Chapter16.Compensation

Chapter 16. Compensation

Compensation of software professionals is always controversial. Often there are tenfold differences in productivity between the best and worst performers on a development team, yet no conventional salary structure provides for this kind of dynamic range. In this chapter, I examine some new ways of looking at compensation and performance in software organizations. Although I provide no "silver bullet" for resolving the problem, I do provide a framework for thinking about it in a non-traditional way.

Here's one important conclusion: Many problems that we seek to solve with compensation are really job assignment or skills development issues that need to be attacked with tools appropriate to those domains.^[1] I attempt to tie together three variables: compensation, skill level, and job difficulty. As compensation is linked to performance, the challenge is to correlate performance with skill level and job difficulty.^[2]

^[1] Disclaimer: The ideas presented here are those of the author. They do not represent the philosophy, policy, or practice of Rational Software. The author has benefited from extensive and penetrating discussions with his son Marc, who is the compensation specialist in the family.

^[2] My exploration examines only one aspect of compensation: financial rewards such as salary, bonus, stock options, and so on. I will not consider intrinsic rewards and privileges, which might encompass "perks"the large corner office with the window, for exampleas well as visibility, power, and influence. However, I do want to emphasize that compensation does include more than just salary; management has at its disposal a wide variety of mechanisms for compensating team members and can adjust the compensation mix to fit the specific employee and organizational profile.