Thursday, January 17, 2008

Little Rewards Trump Big Rewards

I have a large enough team now that I have a bonus pool. I can distribute that pool however I like. There are two ways I could handle this:
  • Lump Sum Rewards. 
  • Small Rewards More Often
Lump Sum Rewards
The advantage of lump sum rewards is that it feels like a lot of money: "Wow! I got a $5,000 bonus this year!" (or whatever it is). This is the kind of reward that's (a) noticeable; and (b) something people will talk up inside and outside the company. It can substantially improve morale and your group's perceived status.

The bad news is that you can only afford to do this sort of thing once a year or so. So for 50 weeks out of the year you get nothing, and for 2 weeks out of the year you have a team happy with the glow of a windfall. Also, if you repeat this over enough years, your team will come to know and expect the bonus, and to compare it to last year's bonus. It takes more and more to get the same effect. When you're talking a $5000 bonus, giving $5100 doesn't look that much better. This can turn very expensive very quickly.

Small Rewards More Often
This is my preferred method of rewarding. I take the pool and split it into roughly monthly amounts. And then I spend it on a lot of different things, none of them large. 

One person on your team came in over the weekend to finish up that big project? Awesome. Here's a $50 gift card.

The team got a release out on time? Cool. Let's all go out to lunch one day. Total cost (depending on team size), about $250.

A couple of people on your team have been really helping out the more junior people? Let them know you notice: $100 each.

Random Thursday? Great. 6 pints of ice cream to perk up the afternoon. Or maybe USB keys for everybody.

Structuring rewards around non-monetary things, or around small monetary amounts keeps the rewards coming. It lets you tie work to reward very closely, since you don't have to wait until "bonus time" comes around. I find that I use my bonus pool up a lot less quickly this way, but I have a stash that I can use to instantly reward good work. Overall, the morale of my team goes up.

The downside to this is that your team winds up bragging about the quantity of rewards rather than this windfall that they got. It doesn't do as much to make the people outside your team jealous. However, if a potential team member comes along, there will be a story about good work getting noticed early and often, and that's the kind of long-term benefit I'm looking for.

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