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We are a new start up (in finance) and still trying to figure out the basics on employee incentives. If this is not the right SE, please let me know and I will move it.

When monitoring projects, we want our team to recognize any errors that they missed in their analysis when deciding to commit to a project and feel incentivized to do so. On the other hand, we don't want to encourage low standards during their analysis phase.

We want to reward for catching on the mistakes as soon as possible and disincentivize letting errors cause damage that careful monitoring would have prevented.

Q: Reward the team's ability to spot mistakes, yet disincentivize low standards. What are some good mechanisms to do that? Any bonus-pay systems ideas to help achieve that?

Thanks

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Commitment to quality is a team cultural thing and cannot be extrinsically incentivized. The team itself must create the culture. This in turn requires that management creates a supportive space so that the team can proceed to create the culture holistically.

If management rushes the team, pushing for results faster, this may cause requirements to be missed. In that case, the message management is implicitly sending to the team would be that it emphasizes quantity over quality, and the culture will never be properly created.

If the team requires help from leadership to create the proper culture, then demonstrate by doing, and use influence to help the team along. Do not use authority as this will tend to foster mistrust.

The DevOps principle of Blameless Postmortems may be a useful tool here. For further reading, see https://codeascraft.com/2012/05/22/blameless-postmortems/

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Don't use money to reward quality.

Studies show that money is an excellent motivator for routine tasks that involve no thinking, and a terrible motivator for tasks that require creativity.

Experts are motivated by autonomy, mastery, and purpose [Spam disclaimer: No relation to the book nor author].

So:

  1. Create an environment that provides autonomy, mastery, and purpose
  2. Pay your employees enough that they do not feel undervalued
  3. Get out of the way.
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As also mentioned in the answer from @Sarov, money is not a good motivator for knowledge workers. Most of them have an intrinsic motivation to want to deliver quality work.

So, to reward catching mistakes but not sloppy work, you should take advantage of that intrinsic motivation and build a company culture where people can be proud of the work they deliver, even the mistakes that are in it. This starts with the initial reaction when a mistake/bug is found. That should not be

who was the idiot that created this and let it end up in production

but rather

ok, something went wrong. Lets fix the immediate problem now and after that figure out how we, as a team, can prevent similar problems from occurring another time.

And then be open to all suggestions, even if at first they seem to be bad for business, for example because you deliver fewer features.

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