Product Design

July 11, 2018

/ business & Agile

Do cash bonuses really motivate IT people?

Anita Soczka i Marcin Staszak

Best non-profit benefits such as free meals, game consoles, a foosball table in a well-equipped chill room, various types of training developing skills and many more are now offered by almost every company in the IT world. Does it work? All depends on a specific employee’s preferences. The tech race and the fierce fight for the best software developers have made both the giants as well as the local players offering more and more.

Top software companies want to attract and hire the best programming specialists. Hunting the best of the best forces software houses to constantly looking for new and often quite surprising ways to meet the most sophisticated needs of their employees. Language classes, chill room fulfilled with tech or fun equipment, books, video and board games, and no-limited deliciousness become a standard.

The international tech giants have more room for manoeuvre, so they offer perks and benefits that smaller players won’t be able to provide shortly. As is well known, Google almost is spoiling its workers. On the list of its perks you can find car wash, education subsidies and generous tuition reimbursement (up to 12K $ per year) or even death benefits (if a Googler passes away while working there, all their stock vests immediately, and, on top of the life insurance payout, their surviving spouse continues to get half of the Googler's salary for the next 10 years).

These ideas are very hard or even not possible to implement in small and medium-sized software houses. So, how to market yourself? How to stand out while everyone around already has popcorn machines in their offices, offer self-development budgets and their employees can work from cosy office as well as all over the world? What about getting to the basis? What do you think about money bonuses? It sounds like something out of date and even controversial at a time of leadership, coaching and non-cash benefits, isn’t it? What about combining these all elements?

Firstly, let’s look at IT specialist market. According to Stack Overflow report, over 62% of software developers aren’t actively looking for a new job, but they’re open to new opportunities. What makes the opportunity and what motivates programmers to quit a current job? It turns out that better-paid offer is still on the top of the list.

Job Search Status by Stack Overflow Survey

source: Stack Overflow

Obviously, money is not everything. Employers should combine cash bonuses with a friendly office environment, the possibility to develop skills and other non-wage benefits they can and want to offer to their crew. Business owners shouldn’t focus only on giving programmers more and more money. It’s essential to control and monitor how do developers (and other employees!) feel about their jobs and careers.

Going back to the point, good salary means not only numbers given in a work contract. At Merixstudio we decided to give developers the opportunity to work together with the rest of the team their way to a specific cash bonus. We were wondered how project bonuses would affect the motivation and the work of our folks.

September 2017 was the month when we implemented this kind of possibility for every project team working commonly on the business success of a client.

How does it work? In a nutshell, every project team can achieve even up to* 6% of a project’s value and divide it. Specifying, the amount including up to a maximum of 5% of the project’s cost depends on “the success of the project” for example meeting the deadlines, evaluations and realising a prior scope of work. The team can get another 1% of the project’s budget in the case when a client is happy about a delivered project and the development process.

*up to - it means that mentioned 5% is sort of buffer. Thanks to it even if the team had a little slip, they still have a chance to get (lower) bonus.

The big question is how to distribute the money equitably? To make it simpler we set three factors that have an impact on the final, individual project bonus:

  • the number of working hours concerning other team’s members - someone who accomplished more time and put more of himself into a project’s success, obviously will get a higher bonus;
  • the experience of specific specialist - in our opinion senior will bring more value and skills to the project, and it is something that is worth to reward. Seniors usually are the most effective in pushing works forward and affecting the development of less experienced people in the team;
  • we believe in the maturity of our folks and their openness to improving their colleagues’ work. This is why work evaluation (team’s members evaluate the work of each other's) is one of the factors. This is the point when you can win or lose if you didn’t keep up with your involvement, communication skills or the quality of your work.

This is how we created the formula from which individual project bonuses are calculated:

the project bonus formula

Briefly, in summary, the project team can get even to 5% of project’s value if it meets financial, time, and project assumptions (what is rather easy to achieve in case of agile-based development, time&material contracts, and committed team that takes care of cooperation with the client). Additional 1% is paid if a client is satisfied with the whole software development process and the final product. The rules are known to all people working with project teams at Merixstudio; they are clear so that everyone knows what's their job and what to do to get extra money.

Here you have an illustrative split of the project bonus:

an illustrative split of money of project bonus

Making bonuses payments depends on the specific project. However, the rule says that in case of short-term projects money shall be sent as soon as the work is settled, and after achieving a specific stage of development (usually once a quarter) in the case of long-term projects. As a result, on average every three months, Merix people receive extra cash injection for a job well done.

Does it work? If someone asks if it was worth also implementing cash benefits, we will answer YES, it was!. The money bonuses project was an experiment. Now we know that this experiment is working, and project bonuses become a standard benefit for our current and future employees. Of course, we continuously face different challenges and try to modify our bonus system to make it even more attractive to teams.

At the same time, we try not to put obstacles in employees’ way, but we’re supporting them in receiving extra money by implementing new tools like risk assessment. Thanks to risk assessment solutions teams can quickly identify and solve threats that could also negatively affect their bonuses. We can then say that we offer both the prospect of extra money in the form of project cash bonuses and tools that make a way to them much easier.

Such financial transparency and the fact of working together on the commercial success of the project as well as the whole company is actually quite a big energy and motivation (and financial ;)) hit.

We often highlight the fact that Merixstudio is made up of people, and there is nothing better than the motivated and satisfied crew.

If you like what we do and what we offer to our folks, check out open job position and apply!Team up with people that care about web development :)

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