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Reflection – Kate Bogh

by on November 3, 2007

Employee rewards and incentives

In class last week there was discussion of how to sustain change management initiatives. One of the suggestions was the implementation of an incentive or rewards system that encourages employees to participate. While incentives may assist in facilitating organizational change, it is even more important to address measurement systems used to evaluate employees.

There are many reasons why employees may not be thrilled about change within the organization. Rewards and incentives are extras, like gifts given to encourage employees to go along with the changes. Rewards and incentives are not a given however and are often not even considered. Employee evaluation is generally a given however and, while they may change, they are often not adjusted with new change initiatives. Sometimes, however, they are not updated to reflect the organizations new values or employee expectations.

In the small software development consulting firm, I work for, we commonly see a disconnect between change management initiatives and the expectations that are placed upon employees.
Here is one example: In this particular company, employees were given a rating, a number from 1 to 4, once a year by their manager. The manager was allowed to give two fours, two twos, there better not be any ones and the rest are threes to his team members. A rating of 3 suggests that the employee is doing his job and meeting expectations. A two is like being on probation and if on probation for two consecutive years, the employee is fired. These evaluations are a big challenge for managers who want to hire all fours and reward them rather than hiring mediocrity to ensure the ratings be maintained. Then ratings of two have to be passed around so that no one gets it two years in a row and gets fired. Ultimately, the ratings go to an executive director who determines, based on the rankings who should be given a raise or receive a pay raise. Due to the direct and substantial economic impact that is tied to this rating, it matters very much.

At this particular time the organization is going through a change initiative that gives employees more time and location flexibility but requires that they work more efficiently using new programming methods. During the following evaluation period, a manager ranked three of his team members as fours, instead of the required two, because this was the level to which his employees were working. The director, having received the rankings, bumped one member, the employee he knew the least, to a three.

The particular worker who was bumped down exceeded all requirements on the ranking rubric, was an excellent worker and an award winning developer. He says that he was bumped because he lives far away from work and because of his excellent work ethic and productivity he had been allowed to telecommute three days a week. When this employee went to the director he was told that there could only be so many fours and that he was a good employee but the director had to make something up to keep the system consistent. The employees’ response, “You have completely removed any incentive for me to even try to be above average.”
In this example, employees are essentially pitted against one another to ensure the ranking system is as distributed as necessary. Change management initiatives are often made up of many smaller organizational changes that make up the broader picture. Employee evaluations, incentives and rewards need to fit into the change initiative or it will not be sustained, as we discussed in class.

In many software development organizations the organizational changes involve moving individuals or pairs of programmers together into team environments. One of the forefathers of agility and production efficiency is Edward Deming, a US statistician. Deming worked in Japan in the late 1940’s on production systems. Deming brought many of the principles of Japanese production efficiency to the US automotive industry and his 14 principles of management are still widely used and respected. “Probably the most ignored piece of Deming’s advice is this: Eliminate annual performance ratings for salaried workers; do not undermine team cooperation by rewarding individual performance.” [Poppendieck, pg141]. Today the value of teamwork and team-based projects are increasing. Consider how many projects we, as MSIM students, have completed during our program so far. Most likely, wherever we end up working, we will be working on teams and probably on more than one team at a time.

Mary and Tom Poppendieck, also leaders in agile methods, look closely at employee evaluation as well. Here are some of their tips:
1) Performance measures should never surprise the employees and evaluations should occur more often than annually. Employees should not be unclear about what their current status is within the organization. [Poppendieck, pg 142].
2) Deming says that employee performance is also a responsibility of management. Managers should take responsibility for the performance of their people and the system they work in. [Poppendieck, pg 142].
3) On ranking: Ranking systems discourage collaboration and require individuals to work towards being a ‘rank above the rest.’ Ranking encourages competition rather than collaboration. [Poppendieck, pg 143].

Tom and Mary Poppendieck provide additional information on incentives and compensation in their book, Implementing Lean Software Development From Concept to Cash, and while never having been a manager, I would highly recommend it.

As potential future managers it is important to have a grasp on concepts of employee evaluation, incentives and rewards before having to deal with problems in the workplace.

Resources: “How to Give an Effective Employee Evaluation”. Accessed Nov 2, 2007. URL: “ManagingEmployees”. Accessed Nov 2, 2007. URL: – provides long list of articles and resources on managing, evaluating, and leading people
Human Resources, University of Alabama. “Performance Evaluation Tips Performance Evaluation Tips for Supervisors” URL:
Poppendieck, Tom and Mary. Implementing Lean Software Development From Concept to Cash. Poppendieck LLC, 2007.

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