Compensation in Agile: Membership Model

How do you reward Agile teams and people on Agile teams? It’s vexed CEOs and Agile organization ever since we started using the word “Agile”

On one hand, you want to reward people who perform better than others, whatever “perform better” means. On the other hand, Agile is a team sport, so really great players might be the ones helping the rest of the team stand-out, not necessarily those getting all the good press. Agile is about teamwork. People ahead of process.

On one hand, you want to reward some teams more than others. If a team comes up with a way to save the company millions each year, it’s not right not to acknowledge that. On the other hand, in a true Agile program environment, teams always don’t get the types of projects where that kind of savings can happen. You don’t want to preach standing teams and a common backlog and then at the same time start paying off teams that get the choicest work.

You might also want to pay people who have worked longer at the company, because they know the domain better. Or maybe those who have worked longer without moving up are considered something to be shunned. There’s all sorts of business decisions an organization needs to make, based on data, but at the same time once you create a process for evaluating people, you’re obviously placing the process at a higher level importance than the people themselves.

Agile principles and “normal” business principles don’t get along so well.

Enter the membership model of performance compensation.

The membership model says this: There is an “Ultimate Ideal” employee that has properties we value and all agree on. Nobody is that person, but we all strive to have these same characteristics in order to help those around us. We reward people and teams based on how close the rest of us think they get to achieving that ideal. Because we must make decisions on this data, everything is force-ranked, and hiring/promotion decisions are based on multiple rankings by different people over time, i.e., we need to move people around. No one ranking amounts to much, but overall a pattern can be determined that shows how well we live up to the ideals we set for ourselves.

So, for instance, a company might decide that their perfect employee has four characteristics: they make work fun for those around them, they understand the needs of the customers, they creatively come up with simple solutions to hard problems, and you would trust them with the most valuable things you have.

Given that model of perfection, each quarter teams anonymously force-rank each other against that ideal. Who on the team makes work the most fun for those around them? Who would be in second place? Who on the team makes work the least fun for those around them? Then you move to the next ideal. By mathematically combining the results, you can determine overall which person ranks highest in each of the ideals. Over time, as people work in new teams and with new customers, each person’s individual ranking comes closer to what could be considered a group consensus of how well they fit the ideals everybody agrees to.

In this way, you’re not asking how much better one person is compared to another. You’re asking which people we would include in the company if we only had 100 employees. Or ten employees. Or five. You’ve created a system of deciding how likely it is for each person to be a member of the club. Some folks might not be the best choice for membership, but that has nothing to do with their skills or value as an individual. It’s a culture question, plain and simple. This is the culture we value. Here is how people stack up against our ideals, as measured by each of us.

The neat thing is that each organization can create its own set of ideals. There’s no one-size fits all. It’s lightweight yet it scales out and optimizes automatically. It creates a ranking system that works across organizations of any size. The same system can work for both teams and individuals. And it provides for a framework to either reward people or let them go, depending on how well things go at your organization.

The only way to create a process and methodology to evaluate people at an organization is to have a people-centered process, where folks evaluate each other. Otherwise you create the same type of mess Agile was supposed to get us out of.

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September 4, 2013

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