Workers are doing the work, but not sharing in the spoils.

Well, there is profit sharing. It's a huge incentive for workers to do the best they can, and usually, when not tampered with, profit sharing works quite well.

But if you agree that workers' personal interests are relevant...

This is only the case with lawsuits.

Jim: you bring up good points, but let's not kid ourselves about from where they come: Utopian societies - nice as they are - will never work and never have. It is not within our nature to be fair after a certain point; and that point is when leadership has to be established. Leadership costs more on many levels than the common worker - and not just monetarily.

Conveniently, I believe you're overlooking the other side of this argument: workers can succeed to higher positioning. Eisner is a prime example. His first job for Disney was theater usher.

Also, it's too simplistic to believe there is a tangible cap for anyone in this world inasfar as a 3 bdr. house or the like. Many, many other issues come into play for each individual. Sure, some of those issues are "I wants," but there are many other issues that are "I needs."

I've read this sentence 5 times, and I simply can't fathom what in the world it is supposed to mean. Super, I know we both have MBAs, we are trained to manage people and projects, and we each have several years in both the private and public sectors. And yet we speak completely different languages. Honestly, I cannot even take a wild guess of your above meaning. Because of my complete bafflement, I simply cannot get through the rest of your message.

Sorry, I'm going to bail out on this discussion, Super. Claim victory on this one - I'm going to concede that you're the last man standing, even though most of your ideas seem to be incredibly, inconceivably, diametrically, opposed to most of mine.

This is just too much work, for not enough reward. It's not even providing a subsistence level of intellectual reward (which would make me happy, thereby leading me to sit on the couch, happily channel surfing instead of striving for any greater reward. ;))

Now I think we're bordering on PLatos Perfect Republic, which we know was far from perfect.

Unfortunately, pay-for-performance systems are difficult to administer in a way that works for workers, and FAR more difficult to administer in a way that works for the company.

Again, Jim: I think profit sharing and stock options render this somewhat of an untrue point.

DD - if your potential profit share is in a range of $0-1,000 and you have little or no ability to influence the profits of the company, you being part of a profit share won't do a thing. Profit share doesn't work unless it is a meaningful amount and able to be influenced (or perceived to be able to be influenced) by the employee.

For most factory workers (or equivalent level in services companies), whether they work hard or adequately is hardly ever influenced by their annual bonus.

Stock options are not often available to employees at this level, and moreover even if they are they are often of a low level and can become a disincentive under certain scenarios (eg, macroeconomic factors influencing share price performance).

I agree somewhat with Super in other words - creating an effective incentive scheme is very, very difficult for lower level employees. It can be done for those further up the chain, but not everyone in a company earns over (say) $50k.

I gotta go. Sometimes I have time to banter and sometimes all he!! breaks loose. But hang in there, Colin. For a wimpy idealogue I can be overly aggressive sometimes and you're making much more sense than I am giving you credit for. I'll be back when I can, and frankly I have loved, for a very long time, good hard debate with intelligent and interested people who disagree with me. And I think we're doing fine on the respect thing, or at least you are. So, if you're throwing in the towel, I'm kicking it off the canvas. Marques of Queensbury rules you know, and you're still very much standing. Sorry I gotta go. I'll be back.

if your potential profit share is in a range of $0-1,000 and you have little or no ability to influence the profits of the company, you being part of a profit share won't do a thing. Profit share doesn't work unless it is a meaningful amount and able to be influenced (or perceived to be able to be influenced) by the employee.

I don't know about that: when I was given stock options and held profit sharing within the large companies where I worked, the shareholder ballots I received in the mail asked for my vote on any action the companies took to influence their profit. The same ballots went out to other shareholders - whether they worked for the company or were investors.

For most factory workers (or equivalent level in services companies), whether they work hard or adequately is hardly ever influenced by their annual bonus.

So conversely you're saying if they worked harder they'd get a larger bonus. That seems fair.

Stock options are not often available to employees at this level, and moreover even if they are they are often of a low level and can become a disincentive under certain scenarios (eg, macroeconomic factors influencing share price performance).

Almost every large company service industry job I know of (Starbucks for one), offers stock options to their new employees, as well as full insurance. I can't see how either of these can not be an incentive on both the worker and owner's part. The incentive is, truly, stick around and you might make some money beyond your paycheck, while also having health care. That's a good deal. Also, many of these companies offer a sort of fast track up the ladder. Again, at Starbucks, one who shows promise can be a manager of a store within nine months, I think. That's not too bad. Managers are paid fairly well.

I agree somewhat with Super in other words - creating an effective incentive scheme is very, very difficult for lower level employees...

If a glorified coffee house can do it, anyone can. It isn't rocket science.

The potential increase in compensation for the average barista (and I use that term loosely when referring to someone at Starbucks) from wokring their ass off as opposed to doing "enough" is, IMHO, practically nil.

Ditto for a factory worker. If they increase productivity by 10% they sure as hell aren't going to get paid 10% more.

When $500 rides on:

- an entire years' work,
- in the case of profit shares meted out on the basis of subjective appraisal - your bosses view, AND
- in the case of profit share linked to companywide performance - the hard work or lack thereof put in by the other hundreds of employees

The average employee has an incredibly minor change in income which they influence.

So you're saying percentages are in place. 10-percent bonus (for example), whether you and others work hard and others don't. I ask because you also use the words "potential" and "if," making this information a bit sketchy for me. If you had hard data, I'd be more apt to take a viewpoint other than that some of these "low-paying service jobs" are indeed not as bad as they appear in the realm of compensation. OTOH, as far as gov't jobs go, how can a gov't employee feel secure when programs are continually in danger of being cut? What happens next?

I imagine the only alternative, as far as Starbucks, are state-run coffeehouses.

I guess I'm thinking of our local telco (which is not govt owned).

They pay lower level employees a bonus, based on:

- company performance (determines half of bonus)
- divisional performance (other half)

then modified by a subjective and objective (KPI) assessment of their contribution - bascially you get a precentage of 100% of the theoretical bonus set out above. 100% might equate to 5-15% on top of the salary (depending on firm/divisional result), most likely in a pretty narrow range around 10%.

They can realistically only affect (in a small way) 50% of their salary (their divisional performance). Furthermore, an "average" employee will get probably get 75% of their maximum. Therefore, their hard work for a year might pay off with a bonus of 25% of 10% (or 2.5%) higher than if they didn't work hard, but could be in a range of 1.25%-3.75% due to circumstances outside their control.

If they are paid 50k pa, this is a bonus which their performance influences of $625-$1875 (and most likely $1250) which they control.

What's worse, is that it is convincing their boss which makes the difference - from what I saw the firm performance didn't change the salary much at all. Basically, the employees expected and factored into their salary a 5% bonus. What came on top of that was what they considered their (weak) incentive.

Now an incentive structure that works can be found in investment banks.

Bonuses range from nothing to multiples of salary, depending on the amount of money you earned for the firm.

Even then they can screw that up - reducing the bonus pool because of poor worldwide performance, but failing to top it up when your own country performs poorly.

Of course, the crazy IB salaries and incentivisation required for 80 hour weeks aren't available to factory level employees...

Well, on one hand, one has to be crazed to work 80 hrs. weekly. It does not bode well for one's personal life.

Secondly, I would not expect any firm to give out bonuses if performance was weak. That's irresponsible to the scheme of a business in general. Given that, an employee, when faced with a business's overall poor performance, should set upon themselves some hard decisions. Stay or go? Ride it out? Etc.

One should not just expect a bonus without considering larger pictures. Nor should a bonus be expected because they were given one last year.

I understand what you're saying, however. But free-wheeling here with my thoughts, I've concluded one human condition with what you outline: that the worker should become somewhat of an independent entity from other workers as those workers could drag the first down due to their collective poor performance. At that juncture, it simply sounds like a poor work force (except for that one worker) that the business employs. Or should it be up to that one worker to encourage the others to "step up?" Should that be a responsibility of this person?

Ideally the workforce is pulled up by the "good" workers! Human nature makes that difficult.

My favourite part of university was corporate governance, and in particular the part of a certain paper focusing on agency theory.

Together with some work I've done reviewing and commenting on firm's schemes (usually share based ones), it opened my eyes a little on the difficulties in setting up performance based schemes for management - it is a logical extension to get down to lower employees.

The biggest problem is as I said - that pay and performance are often not actually linked. If an employee knows they are going to get a crappy bonus because the firms performance sucks, and they feel like another cog in the wheel, they are actually disincentivised to work hard (ie, work hard next year - this year? if you can't win, don't try ;)). Another example was generous stock options in tech companies designed to retain hard to find employees. It worked great until the share prices plummeted...

NZ had shorter investment banking weeks - lucky for me - and I still in effect burned out on the shorter hours...

Okay, one of the things you guys are talking about is the danger of having a weak link between performance and pay, or having performance-pay be limited to modest amounts to it's "not worth it." And you're correct about the impacts that can have, or lack thereof I should say. But there's more. Much more.

Let's say bonus pay is linked to company performance. There, you're at the mercy of everyone else. So, your personal performance is the weakest impact, and you're dependent on everyone else. You feel like you have little control. On the other hand, it creates peer pressure and that has "team" implications which can be good. and bad.

But here's a major rub. Let's say the industry has a decline this year. Virtually no one is going to be profitable, so the company just has to keep its head down and survive until times improve. Well, the workers are going to see that profits will not happen that year. Performance goes down the tube because no amount of effort is going to get you anything. And...during those lean times you cannot afford to also deal with a lack of motivation problem among your workers.

I happen to work for a company right now that is entirely employee-owned. Stock IS our retirement plan, and there is no stock owned by anyone who is not an employee.

But the issue I was thinking of when I first mentioned that pay-for-performance programs are tough to handle properly, has more to do with the specific behaviors you will encourage and discourage with your formula. Sort of a "be careful what behaviors you encourage" warning. You might think it would be nice to maximize customer contact and customer satisfaction. That is, outside customers. So you link pay to the number of customer contacts, and to feedback from those customers. Well, if you do that, then somebody in the company is going to stop wasting their time helping co-workers inside the company, and instead is going to hound and pester your customers, steal customers and contacts from co-workers internally and actively solicit "atta-person" letters from those customers. So, you'll have a worker who gets high bonuses, but your other staff is going to HATE that person and team spirit is going to fly out the window. In the meantime, customers are going to associate your company with Sally (the aggressive one), who's actually too busy soliciting "atta-person" letters to actually serve the customer. This is just a small and not-that-good example, but I have seen many instances where a company thinks their incentive system is going to encourage the right behavior, only to find that they have narrowed the focus of certain workers to the degree that opportunities are missed, just because they would take time away from incentive-seeking behavior.

If your system rewards "miles flown," (probably another bad example but you'll get the picture), then you'll stop seeing that person in the office, ever. Not only that, workers located in Florida are going to LEAP at the opportunity and create opportunities, to visit customers in Alaska. And the folks in the Alaska office will be flying to Florida. Suboptimal.

Or maybe just pure sales. This creates the "used car salesman" type of behavior that customers let you get away with in the short term, but causes them to go to your competition eventually.

Like I say, many companies have been stung by incentive systems they thought would work well. And sometimes the damage to your relationships, internal between workers as well as external with customers, can be irreparable in the short term.

After reading your dissertation on business there I can say that you certainly know government:) Your end-of-the-world scenerios simply do not occur at companies with incentive programs. I mean how in the world do car lots keep the salesmen from killing each other?

I do quarterly profit sharing for my employees. At the end of each quarter they are given a confidential scorecard to fill out for their fellow employees. They rank each other on such catagories as output, attitude, knowledge of the job, etc.. I then tally the totals up and pay the "bonus" propotionate to their score from their piers(I and the other managers also fill out sheets). The number one guy usually gets just over twice what the last guy gets. There has never been any fights or problems. I can tell people the areas they need to work on if they ask. I devised this system because the profit sharing is "their" money and they should have the right to distribute the funds to those on their "team" who made the biggest impact and at the same time send a message to those who are not pulling their weight.

Daddy, your approach and methods continue to suggest you are a thinking man. The incentive system you describe sounds as good as any, though I would reiterate the warning of "be careful what you ask for" as it incentive systems often do bite the companies that were hoping they would improve performance. Sounds like you're on top of your system. With smaller companies, management can keep their finger on the pulse and see right away if things start to go haywire.

I'm not sure of you point(s) in your opening remarks. Car salesmen rarely kill each other. On the other hand, "car salesman" ranks just below baby rapers in terms of public reputation, which a company should factor in if they're going to consider a "survival of the fittest" sales compensation incentive program. If your end-of-the-world remark is suggesting that companies do not have bad expriences, or even that they do not have disastrous experiences, with incentive systems, then I'd assert you are just not aware of those instances. Companies have been burned big time by them. After re-reading several times, I think I understand your opening sentence. I just hope my degree of incompetence is not so high that I add no value to our discussion. Of course, I am always available as a subject of ridicule, but I'd hoped for more. (smiley face goes here)

I throw those comments in cause I know they "get ya", it's all in good fun. I also throw in a few smiley faces when I can for the same reason :) :) :)

Seriously, I don't think you're incompetent, I just think you're not in touch with the real world. You live in a liberal Mecca and have spent a good portion of your time in government. I'm no chef, but if I was writing up a recipe for "disconnected liberal" I think that would be a good start. In fact I would enjoy it with some fava beans and a nice chianti fa fa fa.