Good now to you. Hello, good now. This is Riffing with Ryan. I am Ryan Ericson, surprise surprise. If you didn’t want to see me this morning, too bad for you. But if you did, thank you and welcome to be here today for an episode that we have titled “Should Companies Take Money Off the Table?” Why, why, why, you ask, is this the topic? Because of the two gentlemen I’m going to invite out of the Penalty Box on stage. Had a little bit of a repartee about this a couple of weeks ago. We’ve been trying to arrange the session for a little bit. One of those gentlemen I’m going to bring on stage now is Martin Hinwood.
Hello, Martin.
Hello, how you doing?
Oh, I’m just fantastic, you know that, because I’m always fantastic. And the second gentleman to bring on to the stage for this conversation today is Mr Michael Cers.
Hello, Michael.
Hello, a frequent partner and friend on this particular show that we do here. I do, God, I keep calling it a we. Who is a we anyway?
So, money. I know, and I have a big huge deal with saying we, we, we. Like we are not a we until I agree that I am part of this we. You get it? And that’s just me. But I would propose a couple of things here. One is that Martin, actually I’m going to do this one way. Michael, let’s go first and say just ten words or so about who you are, what it is you do, and where. And we’ll go to Martin, and then we’ll come back to Michael again, and you can give your riff to start us off.
So, without further ado, Michael, give me ten words about your life.
Oh, ten words? Okay, that was too okay. So, I’m currently COO for one of the pretty important edge networking things. I have my background in everything IT, computers. Love to be full-stack developer. Been in agile organizational development, and I like to get into a lot of conversations, write a lot of stuff, and yeah, that’s my life.
There you go. Alright, ten words from Martin.
Well, I am a professional Scrum trainer, a professional Kanban trainer, and I’ve been a Microsoft MVP in DevOps for the past 15 years. I run my own business called Naked Agility, where I do agile DevOps consulting, coaching, helping people get better at building software and products.
Perfect, nice. That’s the ten words. Okay, Martin gets round one for using less words than you did, Michael, so sorry about that.
So, to set the stage for the conversation, again, we’re talking about money. The post that you did a couple of weeks ago, Michael, had some themes around financial literacy.
Again, I’ll leave it there. Financial literacy, is that enough to guide you into your point of view on that particular topic, Michael?
That’s you.
Oh, that was my cue. Good. I didn’t… So, I can bring the post up if you want, but it was, should companies take money off the table? That was… Alfie Kohn, Dan Pink says you take money off the table is beautiful. And then you came in with a not that.
So, exactly. So, there’s one very interesting proverb I picked up in my student time, and that’s everything worth doing is worth overdoing. So, that is basically where we get from. Of course, I know that the original intent of Dan Pink is to say that I don’t want people to be worried about their livelihood because it distracts them from achieving the things that they’re setting out to achieve. And that is not something that we would like to have in a company. But of course, I’m taking this one a bit further, and it’s also based a lot on investigation, a lot of experience in organizational transformation, organizational change, observing also from the good old times of being a project manager or system architect that the financial conversation is usually very, very hard.
A friend of mine recently also gave this example. So, you have this team of developers, they’re working in their traditional way of working, and everybody’s somehow happy. The salaries are paid, everybody has a stable job, nobody needs to worry about anything. And so they have this issue that they’re doing three releases per year, which is not even once a quarter, but every three or four months, more like it. And of course, they’re always doing work, but then when the release comes, first you come the release packaging, then comes release testing, the debugging, preparing the release, release coordination, all of those kind of things.
And so does this team have a problem? Yes or no? And the team somehow starts to argue, “Yeah, you know what? Nowadays, modern and CI/CD, and we should make the transition.” And what do you think the manager understands? “Oh, the nerds want a new toy.” What does the manager say? “No, we’ve got serious work to do.” So what they’re failing is the communication about how much does this process cost us.
So we’re spending like 60 days for a whole team just on the release management, on the release process every quarter or every four months. That is 60 days cost. How much? Let’s just say $1,000 per developer per day. So 60,000 per developer. You have a team of ten people. We’re talking 600,000 three times a year. We’re talking over $2 million for what? What do we get for that? What is the value we produce? And that is a kind of a different conversation.
And yeah, we would like to introduce continuous delivery because it’s a better process, because it’s more modern, and it’s kind of a conversation many people are not able to lead. And because they have never considered how much are we spending on what and what is the returns that we are getting because they do not have the literacy to even think in those terms.
And what I just told you is really, really simple math. One developer, one day, $1,000. Ten developers is $10,000. Sixty days is $600,000. There’s no magic to this. It’s not like you need to have studied accounting or an MBA in order to do this kind of thing. But people struggle to have this conversation because, like I said, the money for ties has been taken off the table. They are happy. We get a fixed salary. Can we live from this salary? We can pay our rent. And where the money comes from or where the money goes, that’s my manager’s problem. But like that, they are bringing themselves into a situation where they are unable to make the impact that they need to make in order to do the best possible job.
Alright, we let that sit for a moment. Thank you, Michael. Martin, you had a response to that in public. I’ll hang you out there to when you go.
Yeah, so I mean, there’s absolutely nothing wrong with what Michael said. I think he is correct that there is an epidemic of people in organizations that don’t understand what their time and their group time costs to the business, costs to the customers. So they’re making decisions and making, as you know, Ryan, Michael, but every developer, every person in your organization, all the way up the chain, makes lots of micro-decisions every day within the context of what they know, their knowledge and expertise, that they don’t go ask anybody. But they make those decisions, and those decisions cost the business money.
And are they making the right decisions, or are they making the wrong ones? And I fully agree that they should be making those decisions within the context of understanding what it costs to do business. I used to work on a Scrum team with an Australian company, and we knew that our Scrum team was charged to the customer. So this was a consulting company, so that includes margin as well, for $60,000 a Sprint.
So this was Australian dollars, right? So $60,000 for two weeks. So we were looking at every Sprint thinking about, well, if the customer is giving us $60,000 and we’re doing this work, what are we providing for them? What are we doing next? What’s the most valuable thing we can do to spend their $60,000?
And that’s absolutely key. But I think that is completely unrelated to the Dan Pink story. It might be anecdotally related, as in a manager that sucks or an organization that sucks, and I’m using “sucks” in a totally bad manner there, but that isn’t very good. That doesn’t understand these concepts might equate the two, and thus we end up with a difficult conflation that Michael’s talking about.
But the idea of me as an employee and my personal outlook on my finances and having enough as an individual with my family has nothing to do with the business. The business that’s running, that’s a totally different story. That’s a personal story to the business operating cost story. Although my personal story of how much I earn and how much is provided to me is a number on the accounting for that, right?
But for me, this is a personal story of if I’m sitting here, this is the Dan Pink idea. If I’m sitting here worried about being able to pay my rent, I’m not going to be focused on solving the business problems. I’m going to be focused on worrying to pay my rent. Me having enough so I’m not worried about the intrinsic versus extrinsic motivations and can focus on the intrinsic motivations of autonomy, mastery, and purpose does not preclude me understanding how much I and my team and the work that we’re doing costs to the business or the customers.
They should definitely understand that stuff, but I think my belief is they’re two unrelated and separate stories. However, the outcome of the personal story is a line item on the accounting on the other story, if that makes sense. That’s the way I think about it.
Actually, in this one, and this may be my personal take here, I have a company too. How do you separate me as a person from the company I run? It’s probably pretty difficult because I identify as this company, and this company exists because of me. If this company is in financial trouble, so am I, and the other way around.
So for me, as a business owner, it is absolutely natural that every financial decision, every product decision, every development decision I have to take from two angles. Even the question, do I go into the cloud? Do I rent the VM? Do I host this stuff by myself? Is made from a perspective of this one. Ultimately, it hits my pocket.
So I have a different way of making decisions than I would have as an employee who doesn’t care where the bill gets sent and how big it is. And even you have this, I mean, I’m joking in this one because what we’re talking about is five or ten dollars, but still the point stays that if you have financial responsibility for your own business because it affects you personally, you make different decisions than if it’s completely detached.
Sure, but that’s not an employee issue. That’s a business owner issue, and there is only one or two or three of you in a particular business, maybe a little bit more depending on the scale of the business. And then there’s hundreds of other people who are the people doing the work that actually don’t care about that story explicitly because the success of that story for you as a business owner lines your pocket. It does nothing for the employees.
But if the business makes a hundred million more profit this year, I don’t get any more as an employee in my paycheck, in most companies, unless there’s profit share, right? But as a business owner, and as a business owner myself, I do separate those things. My success as a business owner means I earn more money, right? Because it’s my business.
But I need to be conscious as a business owner that that’s not how my employees think, and that’s not how they’re supposed to think. And even all of that doesn’t preclude those employees taking care of the pennies and pounds. A great example of this is what they’ve done in Jaguar Land Rover recently.
So one of the things that they found, they were doing a bunch of analysis on why this disaster happened. The disaster that cost them something like $300 million. And the fundamental root cause of this problem was an aging machine that was creating slightly faulty parts. Like they were good enough, but not good enough long term, so they had to be replaced later, and that was much more expensive.
And this machine was run by a person, and they asked that person, “Why didn’t you request a new machine?” And they’re like, “I’ve requested a new machine every year for the past five years.” But what happened in that story is that that request went up in the organization to somebody who it wasn’t in their budget for this year because perhaps they were looking after the shareholders, right? And we want to have a certain amount, so we can’t afford $5 million for a new machine, and they would deny that request.
So the change that they made in the organization was they now allow every single person in the organization to approve any amount of spend. And that sounds ridiculous. That sounds like people within the organization will just start spending money willy-nilly, and you know, you’re then hemorrhaging cash. But they created this understanding of kind of spend it like it’s your own money, right? Would you spend this money on this thing?
And that’s kind of, that’s orthogonal but related to what it is we’re talking about, right? That we want the people doing the work, regardless of whether they are owners in the business or not, if you’re doing work, if you’re making decisions, you want them making decisions with the understanding of the context, the operating context of the business, the costs that we’re running, and things that are happening.
And I absolutely, one thing I totally agree with you, Michael, I see time and again, especially in professional services organizations, where they seem to deliberately shield the people doing the work from the costs of the work. I was just working in an organization where I think we had the group that I was in that was about 150 people working with the customer, right? And this was mega ridiculous cost. You probably would talk about an operating cost per day of about $2,000, $2,500, maybe $3,000 to the customer, right?
So $3,000 a day per person, 150 people, that’s more than a, that’s holy crap, that’s like more than $400,000. My math in my head sucks, Michael, sorry. It’s more than $400,000 per day. It’s a lot, a lot of money. And what were they getting for it? People were sitting doing make-work because they couldn’t think of what to do. But they didn’t fundamentally understand the cost of the business. They didn’t understand what they were being charged to the business, to the customer. They didn’t understand how much money they were burning just sitting there not doing anything for a day.
So they weren’t making decisions with context, and it’s that context that’s important. And I very much agree that lots of businesses think that they have to shield their staff from the cost of actually doing business, and I think that’s wrong.
Exactly, and that is the point where I said this is the point where I said that, look, really, and I was teasing with this post quoting Dan Pink, “Take the money off the table,” of course, because this is the point where it goes wrong when you run your business and say, “I do not want for any reason, whatever, not picking out anything, my employees to know the financial impact of what they are doing.” At that point, you’re hurting your own business. You cannot run a successful business if you’re surrounded by people who don’t know the consequences of their actions from a financial perspective.
I guess then I really don’t understand why you put down on the table because they’re completely unrelated things, right? So I know you’re saying you’re teasing, right? But even when you’re teasing, if you’re making an analogy between two things, they have to be the same thing. And I think they’re fundamentally not the same thing, and that’s what triggered me to reply, right?
Because I guess I got suckered. I’m easy to be triggered, right? I have, I definitely, I have an Asperger’s coach and helps me very much on not poking at things. But for some, when they’re ABS, the issue I have is not that when you’re creating these two things that are radically different, even in kind of in G, right? It’s not for the likes of us who are practitioners within this space who could potentially fully understand that, “Oh yeah, Michael’s just taking a rip at Dan Pink to try and get engagement and talk about the topic.”
But pull it apart a little bit. But what about all of the people out there who stumble upon your post? And what they read, and if they read your post and they’re not in that context of understanding these concepts, they’re going to read, “Dan Pink’s ideas are crap. They’re not what we want to be looking at, and we should disregard everything he’s talking about.”
That’s what I feel that they would hear, which is why I quite often, Ryan will know this because we follow each other as well, I quite often reply to posts based on that context, right? I’m not actually replying to the person who made the post. I’m replying to all the other people who would read that post, and maybe at least I can save some percentage of them from getting the wrong end of the stick.
That’s a British idiom. What’s wrong end of the stick would be getting the wrong idea, right? Misinterpreting the joke as a reality. And I think it’s very easy to make those conflations that result. What’s the dual track agile? That’s a really famous one, right?
Are you familiar with dual track agile?
Yeah, so dual track agile is this idea, sorry, go means the ability to do the right thing at the right time. So dual track is, let’s have the ability to sometimes do the right thing. Isn’t that better than doing it all the time?
Yeah, so this is Joel’s track agile. It’s this paper talking about this idea that there are two types of work, right? You’ve got discovery work and you’ve got delivery work, and you need to do both. And the same people need to ebb and flow between that work depending on how, you know, if you don’t know about something, you’re going to spend more time on that discovery track. If you know a lot about it and you’re just executing on it, you’ll maybe spend a little bit more time on that delivery track.
But lots of people read that and then post about dual track agile being you need a delivery team and a discovery team, and they end up being two completely separate teams. And then we all have to spend a whole bunch of time and effort explaining to people that, “No, that when people say that, that’s not what it was talking about.” You end up having to explain away those issues.
And I just felt that there was a danger in the comment that you made of that similar idea happening, that disconnect between your intent and what we want to help people understand and what Dan Pink was trying to help people understand, which is that intrinsic-extrinsic motivation thing, which is separate from that business operating cost as part of the context that every employee should understand.
Interestingly, I would say, yeah, I am not so sure that, how to say, and like you say, maybe business owners are a little bit different than the regular employees. And the question of should money be a motivating factor? But then I even come back to the concept, how can you promote entrepreneurship, not entrepreneurship, but entrepreneurship if your employees don’t have this mindset?
Which mindset are we talking about? Because there’s the mindset of they’re happy and successful and feel like they can spend more time focusing on the work because we’ve taken money off the table at home versus the business focus of we need to understand the financial motivations within the context of business for business. And I don’t think that piece is any different between an employee and a business owner, right?
It shouldn’t be. If we can agree that it shouldn’t be, I’m with you. The problem is, in practice, it too often is very, very different.
Why does that happen?
I’ve got an idea on that. It’s a very good question. Ultimately, I mean, you brought this up that the employee, they do not think like the business owner. So yes, I agree with you. So what’s the… I do agree. I mean, I was thinking about this one from my own perspective. I used to be an employee for a long number of years, and when I transitioned into freelancing, into being a business owner, this shift, it took me, like I would say, like three or four years to start thinking differently.
I mean, in part, it is, like you said, because as an employee, there are other people making this decision for me. I used to work for a company where I was out of the loop. I did not know the company’s finances except for, “Yeah, we don’t have enough money for a raise.”
So this… go ahead, go ahead. I think you’re going to come back in there.
Yeah, I think I think there’s a fundamental why here that’s really important, which is why historically that thing that we’re talking about has happened, that we’ve disconnected that businesses have systematically and deliberately disconnected their employees from the financial runnings of the business. And it’s fundamentally so that they don’t discover what their colleagues are being paid because they pay them differently.
I had this exact circumstance. I used to work for a little company called Merrill Lynch. You might have… yeah, it was not fun, Ryan. It was not fun. I subprime mortgage as well, so it was even worse pre-2008. The… so I was having a conversation with one of my colleagues, and I offhandedly, not even thinking of the ramifications, offhandedly said, “Oh, now I’m in the 40% tax bracket. That’s going to kind of suck.”
And my colleague, who did exactly the same job as me, was incredibly pissed because they were nowhere near that 40% tax bracket. So they go to their boss, and I get into trouble rather than them getting into trouble for not paying them properly. I get into trouble for letting slip.
Funnily enough, that was in 2007, and in 2008 in the UK, that became protected speech, right? Because in many places, I know it’s… to… it… everybody should be talking. This is part of how we break this cycle, Michael, is that every employee should be talking to each other about the financial stories. How much do we earn should be open information within an organization.
It absolutely should, and I think in most states in the US, isn’t it? It’s protected speech as well, or is it federally protected? I think it might be federally protected. As an employer, you’re not allowed to say to your employees, “You can’t tell each other about…” If you don’t want to, you’re not forced to talk about it, right?
Yeah, I’d have to check into the legality of it, but that seems like it would be a more company-to-company kind of compliance issue. I’m not sure.
Regulations protect it, and that’s, again, this is completely BS as far as I’m concerned. I think, as far as you’re concerned, what I was going to say is going to Michael’s point and then coming back. When you become a contractor, when you have your own business, what are you? You’re independent. Well, what does that mean? You are dependent on yourself for your financial awareness and your business acumen and those things.
But when you are employed by a company who has the financial information and controls the compensation about who they decide where you are ranked, what are you? You’re dependent. It creates a dependency relationship. And then I think that was evidenced, Martin, by that situation.
Oh, well, we’re dependent on this other person to give… well, hey, boss, you know, Martin’s telling me this, and then seeking some other authority as opposed to having a conversation where the structure is set up for you to have that conversation.
And I agree with you. I mean, Ryan and I both went on the same masterclass, so we know. The reality is in many organizations, though, that you do have that situation, even with the best intentions of leadership when it comes down to salaries and stuff. You normally… I’m not saying it’s the right… I’m not saying it’s good, but you normally end up in that hierarchy issue with line management and discussions of salary, perhaps with HR, right?
And I think that the… that does fundamentally have to change. I think I don’t fully understand what that would look like in an ideal world, and maybe there is no ideal, and it’s company to company and that kind of thing. But I did see… who was the web guy from New York that used to be very active? I think he’s retired now. He had a company, and he published all of his employees’ salaries for all of his employees were published internally in the organization, and they had levels.
Because it wasn’t… I can’t remember the guy, but this was an engineering… they were a software development company. And it was just… it was very interesting. And he would open source that story, right? And say, “Here’s the story. Here’s what I’m thinking.” And actually publish it publicly and then say, “What do you think? Is this going to work? What are the things that might not work?”
And I think that kind of open discussion… I actually… I don’t understand where the closed salary discussion comes from, me personally. And this is a Martin thing. I’m quite happy to tell anybody what I earn, right? But I definitely feel like most people feel like it’s secret information.
Yeah, I’m not sure where that comes from. There’s also a lot… how to say, there’s also a cultural element to this. I know that in Germany, there’s this PR: you don’t talk about money. You have it. But literally, that is part of the problem, that the people, the business owners who have access to the money, they don’t talk about it.
So that other people don’t know. And like you already mentioned, it creates a dependency. It creates a power slope. And even bringing this one back to the point of taking the money off the table, as a regular employee, will I ever know whether I am being paid enough to be silent or whether I am being paid as much as I am worth?
How do I find out? For that one, I need to understand what my contribution to the company is because if I understand this, I can argue, “Look, because of me, you’re making $50 million. How about my share is just two of that?” It’s an entirely different story of, “I would like a raise.”
Yeah, but financial situation is difficult. Well, perhaps employee-employer relationships have had their time, right? Perhaps it should be business owner to business owner relationship, and everybody we hire in our organization is… I always found it weird. Ryan won’t get… maybe won’t get this, and I’m not sure what happens in Germany. I found it weird, Ryan, that I had to do my tax returns when I went to the US.
In the UK, you don’t do a tax return. A normal employee does not do a tax return. It’s done for you by your company and the tax man.
Why?
Yeah, because that’s how it’s done here. Same reason we don’t have sales tax, and it’s all included in the price. You pay the price on the ticket is the price you pay, right? The salary I get is the salary I get, and I don’t have to worry about how much tax I’ve paid. I don’t have to… that’s all taken care of by your employer.
Right. How is that different? So this is very interesting. I had no idea how is that different in Germany, Michael.
Yeah, actually, it’s very interesting. The tax system is probably… it’s been a running gag for a long time that sometimes politicians like to advertise that one… it was like ten years ago they said that maybe we should simplify the tax system so that your tax form fits on a beer stamp. But this never happened. If I would show you the tax forms, and literally every single German has to do their tax form every year, and it’s a science, literally. It takes you about a day just because of how complicated it is.
And how to say, in Germany, you tell your employer your envisioned gross salary, but that doesn’t mean that that is your net salary. So what is transferred to you on your bank account is about half of that, and depending on which tax bracket you are and whether you’re single, married, have children or more, it could be a bit more than half or a bit less than half.
The problem is that this one already creates the first level where people feel treated very, very unfairly because in Germany, you have two levels of tax. One is the tax that you pay as an employee, and the other is the level of tax that the employer pays.
And I like to say I run a business. I charge my customer €100. From those €100, I, as a private person, can spend about 30. The rest goes to the government in one form or another. So as an employer, I always see the €100 that I need to make in order to pay myself as an employee. There is €0 as an employee.
And there was even one comedian in Germany who made this joke that it’s a bit schizophrenic running a one-person company. As an employer, you say, “My employees, they’re asking too much money.” And as an employee, you say, “My employer is ripping me off.”
But I think, I think, Michael, by default, if you’re just an employee in Germany and you have no special circumstances, the company does your tax return. No, correct?
No, no, they file, of course, they legally have to do, but you still have to take care of your tax returns by yourself. The company’s not involved in this process.
Okay, that’s not the information I have over here. It just says that you may want to file tax returns, but you don’t have to. In the UK, I can file as an employee. I can file a tax return if I want to, but by default, unless if I’m only working for one company, Ryan, if I only have one employer, then they know everything about my incoming finances.
So unless I have any other things that I need to declare, I can just let the company file my tax returns on my behalf, and that’s a legal obligation of theirs within the UK. So they pay the employees’ tax.
What’s actually really interesting is companies shield from employees that other piece that Michael’s talking about because you have the cost of the employee, right, from the perspective of the employee. Like I know I get paid X amount, and my tax is this amount, but what you don’t see is the employer’s liability tax, workers’ compensation, and federal programs, and all that stuff that we have here.
And even like we pay something called national insurance, which is like Social Security in the US, which used to be for a specific thing, and now it’s just tax, right? And there’s employer and employees’ contributions, and the employer’s contributions is higher. So staff don’t normally see or even understand. Staff, employees, not business owners, just pure employees don’t normally have any visibility on what they actually cost the business.
Exactly, and yeah, that’s weird. Well, I think this comes down to a basic… so we’re talking about individual incentivization, right? And I think this… and Michael, you brought Alfie Kohn into the conversation with that too. And Alfie, as you know, and Martin, I think you know this too from where we’ve been talking about in Beta Codex and all that stuff, is that incentives are individual incentives are demotivating. The punished by rewards kind of thing.
And that employee of the month is one of my favourite ones.
Yeah, well, and I think we’re coming down to this, okay, so my individual tax burden is this. What am I contributing to that? That all that conversation becomes null and void when a small group of employees in this area are managing a business in and of themselves with their own profit and loss statement. They’re managing that again. It’s a different relationship in terms of, oh, it doesn’t necessarily matter what all of us… no, no one person creates value on their own.
And I think that that is a big concept because I need both of you to create value in whatever I’m doing. And on the variable compensation is top of that. But if you raise… and then I’ll leave there, but the baseline base compensation, if you pay people fairly and pay them well, then that quote… I think this is a Deming quote. I think that that is actually… I was trying to find it. My Deming… I’m not 100% sure, but I’m…
Yeah, I think so. I think it’s really interesting, though, Ryan, that the… and suddenly we’re starting to have a conversation just about capitalism, right? The big elephant in the room, right? In the system within which we operate, that we’re all operating is fundamentally about a small group of people gathering large amounts of wealth, right? Because the wealth flows from the people who don’t get paid very much, but we make a lot of profit on the people that are not.
And rather than paying them better, the wealth flows up to that one person at the top, right? The CEO with the multi-million dollar salary for whatever reason. But they’re taking a lot of risk. But are they really taking $100 million worth of risk? Personal risk? Not really, right?
And I think that’s… that idea that we were kind of the employer-employee relationship, if every person in the story would their own boss, right? You basically got a… they’re a bunch of boutique individuals who are selling themselves for how much they think they’re worth and doing their own taxes and doing their own thing and understanding that part of the business, like you’re saying, Ryan, doing profit and loss for that part of the business.
Yeah, I think the reason we don’t have that systemically is because those people would be absolutely aghast at the levels of profit that they generate. That’s money that’s going somewhere else that they don’t get, right?
Exactly. Behind the business to hide that. It’s not really hide; it’s a virtual hide. Make it as… what’s the… 01:00:00.000 –> 01:00:00.000
