Agile projects: how to set compensation by project?

With the mass adoption of agile values and methodologies, boosted by the pandemic, companies began to convince themselves that their traditional Job and Salary Progression Plans can no longer keep up with how dynamic work has become, as well as its new characteristics. It's like trying to place people in little boxes: they won't fit in one single box anymore. Besides, new authors and proposals on the topic of "Motivation" now question old methods by pointing to research evidence showing that their results are ineffective, and may even cause effects contrary to the desired ones.

If back then, purely individual work and silo-like sectors used to be an unquestioned reality, organizations have been increasingly noticing the benefits of collaborative, multidisciplinary work. Let us add the fall of old yearly performance appraisal methods, solely restricted to the perception of managers, HR committees, giving place to a culture of feedback and acknowledgement, also collaborative. In this new mindset, we can see that offering feedback only after the conclusion of an action or project, is less valuable than giving feedback as a means of improving ongoing activities. This causes the learning to yield continuous improvements and not just future ones.

All this change also causes an impact on acknowledgement and compensation methods. Companies seek more collaborative, innovative and fair ways of distribution. Besides, the instability created by the pandemic caused companies to adopt short-term plans, which makes it necessary to reevaluate their annual models of variable compensation. That way, compensation by project comes as the ideal, short-term acknowledgement option. It meets the current work characteristics, agile values and also the new management models, such as Holacracy, Management 3.0 and Flat Management. It's a way of financially compensating people for the results achieved in a project, allowing for it to be used along with merit pool distribution tools, as well as a form of distributing the obtained profit, among the team or only among the partners.

Collaborative models of compensation by project, meet companies and workers' current desire for greater transparency and fairness in organizational processes, considering that traditional distribution models will not always be able to lean on these values. These are the famous calibrating committees, in which, quite often, managers will take part in the contribution definition of employees they barely even know. In other occasions, people use their persuasion skills in an attempt to convince colleagues of their merit and, thus, getting a bigger slice. There are even cases in which the division will only consider pre-established percentages, neglecting other qualitative factors. Compensation decisions, in many organizations, follow a top-down format, in which employees' perception of one another's work will largely be disconsidered.

I'll highlight two of the new methods that have been coming up as a more coherent option to solve these matters: Money Pile and Team-Set Salaries. According to research carried out by Mercer, 58% of companies are redesigning their organization so as to become more human-centered, and 45% plan on investing in workmate acknowledgement tools. Both methods are structured from these characteristics.

Money Pile

In the so-called Money Pile, the group meets and, in a first moment, each one will expose their situation and financial needs. Once everyone is aware of their colleagues' reality and needs, the value division begins. That's the moment when each person suggests what they believe would be a fair distribution. People have the liberty of disagreeing with each other, taking money from one person and offering to another, taking turns until everyone is pleased. According to Fábio Betti, from Corall Consultoria, the experience of dividing amounts among partners through this format is satisfactory. It requires great preparation and works well for a small, trusting group, but the question remains as to how effective this would be for larger groups, made up of several small teams.

Team-Set Salaries

The answer to Fábio's question is in another method, Team-Set Salaries (TSS), which works well for larger teams, without taking as much time as Money Pile, preserving, at the same time, the benefits of collaboration, attention to the team's opinion and perceptions, besides the respect for their autonomy.

TSS can be used to divide profits in a partnership, distribute project rewards, divide amounts among groups, and even to make salary-changing decisions, all based on the team's input. It's a method that will comply with agile values and respond well to the new management models, allowing for it to be used in hierarchical companies. If you're looking for a practical, innovative and collaborative methodology to meet these compensation needs, book a talk with us, and we'll help you understand how Team-Set Salaries can help your company.