Plenty of unsung cogs, including myself, have left MS for “greener pastures” and have increased their value and grown in other organizations. A system like this would replace money with job satisfaction for the vast majority of MS cogs who feel unappreciated. Extending a model liek this would allow for more initiatives from the workhorses to be pushed through since the team model can be used to show solidarity(no pun intended) and belief in the initiative. ANyway, great article.

I agree that compensation has to be calibrated to the market, both for incentive pay and other kinds of comp. (Unless of course you have found a niche without competitors, in which case please contact me right now so we can have a little chat about going into business together.)

I am assuming a baseline salary, benefits, etc. that are geared to the market. And an incentive pay budget that is geared to market at a gross level.

What’s different is the method I propose for allocating comp — at least the incentive pay piece — at the individual employee level.

To use your analogy, the gambling game I’m proposing — incentive pay allocated through a peer review mechanism — is likely to be more accurate and objective than the industry-standard gambling game in which managers make all the decisions. This is because peer review incorporates more information than managers can possibly accumulate on their own.

Bad managers using the industry-standard system work in a near-vacuum and just make up numbers based on their gut feel. Good managers using the industry-standard system learn to poll their employees for peer performance feedback on each other. This nets them slightly more comprehensive info… whatever people are willing to share. But it’s still a poor approximation to what I’m proposing, because not everyone will share peer feedback, even anonymously, and not everyone will tell the truth, the whole truth, and nothing but the truth.

That said, I don’t have the time today to engage at the depth it deserves, so let me just poke at it with the long pointy stick of economics. I believe that you are missing the impact of the external — the labour market. Your NewCo is not a closed system; it needs to compete for people. Prices for those people will be set to some extent by their capacity to contribute but also by the scarcity of their skills, as well as a certain amount of “it” factor. You won’t catch me arguing that the market is everything — people are no commodities — but certainly the range within which someone’s price is set has as much to do with the larger world as with their individual contribution and the structure of NewCo.

You can argue that your focus here is on rewards and incentive compensation, not baseline comp — but to some extent it is one and the same. The analogy I use for this is that of comparing two gambling games. It’s not just the size of the prize, it’s the likelihood of winning it and the amount of control you have over the outcome that factor into some subjective expected value calculation — and that expected value is subject to market forces as much as base salary is.

(Unless NewCo is a closed system. Like, say, a cult. What’s that you say? Great idea? Thank you.)

Now, it could be that you have covered this and I may look like a fool. But I am a very busy fool, dammit.