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Jurgen Appelo calls himself a creative networker. But sometimes he's a writer, speaker, trainer, entrepreneur, illustrator, manager, blogger, reader, dreamer, leader, freethinker, or… Dutch guy. Since 2008 Jurgen writes a popular blog at www.noop.nl, covering the creative economy, agile management, and personal development. He is the author of the book Management 3.0, which describes the role of the manager in agile organizations. And he wrote the little book How to Change the World, which describes a supermodel for change management. Jurgen is CEO of the business network Happy Melly, and co-founder of the Agile Lean Europe network and the Stoos Network. He is also a speaker who is regularly invited to talk at business seminars and conferences around the world. After studying Software Engineering at the Delft University of Technology, and earning his Master’s degree in 1994, Jurgen Appelo has busied himself starting up and leading a variety of Dutch businesses, always in the position of team leader, manager, or executive. Jurgen has experience in leading a horde of 100 software developers, development managers, project managers, business consultants, service managers, and kangaroos, some of which he hired accidentally. Nowadays he works full-time managing the Happy Melly ecosystem, developing innovative courseware, books, and other types of original content. But sometimes Jurgen puts it all aside to spend time on his ever-growing collection of science fiction and fantasy literature, which he stacks in a self-designed book case. It is 4 meters high. Jurgen lives in Rotterdam (The Netherlands) -- and in Brussels (Belgium) -- with his partner Raoul. He has two kids, and an imaginary hamster called George. Jurgen has posted 145 posts at DZone. You can read more from them at their website. View Full User Profile

The Flat System

02.12.2013
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Some people argue that organizations should get rid of their bonus systems. They say most of an organization’sperformance is in the system, not in the people, and therefore it’s best not to differentiate between employees. Everyone should get the same bonus. However, by the same reasoning it then also follows that everyone should be getting the same monthly salary. After all, how can you measure that the CEO works any harder than the receptionist?

Flat system color

I believe a flat compensation system doesn’t address the challenge of paying employees what they reallyearned. First of all, there is the problem that roughly80% of all people think they perform better than average[Haidt,The Happiness Hypothesisp.67], and thus, when everyone gets the same as everyone else, 80% of the workers will feel underpaid. (It won’t be true, but you can’t argue with feelings without real data.)

Second, while bad fortune in business is usually absorbed with conservative salaries and incidental layoffs,good fortune should likewise be enjoyed with extra payoutsand by hiring new people. When you don’t pay any extras to workers, the workers share the burden of setbacks, while only the business owners reap the benefits of success. This is probably not motivating to most people. (It has certainly never motivated me.)

Last but not least, organizations should try tobenefit from unpredictable events in their business environments. They should beantifragile[Taleb,Antifragilel.1672], which means they must get used to dealing with fluctuating revenue streams. And employees should be managed to deal with flexible income. Those who insist that income must be constant automatically guarantee that their organizations will be fragile. (And they will earn a constant income ofzeroafter failure.)

In other words, the flat system is a bad alternative to the bonus system. Can we do better?

This text is part of Merit Money, a Management 3.0 Workout article. Read more here.
Published at DZone with permission of its author, Jurgen Appelo.

(Note: Opinions expressed in this article and its replies are the opinions of their respective authors and not those of DZone, Inc.)