How Should We Pay People?

It’s an interesting article on how to pay people from Dan Ariely at Business Week. It’s a look at some of the issues with paying for knowledge work, or work that isn’t well defined. The short version is that you don’t want to specify too tightly what you expect people to do, but then you have to motivate them to work in the best interests of the company.

I think this is one of the fundamental problems in management today. We still have this mentality from the blue collar factory worker and piecemeal or easily measurable work items being applied by management to knowledge workers. It doesn’t work well, and somehow we think that the hours work in some way relate to the output.

I blame lawyers. They tend to use this model, since they often bill by the hour. However the end result, the quality of that they produce, which is usually research, isn’t easily quantified in anything other than a win or loss. That often comes down to not only the soundness of the argument or the logic, but the charisma of the lawyer. That’s not even close to the way we do business in many other industries, especially technology.