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April 26, 2013
Can you apply crowdsourcing to bonuses?

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In recent years, bonus payments have been focused on performance. You may have spent considerable time and effort coming up with appropriate measures and metrics to support management’s efforts at paying just the right amounts to the right individuals. But now, technology and innovation have come to the rescue.

At Shopify (www.shopify.com), a do-it-yourself online store builder that lets anyone easily create an online store and start selling products, they’re trying something new.

“Traditionally, bonuses are mandated from the top down,” says Daniel Weinand, Shopify’s co-founder and chief culture officer. “The manager sets what each employee’s bonus should be, or makes rules saying if you hit these numbers you are eligible for a bonus.

"We thought that it’s quite silly that there would be only one person who determines what the bonuses should be. The people who are working at the company, your peers, probably have a much better insight about how much bonus you deserve.”

How does crowdsourcing apply to bonuses?

With that as a starting point, the company decided to use a concept known as crowdsourcing to determine bonuses. Crowdsourcing, says Weinand, is a way to involve many people in a process, rather than just a few—or even just one.

Shopify is certainly familiar with applying crowdsourcing in their business. For example, when the company found that they needed to translate their checkout processes into many different languages, they realized that their users would likely be able to do so and without the cost associated with hiring 50 different translators. Their users came through.

“We made it possible for our merchants to create a translation for their store,” Weinand says. “So the first person who ever opened a Spanish store could then translate into Spanish. People have the option to choose translations that other people made, or make their own. It ended up that we had 3 or 4 different Spanish checkouts. The most popular ones, the best ones, are used the most. This is a natural process of collaborating in the crowd, and natural selection.”

So, how does crowdsourcing apply to bonuses? Think about the last time you were in a diner. The comment card on the table allowed you to tell the manager how well your server did, whether she or he was friendly and prompt. The concept at Shopify is similar.

“We came up with a system we call Unicorn,” Weinand explains. “It is a piece of technology we wrote. Each month we take a piece of the revenue the company makes and we throw that money into a bonus pool. These are not real numbers, but, for example, let’s say there is $10,000 in the pool and 100 people working. We divide it equally, so everyone would get a $100 bonus. But, you cannot take this $100 for yourself, that’s the only hook. You can only give that money away to your peers.

“What it allows you to do is say, for example, ‘Hey, Mark, thank you for setting me up with this interview.’  So I thank him, and other people in the company see that as well, through Unicorn. And if other people agree that that was a great thing of Mark to do, they can include their own comments. So what happens at the end of the month is we look at all the accomplishments that you liked, then we split up your money amongst them. If over the course of the month if I liked what 15 other people have done, then each of these other people would get 1/15th of my amount.

“Every month, employees get a notification from Unicorn saying how much bonus money they are being paid. Even before they get paid, they see a number and see how many other people like what they did. So if someone would thank me today, then tomorrow I can check back on that accomplishment and see how many people saw and liked it. It’s a short feedback loop,” Weinand says.

“This method really encourages communication, cooperation, and collaboration. If you are working on something and you have a deadline to meet, then someone taps on your shoulder and asks you help out on their project, traditionally you may get upset or irritated by that, because everyone has to work on their own projects.

“With this new way of paying bonuses, people are much happier to help other people. In fact, they are very excited to help other people, because they know that they will be recognized with someone saying 'thank you,' which is a very strong message by itself, but also through the additional bonus incentive.”

Money is great, but public kudos may be better

While money is great, Weinand believes the public kudos may be even more powerful. “Money can never be the only motivator. It only works short term, and it can only go so far. There are many other components that play a crucial role to inspire someone who is working at a company. So just implementing something like Unicorn doesn’t necessarily work if the structure around it also reflects that whole cash focus. I think there are many components that come together, and Unicorn is a big part of it, but there are many other parts that all play into making this company what it is.

“I always believe that every praise should be in public and every criticism should be in private,” he says. “So with Unicorn, the praise is out in the open for everyone to see your accomplishments. I am a strong believer in separating the two kinds of feedback into public and private.”

Lessons learned

While Shopify obviously employs talented people, the process of developing Unicorn was not without a learning curve, Weinand reports. At first, the system allowed employees to view and distribute dollar amounts. “We learned that doesn’t really work, because then you get into the territory of ‘okay, you do this thing for me and I’m going to give you $20.’ As soon as you know what the money is, it takes away a lot of the magic, or that group spirit, if you will.” Keeping the actual dollars hidden until the bonus period ends works much better, Weinand says.

Weinand believes a similar program could be effective in other companies, especially those with a creative work environment. “In some workplaces there is simply no time to think beyond the scope of the job you’re supposed to do,” he says. “At Shopify it works extremely well because we have people who work here who can say, ‘I’m going to stay one hour longer today so I can help my peers.’ You don’t get that at every company. But I do believe that the system could work really well at many other companies.”


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