Merit Money: A crazy idea that works

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by Vasco Duarte

As our CEO, excuse me, our Chief Ecosystem Officer, once poetically said, “A practice that has infiltrated the western business world like a pestilence in a shanty town is the annual bonus system.” The last couple of years we’ve all came to know some of the results of that of course. One of the people who read that sentence was my friend Cláudio Pires. A Brazilian IT Guy who read a lot about new ways of work and management. For him the biggest change came when he was offered a job as CEO at his sister’s company Fonte Medicina Diagnóstica. A molecular pathology center that deals with cancer tests.

Work: a matter of life or death

“My sister said, ‘Your ideas are crazy, so you should manage the company’. She offered me a contract for one year,” Cláudio told me. He agreed, but under the condition that he could change whatever he wanted. “She wanted a fresh company, so she said yes.” He immediately started to work on things. Introducing metrics on all kinds of things so he could measure the results of his work. Once a month they shut down the company and gather everyone to talk about what goes well and where there should be improvements. “We work with cancer diagnostics, so quality and speed are essential for us. Some tumors can double in size daily. A tumor the size of a tennis ball can be as big as a football within a couple of days. It really is a matter of life and death sometimes. Unlike many Brazilian companies, we work with a European quality control, we actually pay for international checks. That makes us more expensive, so we need to do our work very well.”

Constant feedback

One of the problems Cláudio ran into was the salary system. In his opinion, the people that made the most effort should get extra money, but how could he decide on that? Based on employee performance, yes. But what is that? Unique skills? Making long days? Since one of the company’s key values is collaboration, he decided that should play an important role. “We deal with cancer every day, we need to be good, fast and gentle. For a while we had a bonus system based on 360 degrees evaluation, but that took way too long. We then decided to make use of the Merit Money System.”

It works very simple, every month everyone at the company receives the same bonus, Cláudio even came up with a fictive currency for that. There’s just one rule, you have to give it away,you can’t keep the money for yourself. Is there someone you think did well for the company? Reward it. You can give it all to the same person, or spread it in small amounts. You can’t think of someone? Just give it away next month. I think this is great thinking. As a manager, you only see a part of how someone is performing after all. And in this system, it’s the peers that decide whether you do your job well.

Good behavior will pay off

The system not only turned out to work fantastic, it had positive side effects as well. “I have way less things to deal with. All kinds of arguments and other things that I needed to handle before, they now solve themselves.

People just know ‘good’ behavior will pay off. Dysfunctional behavior will be ‘dealt’ with: you won’t get any money. You know what the best part is? It’s a soft practice. I explained it in 30 minutes and it worked right from the start. Apart from that, Merit Money is something I can keep running forever. It’s a promise I can easily keep and it won’t ever backfire on me.”

Photo: rawpixel (Unsplash)

5 thoughts on "Merit Money: A crazy idea that works"

  • Zé Rodrigues says:

    Claudio really deserves some recognition. Since I met him the first time, he has been unstoppable on his quest for better ways of doing things. He has always been observing existing processes and proposing adaptations, at least. Now as a CEO, more than just propose, he can actually make things work.
    Congrats for the article.

  • Cláudio Pires says:

    Rodrigues, you’re an amazing mentor! Thanks!

  • Cláudio Pires says:

    Below, follow the link to the JPEG image of our adaptation:
    If interested, anyone can contact me at LinkedIn:
    Thanks, Happy Melly!
    We go together!

  • Matej Prochazka says:

    hi, my question is whether the base salary is also equal and the only variable part is the bonus? or are salaries differentiated?

  • Luciana says:

    Hi there – I was wondering if you’ve noticed any potential group bias in this system? For example, virtual employees that may not be front-of-mind that tend to feel the brunt of bias. Or, perhaps other underrepresented talent that may be successful but achieves in ways that aren’t quite the norm and therefore aren’t quite understood, others that aren’t as “popular” (eg. introverts who don’t exhibit skills in the most “looked-for ways.”).

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