Thursday, February 19, 2009


Enterprise Architecture: How much should I get paid?

It is the time of annual reviews in many corporations and therefore I will share some thoughts on worst practices in compensating IT professionals...

Traditional pay structures work on the false assumption that people behave rationally. A wise architect I know once said that enterprises are nothing but coffee klatch where silly little human beings can feel good about themselves regardless of business outcome. So, the notion of every employee pulling together to generate profits is the first worst practice. Many compensation plans assume this to be true and therefore rationalize that one should get paid more for higher profits and therefore pay becomes a motivating factor.

Let's agree that the problem of compensation is asymmetric in that you can pay someone for making profits, but you can't penalise them for making losses. Virtually no employee will work for a company if there are circumstances in which they would have to pay for the privilege. This translates into some doing the bare minimum in order to still maintain the floor of compensation.

Has anyone noticed that in a perception management culture there are now more folks who instead of playing to win; play to not lose! We all throw daggers at Wall Street executives for their short-term thinking but haven't realize that we also exhibit the same thought patterns. Even if we weren't to look in the mirror, we at least need to acknowledge that it isn't always obvious in the short term what benefits the company the most.

Many of us love to abuse the word risk which is distinct from the real word we should use to describe our behavior, which is loss. Money is used as a scorecard to determine where one ranks against an arbitrarily decided peer group. Anecdotally it seems likely that people work hard to increase their bonus not mainly because of the associated material benefits but because it governs their place in the hierarchy of their social group.

Do you want a big bonus just because you worked hard and earned it, or do you want a big bonus because you believe in your own mind that you deserve more compensation that your peer regardless of circumstance? Anyway, if enterprises are going to be successful in a declining economy, we need to modernize management theory and noodle ways to motivate people in a non-financial way.

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