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Until now, I worked on projects with fixed salary, receiving it at each period (monthly). But I would like to know, what if the workers should receive their salary with a percentage of the project's value? Would it be more motivating to finalize it as well as is possible?

I see now three payment possibility, as rewarding a project from financial approach:

  • fixed (periodic) salary
  • percentage of the project's value
  • the combination: a smaller amount, fixed salary plus a percentage.

Which is the better solution?

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The surprising truth about what motivates us: youtube.com/watch?v=u6XAPnuFjJc –  Christoffer Hammarström Dec 11 '12 at 12:34
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Although your question falls into another direction, I believe worth to check out some questions like THIS, THIS, THIS and THIS. Motivation and payment aren't always related. –  Tiago Cardoso Dec 11 '12 at 12:42
    
On the other hand, I don't mean that the question is invalid or duplicated, since you're asking if it's better A or B financial motivation approach... –  Tiago Cardoso Dec 11 '12 at 12:45
    
So should I edit it or not? :) –  meszar.imola Dec 11 '12 at 12:56
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Hi meszar! I actually dropped a link in our chat room regarding this question. Hope this helps! :) –  jmort253 Dec 12 '12 at 4:09

4 Answers 4

up vote 6 down vote accepted

I was working with a similar setup and it wasn't that bad at all. We knew what to expect, and somehow we felt that our work has a purpose, because we needed the money at that time.

Unfortunately, when one brings up the money based motivation topic up, the other immediately pulls Daniel Pink's book, which is excellent book, but how one interprets is very important. Dan doesn't say that the money based motivation is evil, he simply proves with scientific methods that it is not effective with knowledge workers under certain circumstances.

The book mostly talks about cases when something has to be done, and the leader needs to motivate people to reach a certain deadline or threshold. In those cases the money serves as a short term motivator, which takes away the focus from the joy of the work etc.

The title of the book doesn't say anything about money: "Drive: The Surprising Truth About What Motivates Us", because it is about motivation. If you agree with people in the beginning about the rules, then this is not a case of motivation. This is how business is going to be done. If you start being behind the deadlines and commitments and you offer money that is a money based motivation situation.

My point is that you should bring this topic up, and talk through with your colleagues and learn as much as possible about their motivations. If it turns out that none of them is interested in money, you can do practically anything and nothing is going to change.

To sum up: use as much time as necessary to figure out what motivates your colleagues and change the rules accordingly. Don't assume anything, do your research.

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Thank you Zsolt, I think, this was one of the best answers I have ever received on StackExchange pages. I ordered right now this book, thanks for the suggestion. –  meszar.imola Dec 11 '12 at 17:44
    
your welcome ;-) –  Zsolt Dec 13 '12 at 16:43

The key to motivation is to remove the money from the table. So you have to pay enough so the developers don't think about the money, and then to rely on intrinsic motivators such as recognition, self-development, etc. If you use percentage or even mixed model, you focus people on the money, and not on the product. On the other hand, it's great to share with the team how product is going and to share the profit, but those should be extra rewards, and not the base of your payment strategy. Keep in mind also that as a business owner, you are taking the financial risk. Setting the payment as percentage of the profit actually moves the risk to the developers of the product and there's no reason the developer should work for you instead of for himself.

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Thank you, Darhazer. What do you think, what non-financial achievment can motivate a developer? –  meszar.imola Dec 11 '12 at 10:55
    
@meszar.imola - The occasional extra long weekend in addition to regular holidays and vacation allotment can go a long way to motivate some people. Or a gift certificate for a nice dinner. Or increased flex in working hours. If you want to split hairs all of these have some $$ value, but I would count them as "non-financial". –  Doug B Dec 11 '12 at 17:49

Similar to other answers, they key thing to understand here is that:

  1. Money is a motivator, but only up to a certain point.
  2. Once people's basic needs are taken care of, money is no longer a major motivator.
  3. Other factors (such as esteem and self actualization) become more important progressively.

Contrary to some of the other answers, this thinking is not new at all.

Most of the psychology comes from a 1943 paper entitled, "A Theory of Human Motivation" and is often referred to as Maslow's hierarchy of needs.

This has been taught in business school for decades.

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I guess sometimes it just takes time for trends to catch on, even if those ideas aren't new... –  jmort253 Dec 12 '12 at 2:20
    
Wow, great answer, the point for Maslow's hierarchy of needs, it's pretty good. Thank you:) –  meszar.imola Dec 14 '12 at 9:31

In my opinion percentage has some extra risk:

Money always is motivating factor. If it isn't so important in current moment but who knows about future? Wife will become pregnant, somebody will get married, child will fall sick and so on.

If something goes in not right way it will be huge chance to lose entire team. Because leaving the company will be able to be avalanche-like.

Mixing looks more better but it has some challenges. Team should have possibility to track changes of the project's value. Because people usually make plans and if reward is less then expected it will be serious lack motivation.

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I understand what you would like to tell, but why do you think, that percentage has some extra risk, if - from your point of view - money always is a motivating factor? –  meszar.imola Dec 14 '12 at 9:29
    
@meszar.imola because percentage gives expectation. But not realized expectation is huge leak in motivation. I talk not about current moment for start it is OK. I mean middle/long time perspective. –  RredCat Dec 14 '12 at 9:45
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@meszar.imola Ok. One more thing about rewarding. Often result is related of work's major workers mostly. So reward of junior staff is related of these guys only. In this perspective such kind of motivation is good for main worker on project. –  RredCat Dec 18 '12 at 13:04
    
Now I understand clearly what you are pointing at, and - mostly at your last comment - you're right. –  meszar.imola Dec 18 '12 at 16:21

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