Any ideas on a better way to share rewards with knowledge workers.. other than time?
Cutting the cake...
In most businesses knowledge workers are employed on contracts with a time basis. This is the same basis usually applied to manual trades.
Typically, a software programmer is hired to code for x hours a week at £y per hour. The employer makes a judgement on whether and when the code produced by the programmer is worth the money spent. The programmer receives pay from day one, without needing to shoulder any risk of the work failing. Conversely s/he will probably not share in the proceeds of the work if it is highly successful.
By contrast, a lone knowledge worker involved in creating a copywrited work, can expect costs for a period while the work is being created, followed by a period when rewards may/may not materialise. The writer shoulders all the risks and rewards of the project.
Conversely the contribution of salaried employee whose ‘strategic’ idea goes on to double the company turnover may well be lost among the many needed to implement it.
Do template/example schemes/studies exist that can be applied to rewarding teams of knowlege workers based on the level of financial risk shouldered and profits of the work derived over over time?
If so, are any of these schemes known to be more successful in a venture environment? Including a 'fair' Term Sheet!
I recall... and am particularly interested in tracing a mathematical model relating to '"fairly" slicing a cake...'
In most businesses knowledge workers are employed on contracts with a time basis. This is the same basis usually applied to manual trades.
Typically, a software programmer is hired to code for x hours a week at £y per hour. The employer makes a judgement on whether and when the code produced by the programmer is worth the money spent. The programmer receives pay from day one, without needing to shoulder any risk of the work failing. Conversely s/he will probably not share in the proceeds of the work if it is highly successful.
By contrast, a lone knowledge worker involved in creating a copywrited work, can expect costs for a period while the work is being created, followed by a period when rewards may/may not materialise. The writer shoulders all the risks and rewards of the project.
Conversely the contribution of salaried employee whose ‘strategic’ idea goes on to double the company turnover may well be lost among the many needed to implement it.
Do template/example schemes/studies exist that can be applied to rewarding teams of knowlege workers based on the level of financial risk shouldered and profits of the work derived over over time?
If so, are any of these schemes known to be more successful in a venture environment? Including a 'fair' Term Sheet!
I recall... and am particularly interested in tracing a mathematical model relating to '"fairly" slicing a cake...'
Asked by Michael Green,
June 2008 - Contact this person
2 Answers
-
Hi Michael,
This is a really interesting question. I’m not aware of the model you mention. My own experience in software companies was that our development team was in-house rather than contracted. We operated a bonus scheme for the developers based on a mix of total company performance (revenue based) and development performance based on product/project delivery targets.
We also encouraged and created schemes for employees to become shareholders with a stated company aim to realise the investment within a timeframe (we successfully sold the company last year and everyone benefited).
These ideas are quite easy to implement in small innovative companies employing predominantly salaried staff. If could get a bit more tricky if you are employing contractors but I can’t see why a performance related element could not be introduced for them as well. -
A way to do this is to set up and option pool that pays out to an employee trust. Should your company get acquired, you can pay out the share of the company that goes to the trust to the coders.
You can build yourself a little spreadsheet that details who will get how much of the cake. Senior people get more than junior people. People who were there early get more than thos that joined late. People who were with you for a long time get more than thos that were only there for a short time. People who underperform or leave the project don't a cut, etc etc
my email address can be found here, if you are interested in discussing this: http://jenslapinski.wordpress.com
Share this question:
