he'd
have to work to catch up (which he never got). Left me to fix the up the
mess, thinking he'd go and con someone else next. now unemployed.

Some people are just too greedy.

On the other end of the stick most engineers are greatly undervalued.
You can hire monkeys, to sell your product (PG Tips did for 30+years)
but not to create it, so why do people think they should be paid peanuts?

Al


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I'm not sure how you get from "guy" to "a lot," but I was aiming more
for the 10% range rather than 50%. It's not a good idea to give the
impression you're made of money. Then the jackpot effect kicks in, and
they start worrying about nothing at all.

Maybe you could have kept a better eye on him, but the odds are you
couldn't have done much to change what he was going to do. I don't
think the high pay was entirely responsible for the inflated ego. It's
always going to be a gamble when you hire one person to do something,
because once they are well into the project you are trapped. Otherwise
he presented a clear case for being fired, which you could have used
if caught earlier.

Re: performance based pay
Try being a software developer for a while and then see how
you would feel about it. Too many things are out of control of the
developer. OS bugs and poorly documented features. Libraries
from multiple vendors. Chips with problems that the manufacturer
doesn't really want to talk about. The list goes on. Add to the mix
the inherent issues in realtime embedded systems. Any developer
that is any good is smart enough to run away from such an offer. It
rarely works out. Quantifying the deliverables isn't too difficult but
the schedule is a challenge.

Doug

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