When companies switch to team based approaches like Scrum individual performance appraisals become more or less meaningless. A team is more than the sum of its parts (team members). Trying to measure the individual contribution to the team’s success as an team-outsider is hardly possible and will harm the team dynamic seriously.
There are some alternatives around. One that comes to mind quickly is team based rewards. The reward is not given to individuals but to teams. To distribution of the reward among the team members can be done in several ways. Things I have seen:
- The reward is distributed according to a predefined formula that may take the formal position in the company into account. (The senior developers gets a greater share than the junior).
- Everybody gets the same share (and this distribution is clear beforehand).
- The team determines the shares.
Option 1 conforms the formal hierarchy and that may hinder self-organization and high-performance. But it may be a first step to migrate from individual performance appraisals to team rewards.
Option 2 is very easy and I have seen it several times. I have never seen dysfunctions in the team caused by this approach.
Option 3 has the best chance to come to a fair distribution of the reward. The challenge is to moderate the discussion within the team. (Remember that most people think they perform over average, see illusory superioty). I know of two simulations where the team came to a consensus. But in these cases the whole thing might change when it would become reality. And I know of one case where it was actually done. The team always found the “compromise” that everybody would get the same share. And after that everybody was pissed off for 3 months since that thought this distribution would be unfair.
Therefore I would aim for option 2 or even better: Dismiss rewards completely. Extrinsic motivation isn’t very useful when it comes to knowledge work (see Dan Pinks Surprising truth about motivation).