Startup Sharing Scenario

Team building is central to growing a startup. Evaluating and rewarding contribution is central to team building. Below is one scenario to use when evaluating a system to evaluate and reward contributions to a business.

In the post on Hourly Weighted Profit Sharing (HWPS), there are ways to get an unfair result.

Lets say contributor A works 100 hours on the project in April. Contributed B works 10 hours on the project in April. The income in April is $500. Contributor A gets $455 and contributor B gets $45. That's fair for April. In May contributor A works for 10 hours and contributor B works for 10 hours as well. May turns out to be a very profitable month, and the income is $3000. Contributor A gets $1500 and contributor B gets $1500.

Whether or not contributor A feels that May's payment is fair is contentious. The HWPS setup measures all the reward for a contribution during that month (or whatever period is setup). Some contributions have a longer lasting effect, which other contributions are more immediate. There should be another kind of measurement that last beyond one period. The basis of HWPS's simplicity is that the value is paid out in the same period.

Contributions should have a degradation function, or a half-life. By default a contribution gets a percentage of the next pay period, and degrades completely. More valuable contributions may have the effect of that number of hours for the next few months, then degrade completely. Other contributions should have the full effect for the first month, the the effect is reduced by some amount on every subsequent month, until it reaches zero. It'll never actually reach zero so some cutoff should be set, below which the contribution is zeroed.