Naked CIO: Should techies be paid for achievement?

This week the Naked CIO tackles the issue of how to motivate techies and reward them for their work - is more money the answer?

I and one of my senior employees have had a raging debate about the benefits of performance-related compensation in the software development department for some time. He believes our staff work for love of what they do and the desire to solve problems, while I wonder if tying compensation to specific results would improve efficiency and effectiveness.

The other day he handed me an article originally published in the Washington Post that argued that money can be a demotivator. It cited a test on students who solved puzzles. They were split up into two groups: one group was paid for solving puzzles while the others were allowed to continue doing it for fun.

The test results showed the group that was paid were less inclined to solve puzzles on their own time and thus became less effective at solving them when they got paid.

All about the credit crunch

10 ways the credit crunch will hit IT

Four types of tech in demand during a downturn

Credit crunch pushes techie wages to five-year low

When CIOs tighten their belts, what feels the squeeze?

I pointed out to my colleague that our staff already see themselves as commodities and see the value in their trade. After all, we pay them a salary to code applications. The question remains, though, if providing incentives on project completions would impact their performance in a positive or negative way.

The important thing to be cautious of is creating a penal system where money is used as a punishment as opposed to an incentive. This is a very thin line to manage as performance-related compensation always has negative consequences if the team does not perform. My colleague would argue that defining success in absolute terms is demoralising if a team misses its targets by one day or one hour.

There are many ways to motivate a group of employees and money is certainly not the only one - yet it does seem to be a key factor in all people's lives. So if an employee is ready to leave the office at five o' clock but knows that if he works until six he could possibly achieve greater income because a project is completed ahead of schedule, to me that would be a positive outcome.

My colleague however feels performance-based compensation would disrupt a good team dynamic and pit one employee against another. This is a real danger. Additionally, he feels the fact that elements outside the direct control of the team often impact development projects would make it difficult to manage the programme effectively. Again I concede this could be a factor.

Ultimately though I wonder if we have the level of energy and commitment we need to be a high performing and valued component of our company. That is not to say I do not value the commitment and dedication the team already provides. It just means that sometimes we need a fifth gear and the motivation to go into overdrive.

I offered my colleague some input on this article. Here are some of his comments which I felt must be included in this piece:

"I gain no additional compensation for taking the time to comment on this but it is interesting, challenging and offers me a chance to influence my environment along with the environment of people I work with in a positive way. Had there been an incentive wrapped around this, my enthusiasm changes, my motivation becomes completing the task as quickly as possible to get that carrot, and honestly it then would probably not be my best work.

"Now, to put a twist on that, if after reading my fine work here and judging that it was quality work completed in the timeframe you desired, you then decided to reward me (or as part of my review or when considering my bonus), that reward would more deeply and positively influence my future performance than setting a pre-determined, risk-laden incentive for a specific task.

"I think that when you expect excellence, you stand a better chance of getting it than when you offer to buy it."

I can't deny he has a point.

The key element here is my belief that money and compensation can be a key factor in meeting objectives throughout all staff if effectively managed and based on very clear objectives that are completely transparent. It is also a way in tough economic times to provide some additional compensation when bonuses and year-end stipends will likely be much lower than in previous years.

The article in the Washington Post ended with this thought: "Next time you need peak performance from your workers, don't offer them money - offer meaning."

Is it not possible to offer both?