Community Style Business – Rewarding Performance

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The core problem with any reward system is the question as to how to ensure the reward is representative of the effectiveness. Wether it is a paycheck/compensation, a bonus or results based compensation, companies find ways to reward their employees. These rewards are not an exact science, see Corporate Scarcity – The manager’s mindset, and can contain quite a bit of disparity from effectiveness.

Community Style Business approaches the problem around rewards preferably through the use of non-loss obverse point systems, leveraging lead measure tasks and gates to ensure high quality services are performed. This blog post will cover various theories around CSB reward systems, along with references which I found useful.

Results Based Rewards

The core concept in community style business is that its members are rewarded proportionally to to what they contribute. This creates a problem when trying to define what and how much a contribution is. How do you identify what is or is not valuable?

There are various guidelines, and examples, on how this can be done. None of these guidelines are absolute, as it is up to the community, ultimately, to correct deficiencies when they occur.

Defining a measurement

The first step in creating a value based reward system is to define a way to measure both effort, risk & need/desirability. Typically the points should be based off of effort relative to a baseline which everyone can understand. One example of how to evaluate tasks for points is a practice known as planning poker, which will be discussed later. This point system is re-evaluated as needed every iteration by the community.

Planning Poker

Planning poker is a means by which all members have the ability to vote as to how many points a task is worth. Each time there is a large disparity in the voting the a representative from the high and low point group can voice their arguments to the group.

The site below provides a good overview and guidelines for planning poker.
http://agile.dzone.com/articles/introduction-planning-poker

Setting the bar

If planning happens on a team level or there is a disparity based on the type of knowledge someone has to have, it is often a good idea to set a bar for a baseline for each discipline. This is meant to normalize the disciplines, while still allowing for adjustments based on need/desirability. The one I’d recommend is, what could an average individual skilled in the craft get done in a set duration. This allows for both normalization across disciplines as well as eliminating a notion of inflation causing disparity.

As the organizations cash reserves build it is best practice to get a third, non-invested party to do these evaluations. This is to ensure that there are no biases toward a discipline or career lifecycle. It also helps reduce the potential for political infighting.

Need / Desirability

I’ve stated multiple times this notion of need / desirability, but I want to take a moment to really define what that means.

In a community system, we start off by assuming all normalized efforts are equivalent, no matter what the discipline. This creates a problem right off the bat. Some work requires specialization, is not something people tend to enjoy or require more end entices to get the right level of talent to do the job well. Alternatively, other jobs it’s easy to find people to work on, these are the “sexy” jobs.

The goal here is not to reduce the value of the “sexy” jobs, but to find an equilibrium with those tasks which are less so. An example of this might be someone working the night shift might get more points than someone working a day shift, if the night shift isn’t attracting enough high caliber people.

This isn’t really a new concept for business, as worker salary is a reflection of this calculation. When applied to a CSB it is expected to manifest differently. Since things like schedules and efforts are ultimately influenced by a community of individuals working, more variation is expected to occur over time, as individuals find the niche which best fits their life. Rather than a stick approach, CSB tends to be best with a carrot.

Defining results not method

While lead measures are useful, they shouldn’t be the only mechanism which is used. Often times when looking at an objectives there is the work done which directly contribute and those which correct deficiencies along the way. A good example of this is a software developer & a software tester. In these types of scenarios there are two approaches which can be used: distribution of existing value or value created for the corrective action.

Understanding the impact of imperfection

The example of a software developer is a good example of missed potential. The reason for this is that if the software developer wrote perfect code, the effort needed by the software tester is minimal. Their job is to just verify the expected results. The problem is that perfect code is very hard to write for many various reasons. As the flaws in the software are discovered, the amount of effort given by both the software developer and tester multiply.

Distribution of existing points

The above scenario lays out a real life scenario, of which happens every day. With a distribution of existing points philosophy, the completion of the goal is seen as the value. There for efficiency is rewarded, but higher efforts will not be recognized. Points are distributed after the work is done based on the amount of effort and lead measures completed.

If applied to the scenario above, the more the tester has to work the fewer points the developer receives. The danger here is that points can reduce in value for effort pretty easily, causing the goal to become less compelling. The positive aspect here is that it rewards quality with more points regardless of time spent. This allows an individual to spend more time to produce higher quality upfront and have that behavior re-enforced.

Value created for the corrective actions

This philosophy states that those efforts directly inline with the goal will be rewarded statically. The corrective efforts will be rewarded without the scarcity of the initial goal.

The example above would be handled by the developer getting a static set of points, while the tester would be rewarded more for anything extra beyond the initial verification effort.

This method plays more nicely when looking at objectives which run longer than expected. The problem is that this method increases the value a goal is worth artificially based on how much correction is needed. The positive aspect is that important goals don’t become meaningless. The developer in the example would have to spend longer to fix the issues before his points would be realized, which also balances out the effort to reward ratio for lower quality work.

Dividing up the spoils

As I stated in the overview, the gross profit is first used to pay for all materials and expenses the community is required to pay. Once that is done, any community initiatives are taken out, things such as a rainy day fund or saving for a consultant to normalize efforts across disciplines. After those two are completed, the points from all contributors are added up, and each member’s percentage of points are calculated. The remaining money is distributed accordingly.

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Community Style Business – Investment

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One of the key staples for community style business is the notion of rewards that are equivalent to value created. A problem which quickly forms is that most companies need some form of up front capital either to get started or grow to their potential. This capital is given in exchange for a long term share of the profits. So with this disparity, how can investors invest in a system which turns around with profits and gives them to the employees? This post will go over some potential mechanisms which can be put in place to accomplish this without going outside the bounds of a CSB. A quick note, this post builds upon the point system initially laid out in Community Style Business – An Introduction

Capital creates value

The first type of investment I will go over is a capital investment to be used for purchases, whether it is equipment, marketing materials, or even a booth at a state fair. In this type of investment, the capital essentially creates value by itself. The points are therefore given based on the expected impact provided by the investment. In the case of marketing materials, this could last for longer than just the immediate time the money was spent. By doing this, the investor has a direct return on their investment, based on tangible forecasts. With this form of investment there is assumed a set duration and point amount.

Loans

Just like in any other business, sometimes it’s more preferable to take out a loan, rather giving away points. These are the cases where the community has a track record which can allow them to treat the loan as a community expense before revenue sharing. Since the loan doesn’t consume points, it doesn’t come with influence on the community, or other long term impacts.

Investing in individuals

Another form of capital investment is in people. This form of investment is very common in small businesses and startups, where revenues are not expected for a significant duration but people are needed full time for an initial effort. With this scenario it’s important to note that the realization of points is often a future event. The investor should be given the points in full with an iteration cap. These points can then be used at the time when revenue is being realized. The cap is a way to protect the team and system from having an iteration where an investor can devalue a a contributor’s points to where they become irrelevant. It is expected that the investors can become part of the community to help guide, but they hold no special status other than their ability to influence others.

Buying and selling points

A third form of investment is short term individual based investment. This is where a single individual requires a working wage to get off the ground and become self sufficient in a CSB. In the above scenario, the investment is for a specific individual, for a specific iteration or iterations. Due to the nature the points sold are for the specific iterations as well. When selling iteration points it is best to sell a specific number per iteration, based off of the teams baseline. This allows the point sale to be able to be forecast for the investor’s profit margins. It also allows the individual to exceed expectations and still be able to receive compensation proportional to the value they create.

The point commodity

Just like any shares system, points can ultimately be perceived as a commodity, with investors being able to buy, trade and realize them. Although similar to stocks, the point system has a more definitive value, as ultimately they are meant to be realized by profits in an iteration.

The selling of a CSB

While selling a CSB might sound a bit odd, given the nature, it’s actually expected for some to get purchased just like any other business.  This usually occurs when a business reaches a threshold where competition with other business require more than partnerships, or a larger corporation wants to add better integration into its own services without creating new costs.

The difference when it comes to a CSB is that since there are no real share holders, a new mechanism is required when divvying up the purchase revenue. First I want to point out a founding principle in business development. Businesses don’t start from scratch ready to be bought. It is the people who invest and contribute who make a business sell-able. With this in mind, the recommended approach for realizing sales revenue is to leverage the point system, but rather than just use a single iteration, the total points for the life of the business is used. This will allow all of the CSB members to benefit, including the investors.

Conclusion

Community Style Businesses doesn’t have to place all the financial burden on the contributors, and investment has a place. While there are various ways to invest and realize those investments, the form it takes differs greatly from the typical corporation. Even so, realizing profits and revenue off of business acquisition stays relevant to the investor.

 

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Corporate Scarcity – The manager’s mindset

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In previous posts I talked about the history of corporations and the contributors mindset. In this post I will discuss the mindset and challenges of being a manager in a corporate environment.

The manager, whether that is project, product, program or resource manager, is continually faced with the prospect of knowing the directions the team or teams is to go, but must turn that vision into a strategic plan as to how to get there. This is primarily done with either too few or barely enough resources to get the job done. During this execution the manager must fend off the pushes and pulls of peers and higher ups, which always want more, if it’s going to have an adverse effect on the teams immediate goals.

When looking at the manager’s perspective it is important to also note that they still have most, if not all, the scarcity aspects of the contributors. On top of that they must also face the challenge of productivity management, resource allocation, aligning and prioritizing varying objectives, positioning and communicating their teams value and finally being a knowledgeable and effective leader.

Productivity Management

Productivity management is assembling, cultivating and maintaining a team to achieve a specific role in an organization. The more productive a team is, the better it, and its management, look. The limiting factor here is that the team size is limited to often being just enough to get the job done. This creates a scarcity environment where individuals are held to a standard mold of expectation of productivity. An individual’s value therefore is based primarily on how well they match the mold, with a secondary basis on their talent.

One place I worked at was a highly political environment, where perception of success was more highly regarded than actual success. In this environment those whom were adept at political maneuvers, even at the contributor level, were regarded as the most successful.  At another company, the definition of success was based on how well you worked with others. A third company I worked at based success on how much you produced as an individual. These are just examples of how varied the mold’s expectations can be.

Hiring

Having a team understaffed or improperly staffed leads to failure of projects and future assignments going elsewhere, or existing direct reports feeling overworked and leaving. As a manager you are expected to hire the right individuals for your team, which often means a specific skill set, a compatible mindset to your team and organization, the right amount of relevant experience and willing to work for the amount the company is willing to give. This makes finding the right people in a timely manner that much more important. This often limits the talent pool making the job that much harder. Add to this that the manager usually has to use an interview system which gives only a fraction of the information needed to make the “right” decision, and a vision as to the perfect fit can become a crapshoot. Many interviewing strategies have been developed, but there are still huge risk factors which can include: how well the candidate interviews, the type of stresses the candidate is under external to the interview, and what preconceived notions you and the other interviewers have. This tends to result in an interview system which results in a period of uncertainty for the company’s productivity, and the individual being hired. In the worst scenarios, the company sinks a lot of money into the individual, with very little productivity and fires the individual, resulting in financial troubles for the individual as well.

Cultivating

As a manager it is not enough to just hire and fire, you are expected to cultivate the team’s talent as well. Lack of talent growth by the team members tend to cause them to look elsewhere to gain those talents, and ultimately can cause them to leave the team. Another consequence a manager faces here is that they are only given a limited headcount, which is one of their largest scarcity aspects, which must be capable and talented enough to handle their role in the company. Growing talent is one way to fill in the skills needed without requiring more hiring. Managers challenge and grow the individuals on the team, aligning skills needed with people they already have.

The difficulty here is that the number of “challenging” projects are often seen as desirable by the entire team, but tend to be outside the team’s primary responsibilities. This creates an aspect of scarcity as you much choose how to grow individuals without creating discontentment with the rest of the team. In rare cases you may run across a scenario where the a team member feels entitled to one of these projects, but doesn’t have the skillsets required, or isn’t chosen. This results in the same discontentment even if they have other opportunities.

Another aspect of cultivation is performance reviews. Depending on the company you work for, performance reviews hold a lot of sway as to the employees’ compensation and future. The problem with reviews at most companies is that artificial limitations are placed on teams and organizations as to how many people can be evaluated as excelling or failing. These limitations once in the organization then get divvied out based off of team perception and politics. This ultimately can lead to a scenario where individuals don’t feel adequately compensated for their contributions, and if the philosophy is made public, an environment where someone’s success hurts others come review time.

One company I worked for had a review come around, and a limitation that worked out to only one individual being given an exceeds expectation grade. The past year I had saved a project, got a multi million dollar deal, and played the key point person for a large international customer, while not being paid for most of these responsibilities. Due to the project, which previously had been seen as a failure, with a customer super cautious about who it worked with, created a scenario where another’s achievement were seen as more desirable than my own. Ultimately the project I turned around became the primary project of the company, but by then it was too late for me. This scenario happens a lot, both from the reviewee and the reviewer side. As a reviewer you must make decisions as to whom you’re going to reward and who you’re not. Often times these decisions are made based off of fear of losing resources, rather than purely a review of the individual.

Over time discontentment turns into turnover, which a manager is expected to limit. A failure to limit higher than normal turnover can cause the manager’s manager to question their ability to lead a team.

Maintenance

Maintaining a team can be challenging. This is probably one of the few aspects which is not scarcity related. Working with people to get better cooperation, help with personal and interpersonal issues can be very rewarding. The difficult part comes in when its time for someone to move on. While this isn’t necessarily scarcity based, it does have aspects of loss aversion. This can create scenarios where someone is under performing or out of alignment is retained longer than they should be. If not let go, the team loses morale and respect for leadership, if let go then a contributing resource is lost or possibly other consequences based off of social circle fallout as well.

Resource allocation & prioritizing objectives

One aspect of a manager is to allocate people’s time according to new projects, initiatives and maintenance. Due to the nature of business there is never enough collective time to do everything. This creates a scarcity aspect around resource skillsets and time. New projects tend to gain more visibility and political points, but increase the required maintenance in order to stay afloat. Initiatives, either peer or directed, help with longer term organizational goals. Maintenance comes with little visibility and political points, but lack of it will lead to epic failure given enough time.

Managers must then balance all of these, communicating what is necessary, and understanding when it’s more prudent to use a pocket veto (not opposing, but taking no action to fulfill). As a manager this is where a lot of time is spent, navigating the various expectations and agendas.

Positioning & communicating team value

In business, perception is reality. While in an ideal world, there’s never enough time for directors and above to fully understand all the details. Rather they rely on the manager to communicate those aspects they need to know. If a team meets objectives, but is never heard about, then evaluation, promotions, bonuses and increases in salary will be distributed eslewhere. Part of being a manager is evangelizing the problem space your team is in, the value they produce and the individuals who excel.

Being a knowledgeable, effective leader

One of the biggest misnomers which contributors expect from a manager is that the manager is an expert in all aspects the contributor is expected to work in. While this may be true in some cases its often artificially created by the manager’s hiring choices, choosing people who aren’t beyond their own comprehension in aspects they’re less knowledgeable about themselves. The other way managers manage those more skilled than them is limiting the comments and involvement in those areas. By not commenting or interacting, the reports assume they’re in agreement and therefore don’t lose respect.

Another aspect which contributes to effectiveness is the ability to lead appropriately. This means understanding how to lead different people differently. Distance of power is used to describe how people expect to be managed, on a sliding scale with extremes being low distance of power and high distance of power.

People expecting a high distance of power want to be told what to do, and in some cases how to do it. They perceive that their manager is an expert in what they do, and any suggestion they have to make is a failure of their manager’s ability to lead. Often times these people respond better to being told their suggestion is wrong, even if the outcome is not as optimal.

People expecting low distance of power perceive their manager as an equal, with a different set of responsibilities. They tend to self manage more, and expect that their suggestions are a contribution to their environment, and not a failure of their manager. If a good suggestion is ignored then the individual starts questioning their ability to lead.

Community Style Business – An introduction

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I first started asking the question two years ago.

How do I work in an environment where all my contributions are valued?

The problem I faced at the time was that I was working for a professional services software company and had just secured a multi-million dollar contract. After working with the customer and rebuilding ties I had my review, where I was given a small increase in pay, and no promotion, even though I was being billed as multiple titles above my current pay grade.

At first I thought it would be enough to step up in the corporate ladder. That’s when it was driven home to me about how much of “middle” management was corporate politics and posturing. That was definitely not what I enjoy.

I then tried both joining a couple of startups as well as creating a business of my own. It was surprising to me how different organizations varied, both in skill sets as well as personal philosophies. But there was an underlying trend of scarcity and in some cases wild financial bets where one wrong step would mean I would lose my house and my finances would be shot.

The one good thing during that whole duration was that I was continually studying. Business, people management and even psychology books became part of my daily routine. Eventually I started working out what I really was looking for in a workplace environment, and titled it Community Style Business.

What is CSB (Community Style Business)

The simplest definition of CSB is:

A group of individuals working together as peers to create value, with the rewards of that value distributed to the community members based on the extent of the individual’s contributions.

This style of business borrows heavily from the organizational structure of agile, in which the members executing define how work gets done, and the inception members (product owners and researchers) work to identify what customers value and how much.

I personally come from a software background, and so the following will be heavily focused on the definition as it pertains to software, but that doesn’t mean a variation can’t be applied to other domains.

Distribution of rewards

Members of this system are rewarded based off of efficiency and completion of work. These pieces of work are given point values based off of risk, complexity and effort in relation to what it would take a competent individual skilled in the craft. This value is then voted on by the community of individuals on the team, much like agile’s planning poker.

Once a unit of work is finished, it is reviewed by the team and at least one member of the inception team. If the work is approved then the points associated with the work are rewarded to the individuals who worked on it.

It is generally considered a good practice to define lead measures as part of a unit of work. Lead measures are measurable behaviors which when done tend to ensure high quality results.

As the product is purchased, and value is transformed, all non-contributor based expenses are paid first. Items such as rented servers, or the power bill and Internet, at face value. After that any community agreed finances are taken care of, such as putting together a rainy day fund. Finally the remaining is distributed based on the percentage of points an individual has as part of the whole.

Leadership

This is one of the main differences from this style of organization to others. The way leadership works in this style is through evangelizing ideas, and gaining community buy in, although depending on the size this could be as simple as convincing a team to consolidate around the idea.

Often times this will come from the inception team, but any member of the community has the ability to become part of inception, even stepping outside of their current role to do so, although it’s important to note that they shouldn’t do it in a way which will cause their current team to fail on the current iteration.

A fundamental principle here is that an idea or vision by itself is worthless, and shouldn’t be directly rewarded. The true value of the idea comes through the researching, flushing out and implementation of the idea. Usually this means many people are involved, from the high level vision all the way down to the details. To that extent those who want to lead with vision become part of an inception team, and are given the opportunity to gain support from others.

People management

Since value is created by each person which should be directly relational to that created, there isn’t a need for the typical oversight of individuals. A member who doesn’t want to work that much will be rewarded with little, and the more workers creating value leads to more value created. If there is limited value which can be obtained, more value created leads to a faster realization of that value, allowing the team to move more rapidly towards more valuable goals.

Those who do not feel they receive enough value for their lifestyle will tend to leave a group on their own. These individuals are often referred to as dead weight in other organizations. In this regard reviews, performance management and classic hiring/firing practices do not apply to the CSB. If a member is not performing enough value, others can be added without detracting from the community.

Pay scale and peer to peer pay comparisons also becomes a moot point in the CSB. Since the system rewards based purely on value contributed, individuals can achieve any pay amount they’re capable of, either through efficiency, talent or brute effort.

Individual responsibilities

In the community model the individual is given a lot of leeway as to how they want to work. The only requirement of this model is that individuals are required to self educate and take part in community obligations. It is up to the community to decide what these obligations are. Examples of items which should be discussed are: insurance, time off, office space, etc.

Individual Community Obligations

A good rule of thumb should be that obligations directly benefit all members of the community equally, if that’s not the case then it’s a good idea to ask if that’s an individual’s responsibility.

An example might be offices of different sizes. If one individual prefers a larger office to himself but others double up on office space then the office space doesn’t directly benefit whole community. In this case, it might be a good idea to allow individuals determine how much of their own distributions they’re willing to give for their working environment. This would allow those that need larger offices the ability to get them, but does not create a pecking order as there is no downside for those who it doesn’t directly benefit.

Self education

In this style of business it is up to the individual to stay informed in order to create the most value possible. This can be done through self education, team discussions, and a suggested high level cross training which gives the individual a concept of other areas of responsibilities and research which is ongoing.

This high level training of research and concepts will allow the community to better understand how to help each other out. Due to this nature there should be an increase in the volume of applicable value across the community.

Community iterations

When I was a manager one of my direct reports told me something to the effect of, “In agile you should be okay if we fail”. While this can sound bad, what he was trying to imply was that in an environment where the group is expected to self improve, harsh accountability regardless of the circumstance will drive away the willingness to try new things.

In the community model, mistakes are expected to happen, people aren’t perfect. The community should pick durations by which it can review and change the way it functions, even trying out new ideas to see if they will work. This iterative process allows for course correction as the community evolves and the business evolves or individuals in the community’s priorities change.

A brief history of Corporations

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A very brief history of the modern corporation

The modern corporation is founded on a rich history, and evolving philosophies, dating back to Rome.  Originally the term corporation comes from corpus meaning body, or body of people.  These were legal entities the Roman Empire used to manage everything from business to religion.  Even the government itself was considered a corporation, although none of these exactly match what we currently know as corporations.

Europe went through a dramatic change after the fall of the Roman Empire, falling into feudal society, where the governing of people and the oversight and management of the generation of value and goods were combined.  Those in charge were responsible for both the generation of goods in addition to the well being of those they ruled. The educated, connected and noteworthy would rise to the top taking prominent positions, the rest would do what they could to put food on the table. Those positions would ultimately be based off of birthright, political prowess, and ability to lead and produce profits. But as the world’s philosophies on government changed, so to did the notions behind how goods were managed and ultimately the profits were distributed.

The simplest transition for those who were in positions of power in this new world, while still maintaining their status quo, was for those with money to invest in groups, and provide general direction.  In return the profits from these organizations would then be distributed based off of the shares these investors had, along with those shares retained by the individuals who created it in the first place.  This transition allowed the previous feudal elite to maintain their positions to some degree, while allowing the government to change around them.

The corporation, unlike the feudal government, was only partially responsible for the employee’s well being and generally led to the corporation taking advantage of those who worked for them.  Ultimately the government had to step in on the side of the employees.  The positive aspect of the corporation is that the individuals who work for them tend to have a stable source of income, independent of the profit fluctuations the company goes through.  Over time, shares in companies became publicly traded as commodities themselves.

The structure of a corporation

A corporation can be broken down into five classes of individuals: Shareholders, the board of directors, executives, middle management and finally the workers.  These entities work together, performing different roles, in order to predict and produce an overall increase in value in comparison to previous quarters and years.

Shareholders

Shareholders have a financial stake in the company, having paid for the privilege of holding stock.  The goal of the shareholder is for the stock to increase in value and/or to get paid dividends from the profits gained.  The shareholders as a whole own the company.  Their ability to influence though is limited to being able to elect those who will be on the board of directors.

Board of Directors

The board of directors provides more direct influence over the executives, providing oversight of those running the company, as well as making final decisions on large decisions including dividends, compensation policies, executive salaries and hiring and firing of executives.

Executives

The executive class provides oversight, direction and strategy for the corporation.  These responsibilities require a deep understanding of how businesses work. The result is a holistic understanding of how to direct different disciplines to work together to produce value which results in profits.  This manifests in the form of corporate vision and direction, or the why and where the company is going.

Middle management

Middle management takes on the tactical aspects of business.  These individuals have to balance the why and where, with the how and what is currently being made.  The ultimate value these individuals provide is the ability to work with contributors to allow the adjustments in order to align with the executive’s vision, but in a way which doesn’t sacrifice what is currently paying everyone’s paychecks.

The other role of these individuals is to keep things running smoothly, providing oversight, handling personnel issues and a source of day to day decision making when properly empowered.

Contributors

Contributors are those who create the value.  They work in different disciplines, but are the ones who actually perform those functions which contribute directly towards revenue.  In most corporations these individuals are highly specialized and silo-ed, having little interaction with members from the other disciplines.

The value of corporations

The Corporation has become a staple of society today.  Most businesses you’ve heard about is some type of corporation.  They tend to provide reliable employment, and structures which allow individuals to contribute in meaningful ways with a limited understanding of business.  No business entity has had more success, or grown as large, as the modern day corporation.  Many corporations also provide benefits to their employees which may include health, transportation, life insurance and various others.  These benefits provide a higher quality of life for those working for the corporation.

Corporate Scarcity – The Contributor’s Mindset

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Previously, I walked through a brief history of Corporations, outlining some of the structure and value of corporations. This post will expand on that and discuss the scarcity aspects as it relates to the contributor’s mindset. Realize that one or all of these might apply to a corporation you research, but these are based off patterns of re-enforcement which I have seen in corporations.

Competing priorities

In a corporation the typical contributor has competing aspects to their work and personal life which compete for their attention. With a set amount of time in the day, week and year, contributors must make decisions about what they spend their time doing and which goals are important. This is the basis for the wide varieties of motivations which effect how the individual sees their work life.

Every contributor has to find a balance between their personal life, peer camaraderie, increasing their skill sets and gaining status or rank. These priorities have different weights depending on the individual, and are valued differently depending on the company. An individual who values status is often called political. One whom values camaraderie to an extreme is considered a social butterfly and a distraction to their peers. The individual whom values their personal life and time to the extreme would be called a slacker. And one whom values increasing their skill set to an extreme tend to over complicate solutions based on what they’re currently studying.

Corporations tend to value specific attributes, although each corporation, and each discipline, values a different combination of these aspects. This tends to result in the corporation trying to re-enforce behaviors which are valued, while discouraging those they don’t see as valuable. This results in what some managers call “team fit”. The dilemma for the contributor is what to do if these valuable aspects do not align with their own. For a few they will move on, attempting to find another place which does more closely align. Although that would be the best scenario, most attempt to blindly change themselves to match the perceived desired aspects, with little to no reconciliation with their own values. If there isn’t a reconciliation, the result can cause discontentment and a gap to emerge between the contributor and their manager.

In one company I worked for the company had set up an environment where the contributors were asked to continually work overtime and weekends. Although the company didn’t officially value this, the internal culture and peer to peer pecking order did. With this aspect where overtime was apparently valued, the contributors began to develop a gap in communicating with their management about their discontentment with the environment. Ultimately when management attempted to change the culture, the contributors listened, but never bought into management’s goals, which included work life balance. Without feedback to the management, the contributors continued the current culture and many ended up leaving.

Some corporations try to communicate values up front, providing a mold by which workers can self assess. A problem emerges with the interpretations of these values. Some individuals are good at reading between the lines of the values, others are not. With those who aren’t, the individual is often time seen as struggling to buy in, or struggling to fit in. This is not really a deficiency on the part of the worker, but rather a conflict in what the individual values vs what the company values. Great managers can identify the differences and is able to adjust in order to accommodate.

Scarcity

The contributor can face various aspects which introduce a scarcity mindset, which in turn reduces the actual value and can warp the perceived value created. The main contributors to this mindset are: assessments/reviews, peer to peer comparisons, the rat race and compensation.

Assessments / Reviews

Assessments are a great tool in and of themselves. The problem comes in if limitations are put in place which causes the individual receiving the review to view it as a critique of areas outside their control. This often occurs when feedback isn’t given at other times throughout the cycle or the viewpoint of the individual and the manager are inconsolable. Often times these issues can be fixed, but can make the employee perceive the review as a losing something. This results in an instinctual loss aversion, where losing something is an order of magnitude larger than a gain of equal value.

Reviews and assessments can also create scarcity when rules are applied to how well a group can do. A common example of this is the 20/10 principle, or that 20% of people can exceed and 10% must under achieve. This creates an environment where one contributor’s success has a negative impact on his or her peers. This can lead to individuals fighting over high profile tasks, not mentoring or helping others and political posturing.

Peer to Peer Comparisons

Contributors will tend to compare themselves to their peers, often times understanding only a small portion of the other’s tasks and accomplishments. The gaps in knowledge which exist are filled in with projections of personal experiences or expectations. To some an unequal amount of recognition of a peer without an understanding of how to get similar accolades can trigger scarcity mindsets. An instant trigger is often times the pay others receive. The same scenario plays out as previously described, but is interpreted as a potential devaluation of the individuals perceived worth to the company, also triggering loss aversion.

The Rat Race

The rat race is used to describe how the processes of promotion occur. Often contributors associate skill mastery with promotions and influence. This is especially true in “high distance of power” cultures. The result is a drive to gain prominence and influence as the contributor is disillusioned as to the skill gap between themselves and their manager in the area they specialize in.

Given that there are fewer positions at each level of the corporate pyramid, contributors who want to advance higher must position themselves for when and if the opportunity occurs, while often not understanding fully what lies between them and that opportunity. This example of scarcity creates friction with peers, but can create a highly political environment with their manager if the individual feels unduly passed over. This is often mitigated by management through carrots, such as opportunities to show worth, but can become disingenuous if the path to the contributor’s advancement seems to lag on without the contributor understanding and being able to properly evaluate themselves.

Compensation

Compensation is a tricky one. The problem is that compensation directly ties to quality of the contributor’s life, as well as reflecting how valuable the company sees the individual. The other side to this coin is that when you pay an individual more, then they can re-adjust their expectations of their own ongoing value regardless of contributions.

Contributors make assessments as to what they believe they are worth. If they perceive they are undervalued, then pay increases produce less good will. If there is a gap in understanding between the manager and employee a small pay increase can be as bad as no pay increase at all, as both will re-affirm to the contributor that they continue to be under valued.

As stated previously, people tend to fill in gaps in knowledge with imagination and personal experiences. Due to this, contributors make guesses as to the compensation their peers receive based on title, life style, appearance, etc.  These assessments are then tied back to the value they perceive is generated by those individuals. This can cause their own expectations of compensation to inflate, trust in managements decision making to falter, create a perception of favoritism or even cause a deterioration of their morale as a member of the team.

Conclusions

The perception of the environment from the contributor’s perspective is one where information can be scarce and decisions are made off of a variety of their own values which may or may not align with the corporate culture. These differences and risks around scarcity can be mostly mitigated by good management, but are inherent to the structure a corporation provides. The risks become larger as the corporation grows, and the values must be interpreted second hand by those outside the founding team. This should be expected though as a corporate culture is ever evolving based on influences, external and internal, to it.