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Let's say I have a team of 10 developers, and 1 or 2 of them are extraordinary outstanding in the sense that:

  1. They consistently take the hardest algorithm problems and solve them
  2. Their superb communication skills mean that they can elucidate requirements well
  3. Their understanding on the software design pattern and general architecture means that they are consistently writing clean, good, easy to understand, easy to reuse code.

How can I reward them without devastating the morale of the rest of the team? As we all know, promoting individual achievement over group achievement is going to be harmful for the team as a whole.

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There are descriptive assumptions in your question, such as you have some reward already in mind, but that somehow would rob team morale. Please elaborate on those assumptions, because in fact the culture that fosters such may need to be addressed. For instance, it is absolutely inappropriate for people to discuss their compensation with others; if this is happening, that needs to be fixed, or the team will always have problems with whiners and poor morale –  Mike Pennington Jun 4 '12 at 10:45
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I've updated the question to show why giving out monetary reward to a selected few can hurt the team as a whole. Also, regardless of whether you like it or not, the salary of everyone will eventually, somehow become public for everyone else. –  Graviton Jun 4 '12 at 13:33
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6 Answers

Give them a raise.

I don't know about your company, but the salary of others isn't usually public information. With that said, giving these developers a raise (in cash ;-) would make them happy (I would think), as well as keep the team's morale as it is now.

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@Graviton, Really?? In my 20 year career, I have not disclosed my compensation to a single coworker. Salary discussions between coworkers cause problems. If you are participating in them, you are part of the problem. –  Mike Pennington Jun 4 '12 at 13:59
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@MikePennington, yes. Even though you don't disclose doesn't mean that others cannot know. Trust me on this. –  Graviton Jun 4 '12 at 14:01
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@Graviton: So what if people eventually know? It sounds like these developers earned the raise and if it says so on their annual performance appraisals, you won't have any problem justifying it to anyone who complains. You can say to complainers: "If you want a raise like Bob got, you have to work like Bob". Unless you want to reward them publicly in front of everyone else. In which case, do something a little more light-hearted, like give them an "Awesome Developer's Crown" or a fun t-shirt or something. Keep raises relatively private, the subject of one-on-one in your office. –  FrustratedWithFormsDesigner Jun 4 '12 at 14:14
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@FrustratedWithFormsDesigner, that's the problem... there will be a lot of times when the judgement of the team lead/manager which is different from the developers.. we all have the tendency to feel overimportant, don't we? Worse of all, when they harbor discontent they usually won't voice out ( in our culture), they would just go back to work demoralized. –  Graviton Jun 4 '12 at 14:19
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@Graviton: Yes, it can sometimes be hard to figure out who's truly worthy of a raise. But if you don't do something for them, eventually they will figure out that they are not being rewarded for going above and beyond what their peers do, and they will either slack to the minimum amount of work for their job, or they seek out an employer who will compensate them for working harder. And for the ones that don't deserve a raise yet, work with them constructively so they can get there as well. –  FrustratedWithFormsDesigner Jun 4 '12 at 14:25
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What you are looking for is a tailored employee reward / incentive program, rewards could be anything really, from cash, either through target bonuses or raises, to schedule flexibility, cool new toys and promotional items.

Personally I enjoy getting first choice on projects, and a bit more flexibility when it comes to working hours and vacation time but you will have to tailor the program to your team and company culture. It's a bit trial and error, there isn't a one fits all solution and it will fail horribly if you don't have solid performance metrics. If after a while you see that you only reward the same couple of people, just promote them already, and continue the program for the rest of the team.

If you are looking for non monetary awards, you should take a look at this excellent article, from which I think the more feasible rewards for a small company are:

  1. Flex those hours. If there's one free reward that rises above the rest, it's flexible work schedules. Nearly every expert we contacted suggested flex time as a perk that offers the most gain with the least pain.

  2. Give them a free pass. Levine suggests giving out a certain number of free days off to employees to use as they see fit.

  3. Let them phone it in. Telecommuting programs can relieve stress and make workers feel more appreciated, as well as more productive.

  4. Remember the secret words. “The two most underused words in corporate America that get the highest ROI (return on investment) and ROT (return on your time) are the simple words 'thank you,'” noted Michael Guld, president of the Guld Resource Group author of "The Million Dollar Media Rep: How to Become a Television and Radio Sales Superstar ."

But you should read the whole of the article, there's some good advice in there.

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Promote them to senior developer or technical lead status and give them a raise with the promotion.

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I would agree with raise as suggested by others. Because they will have aspirations to grow. However, in my view that is not enough.

There are several other factors that motivate people - specially the tech oriented ones-

  1. Good Resources

  2. Recognition

  3. Freedom

  4. Challenge and Responsibility

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Not into this reward thing. Do nothing. just say well done and thank them for being such an integral and dedicated part of the team. Sounds like you got some good guys there. Money is never what people are asking for. Genuinely tell them how good they are and that you appreciate their hard work and efforts. But never make the appreciation tangible, it will cause resentment. If they are as good as they are, and they are happy with the pay that they are getting, then surely this is the best place to be for all. As soon as you add Reward/Punishment, you only get a bad result.

If they come to you because they are not happy with the money. Then by all means, if you feel they are worth it, give them a pay grade, but remember, all the members of the team will need rewarding. Equally. So when you make the pay rise, take this into account.

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You got to ask yourself, are your good guys really that good, or are your not so good guys, as good as they should be. maybe you need to hire better programmers to replace the not so good programmers. This makes the company far more aggressive in hiring and firing. The reward becomes, "your that good, we want to keep you." –  WeNeedAnswers Jun 6 '12 at 1:09
    
This is likely an unpopular answer, but it makes a good point. Extrinsic rewards like salary adjustments tend to have a very temporary boost on morale. There are times when they are appropriate, but finding ways to make the employee love their job (the actual work) more will be better in the long term. –  JohnFx Jun 6 '12 at 15:20
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I personally would consider rewarding them with something related to their work - something which would either make their work easier or faster.

That could be a fancy ergonomic chair/ desk/ mousing device/ keyboard/ etc or some kind of a special consultation with a guru in the field or ticket to a special conference, etc. As for a reward helping you get done work faster I would personally appreciate a one month of having a personal assistant or an experienced expert to consult with. A new super-fast computer or more efficient commuting solutions also count.

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Shouldn't this perk be available to all ( because doing so will make more economical sense) rather than be handed out to those who perform real well? –  Graviton Jun 7 '12 at 3:17
    
Generally it should but: a) the resource might not be sufficient to provide it to everyone, especially the perk of extra staff; b) the reward could be a super version of the perk - e.g. while everyone could and should have an ergonomic chair, the rewarded programmer would have the ultimate, cutting edge chair. –  drabsv Jun 7 '12 at 19:40
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