Derek Sivers (if he had to do it again) – tie profit-sharing TO improvement

Listen first to Derek Sivers, founder of CDBaby.com in Venture Voice then scoot over to news.ycombinator.com:

rantfoil: Derek, thanks for chiming in and clarifying. This is super helpful.It’d be interesting to hear what the reaction was. Honestly I’ve often wondered what would happen if you had a “gilded-company” style compensation — everyone gets paid twice as well as anyone else in the industry, but at the same time, it’s far more difficult to get hired / easier to get fired for nonperformance.

There’s a lot of research that suggests employee compensation is inversely correlated with satisfaction with one’s job — no matter what the job is. How strange is that? If you get paid more, you actually feel like your job is less important or interesting, and vice versa.

What sort of macro effects did you see?

sivers: Unfortunately, profit-sharing didn’t improve anything except people were happier (sure! their salaries doubled!). But performance didn’t improve. Neither did responsibility, initiative, etc.In hindsight if I had to do it all over again, I would have tied profit-sharing to improvement in performance above the current baseline, and also had healthy bonuses instead of everyone sharing equally, whether they were coasting or thriving.

Keep in mind this was a company of 85 people, 50 of which were in the warehouse $8/hr pick-pack-ship, 28 were customer service answering emails, and only 6 jobs were “other”, such as bizdev, tech, or management.”

Everyone thinks it’s intuitive to THROW MONEY at people so that they will improve but as this CDBaby case study indicates, you have to tie your profit-sharing to IMPROVEMENT at the start so that you can have your improvement.

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