Thanks for the Bonus, I Quit | Hacker News Reader

Thanks for the Bonus, I Quit

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1,245 pointstodsacerdoti656 comments

When I worked at eBay, we had a bonus program based on company revenue. It was around 6% of your salary max and managers got around 25% max based on the same formula. For the first few years, you could count on getting a max bonus every quarter. To the point where most everyone who worked there had always gotten one.

And the one quarter, we didn't get the max bonus. In fact, I don't think we got it all. People screamed and yelled and were pissed. At the company all hands they spent a lot of time explaining that bonuses weren't guaranteed. Some of the lower paid folks were actually crying about not making critical payments because they counted on the bonus. Morale went way down. People left because of it.

Stories like this are one of the stated reasons Netflix doesn't do things like bonuses or any sort of variable comp. Because once you get one once, you feel entitled to it in the future, and it feels like a loss when you don't get it.

I worked at a company that instituted a very similar bonus program, it started just after the time the former COO of Ebay joined ... must have been coincidence. Anyways, we had similar formulas, pretty much the same thing. We were eligible for 6% of our salary but it would be paid out in 4 times a year in 2 different ways.

Our bonus was split in two, half would be used for quarterly bonuses, half would be used for yearly bonuses.

Each Quarter you would make personal goals and take on team goals. Each goal which would be measurable and would contribute to your bonus. They would be scored each from 60-120%. Each employee would have a mix of personal and team goals, totally 5 to 8.

Rather than have yearly goals, your average score of all quarters would be applied to the yearly half.

Finally, there was company goals, revenue and profit. If we met "guidance" we got 60% of our calculated goals above and if we hit the 'BHAG' we got 120%.

.....

So, lets say you are pushing a feature and you get it done super early. You your goal, complete on time, well you get 120%!

Of 1 of your 5 goals. It happened to be weighted at 40%, but fixing bugs on time was 30%. You did that ok, no problems, so that's 100% of a 30% goal. And your team didn't get that CFO cost cutting project at all, so that's 60% of that 20% goal. Some finally team sports participation one gave you the remaining at 100%.

Well how much did you earn from that 120% burst of hard work? Well, its 120% of 40, so 48 points. 30 points for the team and only 12 points for the CFO one. Finally throw in that 10. So... you got 100% of your bonus.

How much was that, well, its 6% of your salary. But really only 1/8th of that 6%, so if you earned 100,000, that was $750!

Wait how did the company do? Well, Rev was lower than expected, so it was 80% of that. so $600.

Profit? No, the revenue drop ate away the profits. So is that 60% of the $600?

No, the bonus pool was funded from profits, so we get nothing. And.. we didn't made a profit in all quarters but one, one that you didn't bust your ass, so you only got $400.

So year end bonus of 6%? All you see if $400, but your math got better.

Sounds like lots of time wasted for coming up with such a complicated scheme, communicating it and everybody thinking through how to maximize their own benefit from it.

Sounds like the articles point. But on steroids.

All it does is keep people from doing actual work and be happy doing so. This is just infighting waiting to happen.

Originally it might boost peoples morale, as they think there is a bonus to be gained. But after people figure it out, there morale drop will probably be a net negative.

It definitely would be a net negative for me, as I would feel screwed.

It's fairly standard, in my experience, and makes sense if you come form the position of the company.

In the budget a certain amount of money is allocated towards the incentive scheme. If the company does not perform as well as planned this pool is reduced appropriately (you can't pay bonuses with money that doesn't exist).

If you take the original pool of money you can express it as a percentage of the entire payroll, and that percentage is what, on average, everyone's bonus will be (for example 6%). Alternatively, that percentage is used to calculate what the pool will be in the first place (before scaling for company performance).

You then have the individual perfomance scaling, which is designed to reward people excelling at their job. The individual has a starting percentage-of-salary bonus, and that percentage is moderated up or down depending on how they performed relative to their peers. Relative to their peers is super important here, because the total bonus pool was worked out based on the starting percentages (and then moderated by company performance) so the final bonuses are really just an allocation of that pool between the employees. In some companies managers will literally take their employees' performance reveiws into a big round-table meeting where they argue why specific team members should receive a 4 or 5 rating (the highest), as there are a limited number of 4s and 5s available in the incentive scheme.

The final calculation is fairly straightforward then.

From the company's perspective, an individual's bonus is = (total payroll) * (incentive scheme budget allocation percentage) * (company performance factor) * ([potentially] business unit or department performance factor) * (individual performance factor)

For the individual it's built up in reverse, and it's the accountants jobs to make sure the numbers match in the end!

bonus = (employee salary) * (base bonus percentage +- individual performance modifier) * (company performance factor) * ([potentially] business unit or department performance factor)

Yeah, but your example is a little different than the OP's - I think part of this though is that the company is using the 'bonus' effectively as salary but with the idea that they don't have to guarantee its future.

The company treats it like salary, the employees treat it like salary, recruiters probably mention it as part of comp like it's salary, etc.

Then one day they decide not to do it, of course people are pissed. Netflix is right - you can't have 'bonuses' that are not tied to something real (like the article, and even then there are issues). If the formula is explicitly defined and publicly known then fine, otherwise it's a bad idea.

I've found companies that rely on this also tend to underpay on salary, but say things like "we're competitive when you factor in the bonus that basically everyone gets".

If you run a company this way and don't expect blow back when you slash everyone's comp by 6% you deserve the loss of talent.

Michael Lopp has written something similar about the "Thanks for the Bonus, I Quit" in one of his management articles somewhere. The idea being that if you have a direct report and give them a smaller raise than they're expecting when they know peers are got larger raises (in percentage) the act of giving them the raise could be the trigger that gets them to say “I quit”. It might be because they're already on the higher end of the comp range, but without knowing this they'll be frustrated. Working effectively with people and comp takes effort and understanding how people will feel/think about comp.

This kind of sense of fairness goes back a long ways: https://www.youtube.com/watch?v=meiU6TxysCg

I don't think it's realistic to expect people not to behave this way, good managers (and companies) should model it.

---

Also - I doubt the execs at eBay saw less comp during that time.

Exactly. At my company, salaries are capped and the higher end of your comp comes from your bonus. At the end of the year, instead of raising salaries, they give out larger bonuses. If one day they just decide not to give it to you, you will have earned anywhere from 20-70% less in total.

That's exactly what a bonus is: part of your salary that your company can at it's discretion not pay you. Marketing and HR has spun this into the sham that it's some kind of additional benefit, but it's not. It is directly at odds with the individual employee's end of the risk / reward trade off, and he should almost always reject it in lieu of some other form of comp.

> I've found companies that rely on this also tend to underpay on salary, but say things like "we're competitive when you factor in the bonus that basically everyone gets".

If I had money for every time I heard this it'd be a nice bonus unto itself!

Yeah, bonuses are nice, but I prefer raises or equity. Bonuses aren't necessary.

> you can't have 'bonuses' that are not tied to something real

But many successful companies and employees do, including everywhere I've worked.

Compensation is like hygiene. When it's taken care of, no one notices. When it's not, things begin to stink.

Drucker was talking about this 50 years ago. I think he got the idea from Herzberg [0].

There is so much knowledge that is not yet Common Knowledge. Instead we see the same mistakes on repeat.

[0] https://www.managementstudyhq.com/herzbergs-two-factor-theor...

Also standard works on this are:

Robert D. Austin, Measuring and Managing Performance in Organizations (1996). This book coined the term "measurement dysfunction" to describe how reward structures work against company goals.

And Alfie Kohn's 1993 article in Harvard Business Review where he summarizes decades of motivational research (also citing Herzberg), concluding that giving bonuses to staff is usually a bad idea, and it is an especially bad idea for jobs that require cognitive sophistication.

https://hbr.org/1993/09/why-incentive-plans-cannot-work

I'd also suggest the book Drive about motivation and how economic compensation can have counterproductive effects.

Edit: Oh, and dear Lord how could I forget Deming?! Most of the time we think we're measuring individual performance we're really measuring noise. And it's not individual performance but organisational performance that matters anyway.

Honest question, what's a reasonable solution for a small company (since it's easier to do thought experiments on a small company).

You're a business owner. You hire 3 people. You pay them salaries. That year the company does really well. You want to thank your employees. You're not going to just give them raises because there's no guarantee you'll do as well next year

It sounds by Netflix logic you should just keep all the money and not reward your employees. They got what they asked for.

By netflix logic you’re already paying top of the market so you should be good.

What about profit sharing? The first time I ever got stock options I discounted them as being worth $0. This was small private company.

But the company paid out profit sharing based on all the outstanding shares including unvested ones.

So if we made a profit everyone got a profit bonus early in the next year. We were all stakeholders.

Find a project to call the justification for a bonus - that way the project is the thing, and there won't be a repeat expectation set up.

(we paid december bonuses on exactly that basis once and then the next year wasn't as good and one of my team thought he'd fucked up to not get a bonus again, so the project oriented thing is way superior even if it's the same money being given to the same people for the same reasons overall)

For a small company like that I would implement basic profit sharing. Set aside a certain percent of company profits (10-15% is fairly common) and those profits are distributed among the employees.

The way you distribute it among employees can get tricky. If everyone is in a similar position you could split the pot evenly. Otherwise you can implement a points system. Maybe the lower level employees get 1 point each. The manager gets 2 points. At the end of the year the profit pool is distributed per share (so the manager would get twice the bonus of the lower level). This is the easiest way to manage it. You'd want to run some hypothetical numbers first and talk to an accountant, etc. But this is a good way for a small company to manage bonuses.

Don't worry about Netflix. The Netflix strategy is that they are overpaying you to begin with, so bonuses become less important. They also have programs where employees can buy discounted public shares in the company and stuff like that. So it's a whole different ballgame they are playing. Don't even try to compare yourself to them. I am currently in the interview process right now for a position at Amazon and they follow a similar strategy to Netflix. You have public share buying program that allows you to do well with a growing public stock, plus the base salary they are offering is insanely high (higher than it should be honestly). So despite not offering a bonus program, it is still a good deal because they are paying you so much that the bonus doesn't matter.

I worked at a small company of < 10 employees when I was first starting my career and they did a profit sharing program like what I listed above. A certain percent or profits were set aside and split among employees. I was a higher-level position so I got a significant portion of the profit pool. As the company did better the bonuses became VERY SUBSTANTIAL. I was getting under-paid with my salary, but after bonuses it put me in the top 5% for salary ranges for my job title. The owner was happy because he allowed me to be highly paid, without the risk of paying high salaries up front. Granted it wasn't all wonderful. I did hold a grudge that I felt like I had to wait out the bonus each year because if I didn't get the bonus than I was just getting a moderately low salary for my position.

Isn't that the primary risk of operating a business? You don't know if you'll make as much (or anything) next year?

I would just give them a little bit more than standard annual cost of living raise, maybe 4-5% instead of 2%.

You can decide to give a bonus because your company did well, and tell folks it is probably a one-time bonus.

It is a bit difficult to then make this apply to Netflix, though: They are Huge at this point. If I remember correctly, they profit. They can probably safely give small raises, increasing overall financial security for workers. They can, however, still give employees a one-time bonus.

Well, why don't you consult them? First set aside the amount of money you were thinking of paying. Now think of some options, e.g.:

* Paying the bonus.

* Improving office amenities.

* Buying each employee an expensive present.

* Funding a family vacation for each employee.

* Making a sizable donation to a worthy cause (collectively or for each employee).

* etc.

Then have a meeting with them, and ask them which they would prefer. Try to reach a consensus they all say they can live with.

When I take dividends, 20% of the value I take gets distributed to the staff

I've been at places where you get bonuses and me and the wife always call it "magic money". We don't bank on it and we try to pay down debt or invest it.

We had a quarterly cash bonus program that was variable based on company performance. In the fastest-growth times, it often paid out at the cap (250%). After one such payout, my neighbor stood up and theatrically loudly exclaimed, "I have no idea how this gets determined; I've just been strongly incentivized to act randomly!"

Yeah, that is the smart way to do it, but as I learned, very few people treat it that way.

I know that sales people usually are smart enough to "live off the base, play on the commission", but that's because commissions are quite variable. When you get a fixed bonus every quarter, it starts to feel very much a forgone conclusion.

Same. My wife and I actually live within the lowest salary between the two of us so we have no stress even if one of us loses our job. We have an emergency fund and invest the hell out of the rest of the money. That means the second salary is like a year round bonus, which lets us take nice vacations, buy our kids nice stuff, buy nice cars, pay for our kid's college when that time comes, etc. Our actual bonuses go into the year round bonus fund.

We're in the same boat.

In my case, the bonus is based on company revenue goals. And it's small (relative to salary). So, I ignore it. It does nothing for my motivation. As a line manager at a large company, in a non-customer facing business unit, I don't have much impact on revenue (I can't bill more hours or sell more units). My personal goals have very little impact on the bonus. If my bonus wasn't part of my stated comp plan (ie, it only paid on years where revenue was actually good), I would appreciate it more. As it is, it doesn't factor into my daily thinking at all.

Wife's bonus can be considerable. And it varies by a huge amount (low end 8% of salary, high end ~30%). It's more of a motivation for her - the high end is based on her performance, not company metrics she can't impact. Of course, if she busts her ass and doesn't get the high end, she is miserable until the next cycle. Hasn't happened yet, but two years without the high level and I bet she looks elsewhere.

We're fortunate to be able to budget and live within our means without the bonuses. At lower salary levels, in a high COL region, that might not be easy. Like you, we either use them to pay down student loans, pay off cars, or go on a more extravagant vacation than normal.

Same with me.

We pamper ourselves with something nice with a (small) part of it and put the rest of them on our rainy day savings.

Yes. I had a high school teacher [underpaid] that gave us donuts in the morning. One day that didn't happen. Anarchy. Screaming, yelling, crying, breakfasts ruined. WHAT WILL WE EAT? This teacher was now an evil villain. The teacher learned: never give out free donuts again.

I visited China in 2000 and remember one night in Beijing I very poor sad little came up to me asking for help for food and I handed her 5 dollars. As I recall at the time the little ones always were asking for “one dollar” so i felt it very nice to give 5... after an hour or so eating in the restaurant when I came out a literal sea of children were gathered all around me begging for the same gift... I had given the little girl the only cash on me at the time so when a little boy very angry dropped the f bomb at me multiple times for not giving him the same - I stopped and asked, “do you know what you just said?”... he was thankfully much smaller then me but definitely didn’t seem to phased fortunately he gave up after a few blocks of walking... I’ll never forget this... both sad how desperate they were but also the effect of being generous... as they say you can’t win

> The teacher learned: never give out free donuts again.

Or do it either predictably infrequently (major holidays or whatever) or truly randomly.

20+ donuts, for how long?

If daily and at $1/nut, that comes out to $100 per week.

Was it just on some occasions or every morning?

Should've doled them out based on performance. My fourth grade teacher used to give out candy bars for good grades. King sized ones, too. No other teachers gave out much of anything except gold stars. I was an overachiever so I usually managed to get a treat.

https://www.npr.org/sections/money/2012/07/13/156737801/the-...

There’s a pretty strong dopamine response with sugar, so there would be a strong association with that and class starting.

No wonder they went nuts.

If i recall the same happened when google replaced their holiday gift phone with donation to some charities they picked.

Before it was a gift phone it was $1,000. They changed that in....2008ish maybe. I can't remember the exact year.

2009 was both. Cash a few months before, N1 right before Christmas.

The year before i joined - 2010 was last one afaik (also when it got leaked)

2008, it was a T-Mobile G1 which was the first Android phone on the US market.

Not to sound miserly, but how is this a bonus for the employee whatsoever?

The Christmas gift was in addition to the normal annual bonus payed out in January.

Wait what? Who gets the tax break there?

When you make a charitable donation of cash, you get a tax deduction to undo the income tax you paid when you originally got that cash. If a company directly donates to charity, you don't pay income tax on that money in the first place, so you don't need a deduction to undo it.

The end result is the same $0 net change in your bank account balance.

Also, companies can deduct all expenses from corporate income tax. So if a company pays you money via payroll, or pays that money directly to a charity,t he company will deduct it from corporate income tax either way.

The benefit of a company making charitable donations directly is that payroll taxes are avoided (not to be confused with income taxes). Both the employee and the company benefit from this, because normally both the employee and the company pay payroll taxes.

If I recall correctly, the employees just picked a charity and Google gave the donation. The "gift" was being able to pick the charity. I don't think there was any employee tax break.

Obliquely relevant question: can U.S. sole proprietors make expensed charitable contributions? I'm guessing not, because that would decrease the 13.5% Social Security "contribution", and would be on top of the "standard deduction" that was increased to make Schedule A itemization preferable only in exceptional cases.

They didn’t share the details but most likely the company. The donation was “on behalf of all employees”

It should be a wash either way unless someone falls into some weird edge case where deductions are limited. The corporation is deducting the payment either way, either as comp paid out to employees or as a charitable donation directly.

"The Human Fund"

- since Festivus 201X

And then the accountants probably tabulated them as corporate donations. So were they gifts from the employee or not?

My current employer does bonuses based on both individual and company performance, and I think they can be sizeable, but I pointedly never did the math when accepting the offer or since then. I don't want to know.

Base salary is in the contract, bonuses aren't. Base salary gives me a floor for how competitive the offer is. Bonuses, if they actually materialize, could theoretically help keep me from wandering off to a higher-paying job -- but I'm probably not going to do that math until I want to leave anyhow.

It's basically like stock options and whatnot. Lottery tickets.

Ouch, 25% vs. 6%. That's how they value managers vs. (engineers? or everyone else?). Sad.

Well, a) it's based of base salary, so managers may be making a lower base than others, and b) while both bonuses are based on company revenue, managers may have a higher target.

It makes sense to have a larger part of sales' income be commission than, say, engineers, who may have less control over meeting revenue targets.

I'm surprised there isn't more discussion on this. That's more than 4x more for managers than engineers.

In any human hierarchy, the management of the hierarchy tends to view itself as the most important component.

At the same time, it is literally the least talented.

Well, if the managers have a base salary of 100k and the engineers, 150k, I think it’s fair.

I had a similar program and there was also incentives based on year end leveling.

We met all of our goals, but because I was 11 months in they cut it in half.

Then I was supposed to receive the top performance award. However, they gave it to another coworker because I had only been there not quite a year. This of course reduced my bonus by half, but again the monetary award was further reduced again. In the end, even though I was leading all the projects and getting things done I received a quarter of what I should have gotten. The full top grant was given to someone who did basically nothing and came to work maybe three days a week. He was also drunk those three days.

I quit two weeks later. Mostly because a friend called because they had reqs open and they were offering me a 25% increase in pay. That wouldn’t have been as competitive if they hadn’t played so many games.

I heard all on my in progress projects stopped because no one knew what they were doing.

> they spent a lot of time explaining that bonuses weren't guaranteed.

In Israeli labor law, if an employee repeatedly gets the same bonus regardless of any concrete criteria, then that bonus is considered as part of that employee's salary as though it had been part of the contract. This is due to many employers calling a part of the salary a "bonus" so as to avoid it counting towards retirement benefits and other allowances; and for the flexibility of being able to cut salaries without ostensibly having done so.

Bonuses are great if they are very transparently tied to external events (exceeding revenue goals etc) and not any internal politics. Worked at one company where one could take the annual report and apply the published formula to come up with your bonus. That was great.

Making it unpredictable and secret is super toxic though. At one SV hardware company we had a great fiscal year, exceed everything and then they announced that based on their super-secret bonus formula, it came out to 0.05% of target. They actually paid out that 0.05% which felt more insulting than just calling it no bonus this year. I did quit the place after that incident.

A much better way to handle it was at another SV hardware company I was later. Same scenario, best fiscal year ever, etc. But bonus computation based on secret formula came to zero. This company had actual decent humans in charge (based on many events not just this one) so they acknowledged that the formula needed fixes and retroactively changed it to account for the exceeded financial targets. Sadly they still kept it secret but in subsequent quarters it did seem to track financial goals pretty well.

This is the curse of 95% reliability. People will rely on it even though they shouldn't. It's better if it's only like 66% reliable.

We know how to deal with this in the technical domain - we break things on purpose in a controlled way so that people don't rely on an SLO that is there by mere chance.

Maybe companies should do "bonus tolerance breaks" for the same purpose.

This happened at the Japanese megaCorp I worked at but wrt overtime pay after the financial crisis.

Everyone worked huge overtime, boosting their pay by 50-80% in some cases. Economy crashed, corporate orders to cut overtime ( but obv not the work deliverables), and people were having difficulty paying their mortgages.

Management lesson: Money is fungible. Making some part of compensation variable on a whim is giving management a rope to hang themselves with.

There are differences in types of compensation in the very short term because of IRS withholding rules. I think a lot more gets taken out of a bonus early in the year, although of course it's all the same when you do your taxes.

But bonuses are compensation! At my last job I had a negative slope on my total compensation, because I’d get raises every time that barely beat CPI, but the bonuses kept shrinking by thousands. I ended up quitting because my promotion to team lead came with a net pay cut and the CTO refused a pay increase flat. And thus ended eight years, because they wouldn’t pay me as much as my colleagues, and cut enough bonuses and perks that I was making thousands less than I used to make.

See banking. TC is still less than 15 years ago, esp in London

Yes, my experience is that companies always come up with reasons not to give the bonus. Recruiters like to include them as part of the compensation. As yeah you ask X but you get a bonus of Y which makes your request Z salary, awesome right. Of course the contract says it’s a discretionary bonus...

> my experience is that companies always come up with reasons not to give the bonus

This isn’t true in my experience. If you’re trying to make a decision based on comp+bonus then ask what the bonus ended up being the last few years

I know of a few companies where the pay isn’t quite competitive without the bonus. If you lose 10% of your income with the same or greater responsibilities (life often gets harder when the money gets scarce), your finances and plans don’t give a shit what you called it, they just know it’s gone.

It is foolish to include you bonus in your financial planning.

> Because once you get one once, you feel entitled to it in the future, and it feels like a loss when you don't get it.

That seems to be the risk of any company that tries to convince you that you have to do your absolute best as an employee (also known more succinctly as "any company").

Past some point, it's just more money to put into savings--and lack of it is annoying and something to take into account for evaluating future options but not much more.

But, yeah, you have people making less money for whom the expected quarterly bonus was factored into paying their mortgage.

There are plenty of stories of people making high incomes and still living paycheck to paycheck.

I think bonuses can work as long as they are an actual bonus. The base salary needs to be correct first. I worked at one place where the base salary was lower, but the bonus made up for it and it was super stressful. I ended up negotiating for a higher base.

One upside I've seen with company performance bonuses is that it can (not always) force even a private company to share more information with employees. This is useful for knowing the general health of the company. Even if the company shares nothing, if bonuses drop significantly or go away that's a clear signal of problems. All too often I see stories of people getting laid off and having no clue it was coming.

My approach is to think about the base salary as the "real salary" and the bonus as "lottery".

I negotiate the base salary as high as I need to make. When discussing bonuses, I politely pretend to be interested, but what I actually think is "this is just some imaginary number, that maybe I could get if I win a lottery, which probably is not going to happen".

My family budget is calculated on the base salary. If I get a bonus, I will probably immediately move it to a savings account, or maybe use it as an extra payment on mortgage, to get it out of sight.

The compensation expert Graef Crystal was for a long time a consultant to executives who were negotiating their contingent bonus packages. Sometimes there wouldn't be any bonus at all in bad quarters/years and his clients would claim bitterly to him.

https://en.wikipedia.org/wiki/Graef_Crystal

As to eBay, for people who aren't truly poor, running your expenses up so close to the limit that losing 6% means your financial life is in ruins is a very bad way to live.

Welcome to Silicon Valley, where people bid the most they possibly could afford, assuming a great bonus, for everything.

>And the one quarter, we didn't get the max bonus. In fact, I don't think we got it all. People screamed and yelled and were pissed. At the company all hands they spent a lot of time explaining that bonuses weren't guaranteed.

This is only understandable if the company didn't perform well but did the CEO and other executives not get a bonus as well?? If they didn't it's 100% reasonable. Not so if they continued getting their fat bonuses while everybody else didn't. It's understandable employees become unhappy about this. Let's face it, compensation is mostly one of heaviest factor considered in a job and bonus is factored in to some extent. Hence from bonus to no bonus make that position look less attractive. Pissed? It's an overreaction but maybe it's time to move on. If there are better pastures some people will not hesitate to go. I'd appreciate if the downvoters tell me how is it fair that executives don't get affected by a downturn at all while everyone pays the price collectively, sometimes even the executives mistakes. It completely eludes me and I'm sure I didn't get downvoted by executives.

One reason to do a company with variable comp is if you have a handshake agreement with the hiring manager that they will guarantee to the extent of their ability a high multiplier.

This approach is used a lot in companies where the average tech talent isn’t highly valued and so genuine talent is otherwise unattainable. It’s 100% misusing the system to overcome flaws elsewhere.

This is sort of the deal on Wall Street. You get a "discretionary bonus" and its more mysteriously tied to the performance of the firm. This is the secret, you can't give people too much of a formula. Bonuses have to be conjured up in a nonsensical way, otherwise stuff like this happens.

It seems odd to me why bonuses are tied to the performance of the company rather than the employee's performance.

Is this natural dynamics in an increasingly large company? As a company grows, individual's impact diminishes and so does visibility, and revenue per employee dwindles. Consequently, resources increasingly concentrate to the top. That's why we hear Microsoft's engineers below level 68 complain about pay, and Amazon's entry-level engineers are known for their relatively small package. Ebay's situation was probably even worse, as their business stopped growing fast long ago.

All the more reason for working for a blow-out small-to-medium-sized company, except for those few who are truly good at climbing up corporate ladders. The accumulated chance of getting outsized equity return is larger than working for a big company.

Depends. The US is a bit special and not everyone works to maximize salary. But where I work, small startups absolutely struggle to compete with large banks on salary (Hong Kong, we do banking like France does croissant or the US middle east wars).

It doesn't matter, the perks. In fact each time I hear of some I think they must have huge salary issue vs the competition and try to find leverage points real company cant follow (a bank wont do your laundry, as I heard FB was offering at some point).

> Ebay's situation was probably even worse, as their business stopped growing fast long ago.

I worked there a long time ago. :) This happened right as they peaked in growth and started slowing down.

> And the one quarter, we didn't get the max bonus. In fact, I don't think we got it all.

Was there a clear reason for this? Given how it’s framed, it sounds like there wasn’t.

Yeah it was clear, it was because the total company profit didn't meet the internal target, but that hadn't happened ever in the history of the company, so people were surprised.

I appreciate your use of "stated" here (serious)

By the same token I’m not going be doing ANYTHING beyond job description scope for a company that doesn’t give bonuses. Bonus goes both ways.

This reminds me of the (roughly the same) saying that people always spend their next pay-check instead of their current one.

> People left because of it

So, one question: After they left the company, has their income increased/decreased/stood the same? Maybe it's a hidden key factor for the decision.

Same with stock RSUs. Most tech companies have been blessed with rising stock prices - it wont last like that. Sooner or later big names will disappear like Enron, Lehman did.

Bonuses also mess up tax withholdings.

How? Company should withhold just as they would any other pay. Even if you get dumped on and it bumps you up a bracket it likely won’t have a huge impact as you’ll likely not have a ton of pay in that bracket.

Did you at least get a jelly of the month club? That’s the gift that keeps on giving.

> I remember being in shouting matches with our signal integrity team about among other things, how many capacitors we needed.

I think the place where big companies go wrong is by having teams that are too specialized. If you're the Signal Integrity team, the only thing you care about is signal integrity. You should just say no to anything but the most conservative arrangement possible; you're responsible for Signal Integrity, not profit or time to market! Block the project until the signal integrity is as good as it can be, that's your one and only job.

The even bigger problem is that the existence of the signal integrity team means that signal integrity experts aren't embedded on the product team. The product team can happily say "they're handling that", and cut whatever corners are necessary to get their $25,000 bonus, not caring at all about the tickets the Customer Service Team will have to handle as a result of poor signal integrity, the weird bugs the Software Engineering Team will have to work around, and the terrible reviews caused by a computer that randomly flips bits in memory.

Engineering is a discipline about balance, and I think the balance has to be done inside the team. You need to make a conscious decision to trade off a lower BOM cost for more customer service tickets, and the team needs to own that decision and plan for the future under the constraints of that decision. (Instead of sending out an order for capacitors, send out a req for more customer service.) If there is someone in the "out group" that you can pass your concerns off to (i.e. that makes the cost of your balance decision cost 0 for you), then you'll never make the right balance for the product and company as a whole. You'll just maximize for your own gain. From there, you ship your org chart, the company becomes entirely about politics, and you're out of business... just like DEC apparently.

(I guess I also want to comment on the article as a whole -- being bitter about too small a bonus. Something similar happened to me and I sure was bitter about it. I actually quit over it. It all sounds very rational to me, knowing how humans work, and I can't believe management would do something so stupid. It's the kind of thing that kills your company, and yup! it killed them! If there is one constant in the field of engineering, it's that we forget the mistakes of the past much too quickly. Except Therac-25, everyone remembers that one, but integer overflows are still killing people to this day. Sigh!)

You could have replaced SI with Security and described my current situation perfectly

That's true but what can you do about it? It's a direct consequence of building large/complex products. To me it seems that you're just advocating for only building small/simple products.

Typically you have a chief engineering team that is in charge to strike that balance, and drive the compromises with all the specialists.

Have Special Teams & Product Teams.

Special Teams don't get ownership of anything, can't veto anything. They're there to answer any and all questions from the product team and to set the stage for how the product team may solve a challenge (i.e. present a menu of relevant approaches with expert commentary on the applicability to the problem, but implementation is the product team's job).

This limbo position helps tamp down on the prestige of a Special Team relative to Product while still attempting to harness expert value.

So how do you measure the value and contribution of the product and special teams including compared to each other. Somehow promotions, head count, budget and so on needs to allocated. Without ownership or the ability to veto it's not fair to measure the Special Teams on any product related metrics. But if you can't measure them on product related metrics then what do you measure them on? Feedback by other teams which will result in endless games of politics?

Issue with this approach at some companies though is when Special X Team is measured by the quality of X, but has little authority over Product teams, who have no incentive to do X well.

Maybe hire more generalists, make it easier for people to move around the company, have a 2D team structure (i.e. maybe you have a signal integrity team and a PCB layout team or whatever, but then you would also have a subset of each working together on the CPU Card team). There's probably a name for that.

Matrix organization.

Great in theory, extra hours if you're a wrench turner.

Couldn’t you make the objective of the team: highest reliability for lowest cost?

In my last job I worked at a company that paid slightly below the market rate, not including the bonus. At the time I got the job, I didn't realise that I was already being significantly underpaid. I thought it was a bit low but didn't realise the extent of it. So when I got the new job, I was blown over by the huge jump in salary and couldn't be happier. What was better? I was entitled to receive each year up to a 10% bonus for just doing my job, 15% if I went above and beyond, or 20% if I was a "role model".

At the time, both the recruiter and my new manager explained to me that I should think of the 10% bonus as a baseline expected part of my salary "you will always get this unless you are doing something egregiously wrong". This was indeed what everyone was told, and what management was told to tell people. Of course, this made me recalculate what I thought I was worth and it did in actual fact bring my salary up to roughly market rate.

What the recruiter and my manager said was right. Come bonus time, I and almost everyone else in the company got their bonuses (apart from the people that did egregiously bad, and they saw it coming). In the second year I even qualified for 15% and when I got paid out I really felt that I had actually gotten a bonus. I was banking on 10%, but not 15%! I treated myself to something I'd wanted for ages but could never justify.

Then Covid hit, and suddenly upper upper upper management started signaling that bonuses might not be paid that year. Needless to say, absolutely everyone apart from the CFO was up in arms. Morale, which already wasn't amazing because of Covid, plunged even further and the number of "hallway conversations" increased significantly. People started to leave in larger numbers because the bonus was an expected part of their salary. Each year they waited expectantly to receive it, and if they weren't going to get it this year they would need to go and find a job that paid market rate as base salary. The thing that made this worse was that we were working at one of those few companies that actually did better during Covid. For better or worse, we sold a service that had an increased demand for Covid.

By this time I was a manager, and we were told in a leadership meeting by our head of department where we were all vocally pissed, and were told that we had to pass the message on to the people we managed. Clearly, this is what had happened to him, and to his manager.

The company didn't want to come out and say "you aren't getting bonuses even though we're projected to do better" presumably because it would provide a platform for people to ask why. Instead, they thought it would be better if it came from the direct line manager. Great idea except that we received the message from someone who at the same time said to us "I can't imagine how they'll get away without giving bonuses". It just served to add to the feeling of being cheated.

Anyway, they ended up actually paying the bonuses because the annual revenue figures had increased so much that it was basically impossible for them not to pay them. When we got them, we didn't feel happy that we had received a bonus, we just felt bitter that the company put us through hell for seemingly no reason.

I no longer work at that company.

This is what I think of when companies offer the passive-aggressive "unlimited vacation time" policy.

It's not unlimited, and you shouldn't start off your employer-employee relationship with an obvious lie. Set a policy and make it clear that you are exchanging x dollars for y amount of work.

At some companies they call it “discretionary time off” to make it clear it is between you and your manager but the concept is the same. What many companies fail to do is properly train their managers (1) how to manage this with their reports and (2) to consistently take time off as an example to the people that report to them and to set expectations. Without a program in place to encourage people to use it, people don’t use as much as the company typically intends. Due to legal nuances, it is a bit tricky to officially track performance in this regard.

Most companies that I’ve worked at which had this type of vacation policy had a directive for managers to ensure that every employee took at least 3-5 weeks of vacation every year (the minimum varied with company). It wasn’t always successful but that was the objective. More than that was fine too.

One of the original motivations behind these policies was the burst-y nature of some types of engineering work. Companies wanted to allow engineers to take 2-3 months of paid vacation after a relatively intense 12-18 months with few breaks working to ship some product. Giving people multiple months of vacation is surprisingly difficult without also running afoul of other legal and accounting complexities around vacation time in various jurisdictions. The “unlimited / discretionary” policy is essentially a loophole in US law that originally allowed managers to reward people with large amounts of time off. It has been generalized, and has other accounting benefits, but this was the original use case.

I’m back at a more traditional company after being at a startup for two years and the unlimited PTO was amazing.

It wasn’t passive aggressive at all and now I sit here one my hands waiting to accumulate enough pto to take an extended break.

Similar story from a friend. The privately held company paid record dividends in both 2020 and 2019, but used COVID as a cover to do without both bonuses and raises. The only way to see this money would be to become a stock holder in the company, which is only offered begrudgingly.

> both the recruiter and my new manager explained to me that I should think of the 10% bonus as a baseline expected part of my salary

If a company does this in Europe [I think generally in the EU], I believe it would then be considered a contractual entitlement and part of your salary - so the company would legally have to pay it anyway.

I work London finance. Bonuses are a big part of the pay package (in many cases over 100% of your base, sometimes even 10x base for guys who work on successful algo-trading projects).

Every place I've received a bonus from gave me a gigantic, in-very-clear-terms, no-nonsense page to sign that said I acknowledge the this bonus is discretionary, it is not to be expected, there is no expectation to ever receive another one, etc.

This is most likely done because everyone expects to get some kind of a bonus (if you don't receive a bonus, unless the company is basically going bankrupt, that's a really, REALLY strong sign that you should probably your bags up and GTFO). It is considered part of the basic pay package, but then again, one of these years, there might not be a bonus, and they want to make it absolutely clear that you can't expect one in that case.

The reason for this is that most hedge funds pay bonuses out of their performance fees, and if you have a shit year in the market, there isn't any money to pay bonuses.

Which company is this?

This reminds me of my first job as a developer, age 21. I haven’t shared it before, so here goes...

There was a ‘crunch’ coming up at work (i.e. IMHO, bad planning) and so the boss offered everyone a bonus if they performed well.

However, the older employees warned me that the criteria for such bonuses were often ill-defined. I therefore pushed for clear achievable objectives. These pre-agreed objectives were promised, but never provided.

Anyway, we all work hard, some more than others, but we met all the deadlines.

Then comes bonus time, and they propose that I be given 30% of the maximum bonus. I explained that I felt this was entirely unreasonable, as I met all my deadlines. No other objectives were set, and therefore I felt I deserved the full bonus.

They didn’t agree, and we went three rounds of meetings with more and more people in the meeting. Each time they tried to convince me what I was asking for was unreasonable.

At this point I should add that I had seen this boss (CEO, small company) be what I would now call abusive. Verbally abusive to junior staff members, and insulting members of staff behind their backs. So my loyalty was, well, absent.

So on the third round of weirdly manipulative meetings, we come to an impasse. So I explained that I still stand by my request, and I pulled out my letter of resignation.

At which point there is a long silence. My boss puts his head in his, and the other two people in the meeting (another boss, and my coworker) looked surprised, to put it mildly.

After collecting his thoughts, my boss asks: what is to stop me threatening to resign every time I don’t get my way? To which I calmly explain that he didn’t have to pay (Ie. I could just quit).

After a bit more stunned silence, the boss relents, and agrees to give me the full bonus.

I wait until the bonus is in my account then I hand in my notice anyway. Abusive bosses don’t get loyalty.

The best part is, the coworker in the meeting also didn’t get the full bonus, despite working much harder than me. He’d only asked her into the meeting to try to guilt/manipulate me. So not only did the boss have to give me the full bonus, he had to do the same for her too.

After that I went freelance. And 15 years later I can say it was the best decision ever.

> After that I went freelance. And 15 years later I can say it was the best decision ever.

Every time I've left a job, I've been uncertain and conflicted. Every. Time. Then, a week or two into the new job... Every. Time. ...I thought, "Wow! I should have done this sooner!"

I’ve worked for a startup who was giving 866 stock options per month. Had I known they are valued $125 today, I would have:

- Shut up a few more times because I’d trust more the managers, and just followed the stream,

- Accepted to be patient about being a developer on a boring project, because what stressed me was “I don’t know enough to reach the career level that can allow me to ever buy a house.”

- Made 4 millions instead of 1.

I regret leaving and aggressively seeking for a better career, but at the time, things snowballed negatively because I wasn’t getting enough emotional attention. Of course it was a rational choice on both sides, but it was a mistake overall.

On my leaving card, all my colleagues wrote variations of “To the most motivated guy every” – proof that I was putting in decent work, albeit not working cleverly enough.

You really shouldn’t feel bad, because what happened has a low probability.

It’s like saying I should’ve invested in X which got quadrupled in price last year.

Most stocks (even very promising ones) didn’t achieve anywhere near that growth.

So you choosing the right one among the many to “shut up and stick to it just a little bit longer” has a low chance of exceptional returns on your investment.

You cannot see the future, even the most sophisticated analysis can be wrong, and even the best companies can stagnate for a loong time before getting lucky.

The mindset you should have (I know it's easy for me to say) is that you made the best decision with the data available at the time.

For every success story, there are many more failures, where after years of hard work, the company still doesn't succeed, where the managers that look like idiots are really idiots, and the stock options end up being totally worthless.

Regrets are pointless. Had I known what I know now I'd have put my (unused) beer budget into crypto this time last year and be looking at retirement now.

Ignore the money, divorce your happiness from money, and do what makes you feel happy. Sometimes you're ahead, sometimes you're behind. The race is long, and in the end, it's only with yourself. Your choices are half chance, so are everybody else's.

Employees forget that they sell their labor. Sell your labor to the highest bidder.

Counterpoint: they sell ~8 hours of their day. Selling that to the highest bidder ignores that there's different environments that might be better or worse for everyone's general sense of fulfilment. IMO, chasing highest pay only is a recipe for an unhappy life that only pays off on the short term.

No one should sell themselves short, but choosing, say, a 100% worse environment or a dead-end technology stack for a 5% higher pay (or whatever) is not wise.

Why? My job is extremely easy with a great team and manager. I could get more, but I'd have to work in a high stress environment, and life is too short for that shit.

The problem is evaluating the size of the bid. Salary is only one part of the equation and people rarely get wealthy on salary alone. There are multitude factors when evaluating the "bid" of the company and to actually understand what is valuable and what is not is the difficult part.

Me too, every time. I've felt guilty even, but never for long.

> my boss asks: what is to stop me threatening to resign every time I don’t get my way?

Nothing. That's how negotiating an employment relationship works. Holy shit.

It's not. That is an independent contractor relationship. Employment means you play ball for the stability of the paycheck. If you want to throw a tantrum every time you feel slighted, you shouldn't commit to a full-time permanent job.

Employees are not the top of the totem pole, there are always other factors that people making these decisions have to consider. They don't always have to share that with you. It's a nice idealistic view to think otherwise, and I truly hope you always find work in places like that. But this is not the lived reality for the majority of people, and it's actually not a bad thing.

Boss-employee relationship goes both ways.

They pay me because of my work/because I am valuable. From the story, the poster was valuable (otherwise the boss would not have paid him/her out).

> Employees are not the top of the totem pole, there are always other factors that people making these decisions have to consider

And that is entirely his/her thing. If I was promised this and that for a given task, I should be getting it, even at the detriment of the company, his her own paycheck, whatever. I am not responsible for the well-being of a company, it’s not your “family”.

Of course, during unexpected events (like COVID), things like an OPTIONAL temporary pay reduction for every employee (very much including the bosses themselves) is acceptable, and I think any employee planning to stay there will gladly accept such if the leadership is otherwise not exploitive/fair.

I allow my boss to be very demanding. Want me to take an important customer call during holidays? Sure, I can convince my wife to allow that. Want me to work a week in a different timezone? Let me check first, but should be doable.

But. Do. Not. Ever. Touch. My. Compensation!

Being promised 100% but arbitrarily receiving 30% would be a no-go for me.

> They don't always have to share that with you

How that is related to fact that employee can resign from work if they want?

After you pulling a resignation notice as an argument, an experienced boss would instantly know you would not be an asset he could rely on even mid-term, so his best option from a business perspective would be giving you no bonus at all (or the original one), and immediately starting to look for a replacement (and probably firing you).

This is an employer-employee power relationship. In general the employer has the power, but it cuts both ways, to some extent.

Pulling a resignation notice shows that relationship to have broken down, probably irrevocably, I agree. But, the employer initially broke the relationship, by not keeping their promise regarding the bonus.

The employer (perhaps here the boss's boss) knows they have treated the employee unfairly to an extent that could become legal, which would have an associated cost, and also could impact upon the other employees' motivation (and how employees evaluate the promise of future bonuses).

If the employee is essential and their replacement cost is high, then there's an significant additional cost to firing them fast.

The employer might have to weigh up the costs, and could reason that it's cheaper or otherwise better for the business to pay the bonus.

Yeah... I'm rather perplexed why the boss didn't just fire him on the spot. A new grad is likely not valuable enough to be worth fighting for.

It reminds me of relationships where one partner uses the threat of divorce/breaking-up to win arguments.

It's definitely a nuclear option, which most often should be responded to with, "okay, do what you have to do".

This all depends on the value of the employee and the opportunity cost of firing them and finding a replacement.

It is certainly not true that it is never viable to pull the resignation notice as an ultimatum. Simply depends on who has the leverage.

Given that fraud was attempted - in some cases the lying boss would be fired.

Many psychopath in business settings.

> what is to stop me threatening to resign every time I don’t get my way? To which I calmly explain that he didn’t have to pay (Ie. I could just quit).

This might be my English failing me but I can't understand your answer; it doesn't seem like it's actually addressing the question that was asked to you.

Could you elaborate a little further? I was met with that question before and would like to learn how to handle it well.

It's just pointing out "yeah, if you're worried that I'll keep doing this, then feel free to just let me resign - but if you want me to stay, you'll have to live with the risk that I'll do this again". It's not assuaging the manager's fears at all, because there's really no way to do that.

I like that a lot. Thank you. (a) be honest and (b) remind them that you got them by the balls if crap hits the fan.

Not sure if intentional, but this is exactly the opposite of the message of the article.

Well done!

This reminds me of a story back around that time about a guy who was, like, employee 200 at Amazon. He goes to the can, and sees a vestment sheet for the early employees, and realizes that he’s been hired just after people were getting stock grants. Just just prior to him are shortly to become millionaires, and he’s sitting there with a regular job. He quit because of the inequity, and did a tour with this story as a “comic,” but it was just bitter. (I can never find this story any more.) Anyway, the point is that he has a great job at a booming company, with nothing but bright days ahead, and he can’t enjoy it because he knows other people are getting a lot more. I mean, I get it, but everyone can point to someone who has made a better deal for themselves. It doesn’t mean you have to despise the deal you got. I know I can’t make that kind of money because I know I don’t have the personality or family situation to make that kind of deal. And that’s ok. I can’t complain. I do alright.

There is something buried deeply in our minds that recoils at being treated unfairly. I have a good job, the pay is decent, the work is interesting - but I'm in the process of looking for a different job because I didn't get a promotion. Some junior members on my team did get them though, and it feels unfair (I absolutely have no idea if they don't deserve it, and I like them as team mates). However, I had previously talked to my about the promotion, set the targets, and went above and beyond to meet those ambitious targets.

I've introspected a bit, and I admit it's weird reaction - nothing changed about my job, except knowing my colleagues were being recognized and getting something I am not. The perverse thing is, if no one got a promotion, I wouldn't be this pissed.

There's literally a biblical parable about this (though sort of in reverse). I'll paraphrase it (it's from Matthew Ch 20):

A man goes out in the morning to find workers for his vineyard, promising them each denarius for the day. Around lunch he goes to find more workers. During the afternoon, he goes to find even more workers. At the end of the day the man pays everyone, starting with those who arrived during the afternoon. To these folks he gives a denarius. The workers who had arrived earlier see this and think they're about to get a bonus, only to then also receive a denarius apiece.

The main purpose of the parable is to describe that everybody who makes it to Heaven is there on equal terms. But there's another truth to it that the article also describes--if you agreed to work for a wage and then receive that wage, can it really be called unfair?

My view is: everything is comparative but if you make everything a comparison, boy you are in for a world of hurt. Life is mostly unfair so better treat the good times like the bonus that they are.

> Anyway, the point is that he has a great job at a booming

> company, with nothing but bright days ahead, and he can’t

> enjoy it because he knows other people are getting a lot

> more.

That's only partially true. You might have just realized that you're worth more, and that you could do about the same job at a different company and get better remuneration.

I can offer an anecdotal example: back in my first job I had reached quite a happy point. I was able to do my job without much problems, I was competent for my tasks, and my compensation was okay-ish. Not great, but I could sustain myself and get me something nice every now and then.

Then I started seeing people as competent as me leave and get waaaay better remuneration, doing jobs maybe different but still interesting/engaging, still rewarding.

Anyway, I stayed there for about two more years, then I left. My next job was a ton of fun, got competent at it again after some initial ramp-up, and was making waaay more than my first job.

That's Mike Daisey, he did a tour called "Doing Time At Amazon.com"

Mike Daisey, the guy who got caught lying about conditions at Apple factories, so not sure how much I believe the story about finding a vestment sheet.

I actually think bonuses and equity grants are terrible for comapany morale. I've seen it many times, and heard many more stories.

On top of the issue in this story, there are others too.

For example, if someone wants to leave, but the bonus or vesting is coming up, they will stay, and you don't want people on a project who don't want to be there.

As another example I know people who work at companies that are going to IPO, and nobody at the company is working at all. They just spend all day thinking about the IPO, and afterwards, checking the stock price.

I don't expect this to be a popular opinion here, but anything outside of a salary for compensation is just a bad idea.

If you pay a high salary, you create an incentive to just mark time and maximize the number of paychecks collected as well.

If you pay in part in equity (or performance-based bonuses), you can balance that somewhat.

No pay structure is a substitute for strong leadership, but each system provides pulls in certain directions.

The bonus is a double-edged sword. There's nothing more demotivating than getting a bullshit explanation for why your bonus is reduced/non-existent.

  > but anything outside of a salary for compensation is just a bad idea.

In the hedge fund industry, you can't be a successful firm without a bonus compensation model.

- The profit is usual attributable exactly to specific people. If they don't get paid their share of what they brought in, they'll quit and go elsewhere where they can be paid their share, and you'll be left with all the worst people.

- Some years are successful, and others aren't, meaning you can't have a stable high salary, since that will risk bankruptcy in unsuccessful years. You could adjust salary up and down each year, but that's no different to having a bonus.

In a "normal" company where revenue is stable over time and each person's contribution isn't so easily quantifiable, I can see your point.

>For example, if someone wants to leave, but the bonus or vesting is coming up, they will stay, and you don't want people on a project who don't want to be there.

People shouldn't stay at a company based on money? Isn't money one of the main factors causing people to stay at a company?

Or are you more saying they're staying only for a few months then quitting? Yeah, I see that. But maybe the answer isn't to get rid of bonuses and equity, but rather to spread them out over a long time. Don't have yearly stock vests, instead have monthly ones spread out over a year or more.

Startup I work for was acquired within the past year; came through as a "key employee". Don't like the new environment. Huge management hierarchy and management culture, command/control, siloed decision making, and etc.

Unfortunately my reward, as such, is tied up in retention based compensation. Not phoning it in yet, but struggling to reach the 1 year cliff. Honestly coming around to the idea..

Bankers and Salespeople have a different structure they get a minimum salary too low to live on and then get bonuses based upon performance.

My son was an O'Reilly Auto Parts store manager, turned out he didn't realize his salary was $500 a month until he was in an accident and was out for a six weeks... he was stuck, he had to go back to work even tough his femur was just broken in half.

Mostly agree.

Bonuses should be a surprise to employees. Anything else just becomes an expected part of comp bundle.

Couldn't disagree more. Want to see employees work hard and be motivated? Give them equity that is a meaningful amount. I know it works for me... I work 10x harder for my current job where I have equity and stock bonuses than at previous jobs that were all salary.

> I actually think bonuses and equity grants are terrible for comapany morale.

Not just morale, even when things go well it can be a disaster. My wife's company just paid out a massive bonus and 5 people, nearly all of the people in this one small department, quit.

Incentives happen because they are empirically effective. I would contend that the issue is less the content of the incentives but rather the perception of fairness.

If everyone is aware how the bonuses work and feels their 'fair' share is obtained, then it just becomes another part of the calculus.

I speculate as a non-manager that bonuses are a good way (in the federal contracting realm, from the company perspective) to incentivize employees without inflating their base salary to the point that the company isn't competitive for new work.

I knew a guy who put his two weeks notice in just before the annual Christmas bonus came out. So they stiffed him on the bonus.

They ended up paying for that in spades.

This was in the planning field and he was moving from a private consulting firm to a government job. Government is where the real power is for this industry.

If they were one minute late "Sorry, we are closed/you missed the deadline." If they had any errors in their paperwork "Sorry, reapply after you fix this."

Etc. Ad nauseam.

By. The. Book. Every step of the way. Zero wiggle room.

It had to have cost them more than the bonus they denied him.

This is a moral conflict if I ever saw one. Assuming that the guy was a pedant only against his former company and not everyone around.

On one hand, a sleazy company gets karma-whipped.

On the other hand, the overall harm from a public authority enforcing the law unevenly because of a personal grudge is not negligible either. Junior people working with him will normalize this behavior and repeat it.

Neutral public institutions are a great achievement that helps the entire society grow.

Cool story and I see absolutely no problem with his behaviour.

> They ended up paying for that in spades.

Assuming that guy behaved differently with other companies, shouldn’t we call it corruption?

Edit:

> This was in the planning field and he was moving from a private consulting firm to a government job.

Some downvoters want explain? Seriously HN, you want this kind of government workers?

< I'm not condoning what he did.

I didn’t assume so. It was an interesting story to share.

At a certain multinational company that Anon(a close friend) is currently employed at had this way of distributing bonuses when the pandemic hit.

Context: the company is chasing a $100mn y-o-y growth at this point.

- All employees in the US offices get a hefty bonus for the profits they contributed to

- All employees in the India office were to not receive bonuses/increments because we wanted to cut costs (not to forget, Indian salaries are 20% of their US counterparts)

- All employees in the US were to get reimbursements for stylish/modern/gaming chair while working from home($300 a piece)

- All employees in India had to get their $40 chair approved from the manager (request denied in most cases, "unnecessarily too costly", he said)

- No more bonuses for India offices for the next year or so because we spent all the money on the US employees and the managers bonuses

- Indian new hires are getting offered the salary that someone with 5 years exp is already working at in the company

<puts on tin-foil hat>: distribution of bonus/increments seem to have an upper limit. the less you distribute as a manager = the more you have for yourself and your favorite juniors

<anecdote>: ^^ one of the favorites from above actually quit the next day after getting the bonus. it's common to put in your papers right after the increment letter.

edit: formatting

I can relate to each one of those points. It's awful to feel treated unequally even though you're doing the same work. Before this trend of remote work, usually the solution was to just migrate to a developed country.

That's completely normal and does not only apply to India but all other offshore centers like Eastern Europe or the Philippines.

You guys are a cost centre.

This reminds me of the holiday gifts at Google. By the time I joined, Google had already switched from physical gifts (e.g. a new Pixel) to allowing each employee to choose a charity to which Google.org would donate $1,000.

Even years later, there was still bitterness among the employee base about the holiday gift. It was a bit mystifying to me (as I never had the expectation of a $400 electronic for a holiday gift from my employer), but really shows the power of anchoring. Once people have an expectation for some reward or benefit, any downward deviation from that expectation is met with great distress.

Hm, but it was the way they managed the transition. When I joined (actually I believe I joined literally the day before the cut-off for the holiday gift so got it even tho I started in December 2011)... it was "free Nexus" (and so on, choose from a list, etc) and then it was "very cheap hardware devices we have excess inventory of" and then it was "donation to a charity we chose" and people got miffed because it just smelled like a big tax write-off.

They would have been much better off just eliminating the holiday gift with a heartfelt letter from Larry explaining that he didn't want a creeping culture of entitlement and we were all aware we were compensated handsomely anyways so happy holidays, you'll get your annual bonus soon anyways. Pretending the charity thing was a gift was a bit weird. At that point I was giving 5-10x that amount in my own cash to charities anyways.

It's handled a bit better now, because you get to choose the charity, and it's accompanied by a good matching charity drive program etc.

There was a story I read a while back about Veterans being unhappy with the red cross for not offering free donuts because they had back during WW2.

https://www.npr.org/sections/money/2012/07/13/156737801/the-...

Step 1. create a charity that would "adopt" Google employees and give them Pixel phones

Step 2. choose that charity and pick yourself for an adoption

Dopamine reward signals in the brain are coded by how expected a reward is. Why? Because it's a learning signal. You've done something that you don't expect a reward for, but get one anyway? Hey, dopamine rush, I need to notice that positive outcome and learn what happened because it might work again. Conversely, if you do something that you're used to eliciting an expected reward and nothing happens, negative outcome, dopamine crash - I need to learn about this disappointment.

This post is a classic example (although there are other factors, such as the slowness of other teams who didn't know about the programme) - the people who weren't expecting a bonus were much happier with a much lower bonus. Add in the crappy way they hid the programme, so others didn't realise what was at stake and it was a recipe for disaster.

If a bonus is expected it's not a "bonus", and only sets up expectations that lead to huge disappointment when it eventually doesn't happen.

This past year we received our usual bonus (despite the fallout from COVID), but we did not get our annual 3% cost of living adjustment. Instead that money was used to keep people like janitors, fitness facility people, food people, etc. still receiving paychecks even though campus was (and still is) closed down for quarantine. Some people complained, but I thought it was a good way to take care of our fellow coworkers who couldn’t work through no fault of their own.

My bonus this year was reduced, and also didn’t receive any increase. While it sucks, all I can think about is how lucky I am to get a bonus and still have a job. Many others weren’t so lucky.

> "$25,000 was not enough money to retire on for sure, even in 1996."

$25,000 in 1996 is $42,000 in 2021.

Seems like a modest incentive for top tech talent, even back then.

* To respond to the comment below, the author had been working as a hardware systems engineer at headquarters for 10 years by 1996.

Top tech talent, even in software, weren’t making the kind of money they are today. Top new grads going to the hottest employers could hope to make $50,000 all in (not counting stock options paying off down the road). $100,000 in guaranteed comp was all but unheard of for ICs. Programming was not yet at the doctor/lawyer level, much less the banker one.

That started to change in the dotcom frenzy but that was still a couple of years away at that point.

I happened to have this floating around from when I was digging into tech salaries over time.

https://web.archive.org/web/20010203125200/http://www.techwe...

Those are for the Bay Area, not New England (probably important) and for software (less important). He said he'd been at Digital for 10+ years by then, so for a Bay Area salary, I'd guess he made $100k. In New England, I wouldn't be shocked if it was more like $60-$80, so the bonus was up to a third of his salary.

Dewitt (hi!), this isn’t about an annual cash bonus though. This is for a “hit this target and we’ll do award X”.

Given that a number of “achievement” awards are in the < 5k realm today at major tech companies, I think this should be compared to those, not annual bonuses. So in Google terms this is like an outsized spot bonus opportunity with clear (flawed) rules.

The incentive is in the mind of the beholder. $42,000 captured the mind of the author; for its promise, he worked extremely hard and long, mustering a productivity far and above what he normally would have achieved. Then, when he in fact received not $42,000 but $3,666, less than one-tenth what he expected, he convinced himself that this was not a loss but a win because $3,666 is $3,666 more than $0.

What is your lesson here? My lesson is to become the house, because the house always wins.

I wonder how it compares to the average salary for an experienced hardware engineer. It may be a ~50% pay bump in 1996 vs a 10-25% bump today.

> We are lucky enough to have a regular bonus program even now at work, it’s been going on for years. Every time it is handed out my boss will say something like, “so we had a good bonus this time, but don’t count on it in the future.”

"Good night, Westley. Good work. Sleep well. I'll most likely kill you in the morning."

I'm a simple man. I see Princess Bride reference, I upvote.

"The guilt I felt after that, and shame even for my behavior, well it was real."

Why? If they knew about the program and potential, then they might have felt the same way. They games management plays are the real issue.

Edit: Why downvote? The article even says the way the program worked caused issues.

Guilt for not feeling gratitude but instead feeling entitled.

Feelings of entitlement often lead to anger and sadness.

Bonuses should be: infrequent, irregular, unannounced, and large.

Otherwise you end up in this trap where people expect the bonus and worse yet, count on it to pay their bills.

It’s stupid to make it a part of your overall compensation package because if you do, then the bonus is always weighted based on overall company performance. So if the company has a bad year no one gets bonuses even if individual teams crushed it. Conversely at most companies, everyone gets a bonus in good years even if you have underperforming teams. Add on top of that these stupid requirements that bonuses be paid out on exactly day X, and you end up with lots of people who do nothing until they collect that fat bonus check and then give their notice the next day.

The bonus system as it stands at most companies incentivizes completely the wrong behavior.

I think it helps employees if they understand that bonuses are not rewards, or for incentivizing behavior, though they might incidentally do that. They are built-in pay cuts that companies can use when their financials don't end up matching what they plan for.

I've only ever been at one company that went out of their way to regularly present and show company financials in a digestible way, that when the year ended, it was clear to me at least why we got bonuses one year and why we didn't the other.

> Otherwise you end up in this trap where people expect the bonus and worse yet, count on it to pay their bills.

Kind of like tipping in the USA. It has nothing to do with service, is a standard percentage of the total bill (cork a $200 bottle of wine versus $20?). And the managers pay the wait staff less with the assumption they’ll make it up with tips.

At Google there are bonuses known as peer bonuses and spot bonuses. They are indeed infrequent, irregular, and unannounced, though not large at all. People feel way happier receiving these sub-$1000 (or slightly above $1000) bonuses than the rather more predictable but large annual bonuses.

I would concur. The bonus system at prior fine employers usually looks like Company_perf_scaling * Bonus_pool * Group_political_pie_slice * Personal_perf; I usually assess it as "magic money".

Yearly bonuses IMO should be rolled into base salary raises. Bonuses otherwise should be project based IMO. "Good job on the big projects, have xyz $/stock".

Bonus structures for ordinary engineering / programming where a bonus might be >20% of total salary seems to be out of line with our normal work output.

Oh man I hate bonuses so much. At my last job we had a monthly bonus that made up to 33% of our total income. These were based on certain KPIs we had to achieve. The thing is, everyone can cheat the KPIs. Even more so if such a big part of your income relies on it.

I also felt they killed creativity and intellectual freedom completely. You were not able anymore to work on something else that you'd consider more important because the targets for the bonus were set. I found some fraudulent users who were using our product but instead of doing something about it I decided to just keep in line with what was expected from me after talking about it and having discussions about it with my manager.

So instead of acting on the values and mission of the company, the culture was to chase the money, and you could see it and feel it everywhere.

Worth noticing, at the beginning there were no bonuses but management wanted us to have some 'skin on the game'. I think they blew it by making it such a big percentage.

I went through the same thing in my previous work (consulting firm). Management set up monthly targets related to billing enough hours to the clients (something like 85% in average in our team of 5).

Most of the time we met the criteria even if not everyone was making the target. Usually, 4 were 100% billable while 1 was the anchor :).

One month, I spent a fair amount of time of documenting something because it was the 3rd time that the same errors were showing up so I told to my manager to decrease the target for that month. It was agreed and understood by everyone that the target could be lowered when required (leave, training, etc ...). Except that my manager refused to lower the target so I spent 3 months talking to CEO/CFO to get this bonus paid (more for my colleagues than for me) but I never managed to convince them. So the same feeling as you described kicked in in the team. People started to work only billable hours, neglecting everything else to make sure we met the target all the time.

I obviously left this company after a serious discussion with my manager. I still remember sending an ultimate email asking for the bonus on my last Friday at 4pm.

So yes, give a decent comp and say that bonuses might be paid if the company is performing well. If they are ever paid, I will take my family for a nice dinner and buy some books with them. Else than fine, my mortgage is not in danger!

I've had my variable annual bonus converted into a permanent salary increase.

I will say I like this a lot more.

I don't know if that was the lesson I would have taken. The lesson I'd take is "don't work for a company that tries to manipulate employees to work ridiculous hours for the possibility of more pay".

First of all, it's a bad idea for all of the classic Goodhart's law measure-becoming-a-target reasons. Management throwing money at a problem reveals a certain amount of stupidity fostered by desperateness. Second, it's a very devious practice. This person made 2,000, but most likely worked an extra 10-20 hours a week for a few months. That's 2,000/120 = 16.6 dollars per hour. The company effectively got a lot more work out of some employees for a pretty cheap price. Yeah, sure the other team got a lot more. But never, ever work your ass off for the possibility of more money.

What's fascinating about this post is how the author manages to frame his exploitation in terms of how he was ungrateful or unreasonable. Yeah, sure, for your own benefit you shouldn't care that much about bonuses and you should be grateful for what you have. But that doesn't mean you should let your company exploit you! It's perfectly okay to fight your damnest to get more money from the company. Lord knows they're fighting to pay you the least they can get away with.

Luckily when I started at my company, FY-end bonuses had already bounced around I learned to treat them like a Christmas present. The individual performance aspect existed on paper, but no management chain exercised that because it ruined team dynamics. The only time I saw that done was because someone was basically no-show but it was too hard to fire them, so they got 0 bonus, and their share got spread to the rest of the team.

Awards are similar. I rarely get them for the things I really deserve them for. Sometimes I'd get $250 for 2 hours of work helping some big project and got roped in the list because I was on an email chain. Sometimes I'd get one because the project I did the year before got eclipsed by something else, and nothing this year under my VP merited it.

Folks get angsty about what/who deserves one and what doesn't. It seems the less talented/hardworking the person, the angstier they are.

I try to teach the newer folks around me:

- Don't expect them - Don't get jealous, you don't know the whole situation. - Just be happy when you get a little cash. - You won't get them when you should, you will sometimes when you shouldn't.

You have absolutely no control of end-of-FY bonuses. Buy something fun (a new TV, game console, or hobby thing) and stash the rest. Do not use it for a down payment on something like a new car/boat/house (unless it's just tacking more on to something you were already buying). I've seen too many people do that and end up underwater the next year when we get nothing and they were banking on it for payments.

I once worked for a company where bonuses were literally Christmas presents. They gave them out at the company holiday party and everything.

I remember being enraged when the company Christmas bonus was $50. It struck me as showing that management stopped to think about it before deciding that a larger bonus was too expensive. It felt like an insult.

I would have been happier with $0.

I enjoyed reading that far more than I expected to. Thanks to the author!

I'm now realizing that, yes, I do feel completely entitled to my FAANG bonus. But...the recruiters for all of the companies (FAANG and non-FAANG) involved in my last interview loop all factored target bonuses into total compensation during negotiations. This was 2 months into the pandemic, too, when things were somewhat gloomy. So how am I not supposed to feel entitled to it?

I don't see it any differently from my salary or RSUs in terms of deserving it. The only thing I see different is the potential to exceed the target, and get more than 100% of the original target %.

Everyone is focusing on the bonus part of the story but man, I really enjoyed the computing history about working inside DEC in those days.

Anyone got other good computing history books/stories to recommend? I really enjoyed Masters of Doom and Hard Drive (about old-testament Gates, not new-dove Gates)

The Soul of a New Machine is awesome.

"Dealers of Lightning" is a delight. You'll get a lot of insights to where key people in computing came from.

I just recently finished "The Dream Machine: J.C.R. Licklider and the Revolution That Made Computing Personal" It was really well researched and written.

On The Metal podcast is amazing as well!

Folklore.org, filfre.net

It's actually become an interview question for me of "is there a bonus scheme" where I'm hoping the answer is actually no. I've yet to work in a company that has a structured bonus scheme that hasn't resulted in a worse culture for it.

The worst was in a company where your max bonus was depending on getting a "5 out of 5" performance review - however the whole business unit needed to average out to a particular number (I'm fairly sure it needed to be down the middle at 3 out of 5). What this meant was for every exceptional employee, someone else had to be under-performing in the eyes of the company. The end result was two types of teams: no one would rock the boat or have any initiative so everyone was perfectly average, or completely cut throat attitudes leading to burn out and animosity.

YMMV but to date I haven't had a good time in a company that has bonus schemes (even if I personally have financially benefited from it - the cost came at culture, stress and work life balances).

> however the whole business unit needed to average out to a particular number (I'm fairly sure it needed to be down the middle at 3 out of 5).

This is bad budget allocation.

Around the same timeframe as the Op (late 1990s) I worked for a no longer existing IT company where management some time before I started had the brilliant idea to pay sales bonuses based on forecasted sales. If you didn't make the sales you had to pay back the bonus on your next monthly pay.

Needless to say this really put the pressure on sales to get the contract signed - feasibility or profit margin be damned. Turnover in sales was really big as well, but then the company went from more than 300 staff to about 60 in the 2.5 years I worked there.

The company also had a matrix organization, where everyone in middle management had two bosses, one national, and one international. At one point my then boss got a new title and responsibilities on a Monday, for it to be changed to something else on the following Wednesday.

At least working there was quite educational.

"One of our things is that money follows; it does not lead." --Dan Gilbert

In my experience, successful people go work hard and are excited about "the right things" and incur financial benefits along the way. If you are working on the right stuff in the right way, on average you should get good comp/bonuses.

On the flip side, if your only connection to your work is the bonus then you're probably unhappy anyways.

"Sometimes people mistake generosity for not being fair. Generosity is good, entitlement is bad, and they can easily be confused, so be crystal clear on which is which. Decisions should be based on what you believe is warranted" -- Ray Salio

Other comments talk about becoming entitled to bonuses, while they are genuinely discretionary. Broader, people get used to any perks and complain if they go away. This is reality of life on one hand but a flaw in individual thinking on the other.

Personally - as an employee I seek places where I can feel good about the relationship between the company and the people. When that's right, I'm more understanding if bonuses are tight during a lean year or the espresso machine gets downgraded. As an employer I look for the same thing in employees. Why would I hire those who don't care about their work mission in an emotional way? It's not that everyone has to love derivatives trading, it's that the best people find a way to connect and care about what they are working on and be genuinely excited about it and want their team to win. It's a great attitude and I believe it leads people to much more success (and none of this is to say you should stay on a sinking ship or tolerate a bad work situation -- never do that. But there's something to say about maturely weathering the ups and downs of a worthwhile relationship)

In a good company, it's ride or die together and both the company and the people feel that way. If this is crazy to some people I feel they are missing out on some genuine upsides of what work can be like.

> In my experience, successful people go work hard and are excited about "the right things" and incur financial benefits along the way. If you are working on the right stuff in the right way, on average you should get good comp/bonuses.

Is this true, or a form or survival biais ? I am most of us agree that working hard is somewhat a requirement for meaningful success. What is in question here is whether it's sufficient. We all know a lot of hard working people who aren't successful

From my experience, in the business world, unless one if very lucky or incredibly talented incuring financial benefits doesn't just happen from hard work. And the first step is the ability to ask a fair share of the value one is generating.

> "Sometimes people mistake generosity for not being fair. Generosity is good, entitlement is bad, and they can easily be confused, so be crystal clear on which is which. Decisions should be based on what you believe is warranted" -- Ray Salio

I think one can be unfair in the way one is generous.

Call me a cynic, but annual expected-not-guaranteed bonuses are mostly just retention tools right? You get paid a bonus and suddenly you’re much happier and less inclined to change jobs. If that inclination comes back later then you have to weigh the loss of the proportion of your bonus earned so far in the downsides of leaving, since the bonus is never paid in part if you leave during the year.

That's how I see them as well. It makes people who are unhappy with jobs "just stay until the next bonus". They might quit just after getting it, but if they hesitate and don't do it on the spot, soon they'll be already in another bonus cycle, and again it makes more sense to wait till they get it etc. The effect is strongest of course if the bonus is substantial.

Many years ago I managed a small company that gave out bonuses. It was miserable for the most part. People did come to rely on those bonuses as if they were actual pay.

I worked with the owner to develop a system where if the quarterly bonus was over a specific amount 6 quarters in a row we translated that into a pay raise for everyone and that would effectively remove/lower the bonus but give the employees more stability. It has been a lot of years since I have been there, but the last I heard the bonuses were very small but the avg. pay was nearly 2x over any other company in the same industry. Turnover is near zero and the number of people waiting to get a job there was significant.

I really don't think the message of this article matches the state of the industry today. Annual bonuses in many companies - especially in the tech industry - are practically considered part of your compensation, and often times base salaries are adjusted to account for them (I've seen as much as 25% of comp laid out in "bonus").

It's a flat out awful structure, as people will legitimately wait until they get that annual bonus to quit, which can mean unhappy people staying in a job they don't want, making others around them unhappy as well.

The answer there is to pay out per pay period or something more frequent but sensible for the business case.

This was a joy to read. My aunt, Carli, worked at DEC for a number of years and I recall fondly how proud she was to have a job there. Thank you for sharing this small bit of New England high technology history.

A lot of people forget that Altavista (one of the first web search engines) was created there, and that at some point in the time of the internet, a lot of people mistakenly went to visit http://altavista.com instead of http://altavista.digital.com looking for the search engine.

The general sentiment in this thread seems to be that bonuses are bad for morale in the long term, because people start to feel entitled to them. It's interesting to look at this from the side of the employer for a second.

You want to do right by your people (you know, if you're not a complete arsehole). Hopefully you pay them well. But revenue isn't always easy to predict, and once you give someone a raise, you can't take it away again (at least not easily). So you can't pay people excessive amounts all of the time, because the money might not be there all of the time. Of course the effect of a single large bonus (annually or one-off) is much greater than 1/12th of that same amount tacked on every month. On top of that, some bonus plans can have tax benefits (though I suspect this widely differs between countries etc). Bonuses seem like a pretty good way of paying people what you'd like to pay them, but without the risk of it bankrupting you.

I'm a little bit torn when it comes to bonus amounts, however. Some companies give everyone the same bonus. Or perhaps everyone within the same department or job category. This is nice from a "we're all in the same boat"-perspective. But it ignores the reality that some employees do much more valuable work than others (I'm sure there's a fancy pareto-like name for that, but I don't remember it). On the other hand, it might encourage some employees to "go above and beyond" in a way that's unhealthy.

The author would have you believe that it's an issue of personal morals, outlook and psychology.

I would say that these kinds of programs are manipulate and exploitative (beyond how salaried work is exploitative fundamentally). In the author's situation I would probably say I'm giving up on the bonus from the get-go; would not sacrifice any hours of sleep; and would just try to do a good job.

... or rather, I'd probably redouble my efforts to get people to unionize.

A bonus like this, I would never expect to actually get any portion worthwhile. Even if I performed well, there's going to be someone who doesn't. And it might even be me that doesn't perform. Who knows?

Instead, I would just work at my usual pace, which is already quite fast, and I'd probably already have been being smart about the cost of components anyhow.

In general, this leads to good outcomes anyhow, and I didn't have to stress out about it.

I did just this about a year ago. Big project, lots of "company will fail if this project fails" type of talk. So they trot out a bonus system. I literally didn't read the email.

Turns out it had a 2 part payment plan. Our team nailed the metrics for the first payment...and then didn't for the second. Which left management in the weird position of explaining how even though we had just signed 5 customers (in a quarter that had anticipated maybe 1 sale), we hadn't met metrics...and so no bonus. Watching execs peddle obvious bullshit to an undeniably successful team not interested in the smell was more my bonus than anything.

I reminds me of the Frans de Waal monkey experiment where they rewarded them unequally and the under rewarded monkey gets annoyed. I actually did an edit of the video as I thought it was funny / interesting https://youtu.be/-dMoK48QGL8 44 seconds to get to the funny bit

This felt like a bonus episode of Halt and Catch Fire. If you haven't seen it, it's the story of a fictional Texan calculator company entering the frenzied IBM PC clone market. Period piece, skunk works, early hacker culture and surprisingly good character development - highly recommended.

Nice post. 366 MHz office hardware in 1996...yeah that would have been pretty awesome.

The story also made me wonder about bonuses in European countries where private employee salary numbers are publicly available (or so I've heard). Is the same true for bonuses, if they are offered?

In Germany you have laws to ensure equal treatment in the workplace. So you are allowed to go to your HR and ask what up to i think 6 other people in a similar position & experience level as you are in earn. HR will of course not disclose the names.

I see a lot of comments bemoaning performance-based bonuses, but consider the following:

> I remember being in shouting matches with our signal integrity team about among other things, how many capacitors we needed. These tiny devices evened out the power of the system, but they wanted far too many to be added to allow the design cheap and easy to build

> Meanwhile I was waking up at 4AM on most days, in full-stress-insomnia. Sometimes I would just give up on sleep and go into work at that early hour, and while there, sometimes run into other stressed-out engineers who also could not sleep. I had shaved as much time as I could possibly get off the schedule, and a little cost. A $25K bonus was out of the question at this point, but $10K or more, still in the running.

> Because manufacturing, as discussed, was not on the secret bonus program, did not even know it existed, and had very little incentive to speed up the rework. As far as they were concerned the project was slightly ahead of schedule, so why rush the job and make another mistake? More time ticked by. They actually did make another mistake anyway, and mounted incorrect rams a second time, which I remember being really mad about.

> Meanwhile, our sister project had managed to minimize their cost target and beat the target schedule of their project, such that each member of that team received the full $25,000.

Sounds to me like the bonus program was working exactly as intended. OP got into shouting matches with other stakeholders to trim overly cautious expenses. He and his teammates voluntarily worked far outside regular working hours. Both him and his sister team succeeded in delivering a successful project ahead of time, with lower costs, and were ultimately tripped up only by the incompetence of other teams that had minimal bonus incentives.

I've noticed a huge difference between orgs where people have skin in the game, and orgs where people don't. People with skin in the game, have a real fire under their ass. It's inspiring to see how much they are able to get done, and how quickly. At orgs where people don't have skin in the game, I spend half my time sitting in meetings, discussing what doc we should write next, what format we should use for the doc, and when to schedule the next meeting to review that doc. It's as though people are more interesting in impressing one another and putting in facetime, rather than actually getting stuff done. In fact, I've noticed that people often add a net-negative value to many projects - their urge to add their 2 cents and make their impact felt, results in goalposts getting constantly shifted and launches getting continually delayed.

Is it possible for a badly designed bonus program to produce disastrously bad results? Definitely. But there has to be a better way to give people more skin in the game, when it comes to doing their job as effectively as possible.

I think you're drawing conclusions on a very biased sample. It's easy for me to write examples of bonuses causing all the wrong problems:

1. Introduce a huge amount of technical debt to get it under schedule.

2. Working really hard to get the bonus and either not getting it or getting much less than you expected/deserved. This is probably 5-10x more common than your scenario - you can even find comments on this submission with examples. Working 60-80 hour weeks to get a tiny bonus is very effective in inducing poor morale.

> In fact, I've noticed that people often add a net-negative value to many projects - their urge to add their 2 cents and make their impact felt, results in goalposts getting constantly shifted and launches getting continually delayed.

It's amusing you write this as an example of not having skin in the game, given that I often see this behavior from people who want to appear as if they have skin in the game, so they can claim a portion of the bonus. Almost every major initiative that is introduced in the company ends up with this.

This is just highly dependent on the structure of the company and the ability to objectively determine an individual's input into the final profit of the company. Small companies, sales orgs, hedge funds have an advantage here. If you're not so lucky, your industry / company size may result in bonuses getting handed out completely based on who your boss likes, and no one can argue because it's subjective.

Spend months sorting out a rat's nest of code that your predecessors created? Over the long term, this is value creating behavior for the company. Is a portion of the bottom line measurably attributable to it in a particular year? Maybe, maybe not.

I consider shouting matches an unalloyed bad thing in a workplace. I won't take part in one and I won't work somewhere they're considered an acceptable form of communication. Incentives which promote shouting seem like bad things to me.

Others, I'm sure, disagree, and I wish them luck.

I don't know if I would describe the solution as just skin in the game. I don't dispute that it might lead to results (though some studies might argue otherwise https://novarete.com/motivate-employees-monetary-incentives-...). At least anecdotally, the companies I worked that most closely tied comp to bonuses or had the most stock, were not the ones that had the hardest-working individuals. I tend to believe that it's more the culture of the company, and also how closely your results tie to direct impact to the company. So, small companies, here often being startups, end up being ones where you see such impact, and also happen to be ones where you get stock and ownership.

Sounds like you read Skin in the game :P https://www.amazon.com/dp/B075HYVP7C/ref=dp-kindle-redirect?...

Your "skin in the game" should not be arbitrarily tied to a metric/achievement that is not under your control or else working to the same objectives. If manufacturing have no motivation to go faster, I have no control over their speed, and I know they'll just take as long as the schedule allows? then screw it, getting it to them early won't help me get my bonus. Now, if manufacturing was also getting a bonus dependent on an early shop date, you're in it together. Or if manufacturing reports to me, I can tell them what to prioritize.

I once worked at a company that paid bonuses based on a portion of profits, appropriately named "profit sharing". As long as the company turned a profit in a quarter everyone got extra money. Company financials were shared with everyone each quarter (even though the company wasn't public) and the percentage was calculated based on a specific formula (details of which I don't remember but included years of service, title etc) so everything was pretty straightforward.

It's definitely possible to make bonuses work via profit sharing (even for private companies) as long as the company is not trying to cheat its employees.

I would hold bonuses as a con, if comparing companies to work for. I might even use it as an excuse to leave a company for another one. Why do you want to work for ACME anymore? Because they offer bonuses and you don't :D

I've gotten to the point in my life that I just require the salary to be enough to support me. There has been nothing but stress, centred around my previous jobs, where bonuses are involved. Mainly that pressure of, you better perform optimally else you will affect our bonuses --mentality.

This creates a toxic work culture IMO. My job is stressful enough. I don't need it more so.

I've been thinking about hiring a couple of interns to work on projects that I don't have enough spare time for. One thing that came across my mind is whether I should have some sort of an incentive for coming in under budget or ahead of schedule. On one hand, with hardware projects, sky is the limit for the potential costs (and they wouldn't have a reason to not overspend). On the other, having such an incentive would bias the planning and could result in issues seen in the article.

The problem would be estimating the budget and schedule in the first place. If you are too aggressive it will seem unfair, too lax and you could actually slow the project down.

Pay your bonuses to those people who show up for work on time, work well with others, make smart decisions, and who you would like to work with again in future.

If you are incentivized by bonuses your probably not being paid enough.

Even worse when you depend on others to meet a goal (you almost always do).

Jump ship if you can. The other scam is healthcare tied to employment.

I guess I have no problems with the bonus structure where I work. The base salary is so strong, that equity and bonus is exactly that - ownership and reward for strong quarters.

With that said, I have been under valued and depended on bonuses before, but i guess i don't let that shape my current positive experience. I make sure I only budget for my salary and nothing else.

As others have said, the extras are funny money until they're cash and never forget, taxes on bonuses SUCK

The Alpha boxes were nice.

A grad school officemate had previously worked at Thinking Machines, but, to do the number-crunching for his doctoral dissertation, he instead had a slightly-old Alpha workstation/server under his desk.

He was big on efficiency (e.g., out of the lab by 5pm, but intensely focused while there), and I'm sure that him coding his models in C for a 64-bit dedicated Alpha box was more productive than getting supercomputer time.

That was fun. Write more, Mad Ned!

I will always take a high salary over any kind of bonus structure/program. I worked for a big aerospace company and earned what I considered to be a pretty mediocre salary but we had a profit sharing program that was about 4% of your annual salary, plus we frequently received spot awards and a decent holiday bonus (one year I got a bonus that was worth approximately 2 paychecks). It was nice but it always felt inconsistent and unpredictable, and then one year they basically stopped all of these programs and also restructured our benefits programs such that they were contributing far less to our health insurance premiums AND they stopped paying into our pension fund (yes, we had a pension!). At that point I calculated my total compensation was actually significantly less than it had been in years past and there was no reason for me to stay. I found another job with a 50% bump in pay and since then I have only accepted positions where I could count on a consistently high salary or rate (if I do a 1099 kind of project).

I've been in software since the 90s. I feel as bad about things as I've ever felt, by a wide margin.

I worked at a company in finance markets in the mid 1990s that was paying the traders $2M bonuses.

I think that’s a bit irrelevant. Finance has had a culture of paying a lot and paying based on performance for quite a long time. It is also mostly easy to measure performance of a trader’s accounts or of the firm as a whole. I think some just-so arguments for this structure are that the skills are transferable and the companies are all competing with one another, so someone can easily jump ship, and performance is easy to measure so people know what value they are creating.

Two downsides of this are that it can be unfair to people who just get unlucky (eg working on a less-profitable desk), and that it encourages taking large risks for higher returns, which is especially bad if they are taking on long-term positions. One way to try to address the latter is with a partnership structure where partners are incentivised to rein in big risks, but having joint and several liability is unusual and scary.

Excellent read, but not only for the bonus part. If anyone else enjoyed it for the EE / computer engineering part, I recomment The Soul of a New Machine, by Tracy Kidder.

He followed, in a sort of embedded way, a team of Data General computer engineers in the late 70's, as they went through a death march to produce a 32-bit micro. Sort of like this blog post, but the book got a pullitzer.

http://www.ancientgeek.org.uk/ed/The_Soul_of_a_New_Machine.p...

Thank you for writing this. you brought back some good young adulthood memories of VMS, OSF/1 and Tru64. All seemed like alien technologies at the time :). Thank you for your service and hard work

I have literally never received a bonus that was present on an offer. Not that I'm a terrible employee they have invariably been cancelled or otherwise unreachably cancelled before I received a penny. Sometimes it was a full cancellation, sometimes it was a change in the language that would tie bonuses to unreachable revenue goals (very difficult needle to move as an engineer, at least in the 1yr time scale).

I have basically come to see any kind of potential money as never going to see it money.

Wow. I’ve seen almost the exact opposite. In my 30 year career almost all bonuses were met or exceeded and paid.

While I see the value in gratitude as described by the author, the lesson learned still rings with a certain amount of complacence with the situation at hand. Had there been more transparency in the bonus program, there's a chance it would have been reformulated as to not fuel internal wars and allow for the long term success of the company. While it's important to always exercise gratitude, it's also important to demand good incentive structures.

These seem to be mostly accounts of bonuses for software developers or other, typically salary positions.

(As an aside - I wonder whether this more correctly reflects companies making people "salary" as a means to pay them less overall for working long hours. I've seen "salary" be given to people making less than 33k usd/year, pre-minimum wage increases. Might be a rarity on HN.)

My takeaway has been that these incentive schedules aren't properly implemented. Also, people get very toxic if they see others making more or less pay than themselves. Yearly bonuses based on global factors are nice, but probably are too far from what an individual adds to the business to properly impact their work effort. You want the worker doing marginal thinking with marginal incentives - i.e. the classic paying car salespeople a commission on each sale. This is clearly a more difficult calculation for the IT field.

One idea - pay the bonus per pay period. This addresses people sticking around for a once per year bonus and then quitting. It could be based on the last year's (or quarter's - depending on the business) figures, for instance. Maybe have it be known the full, remaining bonus will be paid out if the person leaves on great terms during the year. i.e. Absolutely no one in your department - not even the custodian staff - has a negative thing to say about your performance.

Another - rethink paying people salary. Salaried employees can be pushed to work OT. But if people can make 1.5x pay for doing demonstrably important work (say, presenting it during the next team meeting) then they'll naturally work those additional hours. It's up to the business to figure out the hourly pay rate correctly, of course. Also, pushing people to work OT as a standard practice generates lots of toxic behavior - another reason to not use that as a standard practice.

Another - pick a metric that definitively impacts your business and is easily measured and high visibility. Use that to determine the next pay period's bonus. i.e. "Everyone in the IT department gets a $300 bonus if system uptime is greater than 98% for the previous two weeks. The bonus decreases by 1% for every percent decrease in uptime from 98% over the preceding two weeks. i.e. you're getting (100%-18%) of the 300$ if the uptime was more like 80% the last two weeks.

> The issue with there being five volt rams on our board was, the power supplied to these chips was three volts, not five. Our design was made to power a variant of the chip that could run on three volts, but the board apparently had the wrong chips installed on it.

Ah yes, classic manufacturing error (I'm not being ironic here). BOM says X but why can't we use Y?

I don't get the idea of bonuses. If employer wants people to do more work, they should just pay more. I'd never work under "if you achieve X you'll get Y". Too many times I found it to be a manipulation or just a scam to get more work for free. Not worth the mental health damage.

This is really making me want to buy an Alpha on ebay.

Is there an OS that has ever had a better name than "Digital Unix"?

Probably won't be as exciting as you remember.

We maintained some Wildfire systems on Tru64, which somehow took all the possible coolness of the "Digital Unix" name and inverted it into bizarro horror, into the late 00s, and it was mostly just depressing seeing what happened versus what could have been. Icing on the foot-gun cake was the IA-64 replacement ended up being EOLed before it was even delivered. That one came in on HPUX, which seemed to have been more often pronounced PHUX.

The minicomputers can get pretty expensive iirc. I haven’t looked in a while, but you may be paying a couple grand for one. For some reason, AS/400s are the same.

I bought a low end Alpha (DS10L) off of ebay about 2 years ago. I turn it on to play around with VMS occasionally. Alphas (and DEC, in general) were amazing.

We got early access to them at WPI back in '91 or so. They were amazing for the time.

I bought some 10+ years ago, and they are in storage, and I am also feeling that urge to go dust them off and power them up. If memory serves, I think I ran netbsd on them.

I thought Inferno sounded pretty cool. I do love a good pun, and it invokes memories of the original Doom.

OS/2 Warp

Amiga Workbench

NeXTStep

Plan9

I love stories like these. Reminds me of the PacificTech graphing calculator story (https://www.pacifict.com/Story/). Oh the weird things motivate some of us weird engineers.

One of my favourite HN reads: The Tragic Tale of DEC, the Computing Giant That Died Too Soon (digital.com) https://news.ycombinator.com/item?id=25319539

Interesting write up. The whole article, with its stressed out overtime, inter-team fighting, and testing the computer using a game reminded me of "The Soul of a New Machine", which is a great read for anybody who hasn't read it.

We had 8 DEC alphas at the university and I wrote a distributed "realtime" ray tracer with those 8 machines, they were amazing for the time.

Also loved the versioning file systems on Digitals VMS.

The bonus system in sales seems to work pretty well. Maybe what's measured and the individual's ability to move that needle is more the question than a variable comp plan

Moral of the story, the key to happiness is low expectations.

It’s not just humans - https://youtu.be/n_9RjDqJ7Zs

It’s all about the psychology of expectations.

Those with high expectations that can never be satisfied are not happy people.

My bonus target was 15%; our CFO's was apparently 1600% in 2020.

There's a real mischaracterization / straw man mentioned in some of the comments here about set bonuses, which is different from the special bonus structure in the OP.

A set bonus is part of your employment compensation. It's not a "nice to have". If the company hits its goals and you perform well, you are supposed to get it. When this is broken, that's a problem, and it indicates a deception by the company.

Yes, if you want you could just increase all salaries by that much and not worry about the bonuses. The reason they come in a bonus structure is two-fold: so the company can not pay it out if they don't hit goals; because management has the idea that it will make people work harder. Both of these reasons serve the company alone, don't act like this is a case of employees feeling entitled.

What is the today equivalent of $25,000 of 1996?

As notorious B.I.G put it, Mo Money Mo Problems

All this bonus talk. Some you wanna try working for an NGO...

The asymmetry between how employees agonize over their behavior towards their employers vs how employers think of their employees never ceases to amaze me. Never forget that your employer will gleefully lay off their most loyal employees if doing so is somehow in alignment with some executive’s comp. I’m not saying you should ever behave unethically, I’m just saying that if you’re on the field, you should be aware of what game you’re playing.

> Never forget that your employer will gleefully lay off their most loyal employees if doing so is somehow in alignment with some executive’s comp.

I'm old enough to remember that people retired from the jobs they spent their whole lives working at... and wondered why those barely older than me were already struggling to find meaningful futures within their careers, nevermind within their company.

Reaganomics and the new business method of short term gains at all costs destroyed company loyalty and loyalty of the employee.

Many employers agonise over laying off employees, I would go so far as to say the vast majority do. Many employers try to keep on employees in situations where they really should be laid off, putting their own jobs at risk.

Don’t get into the the mindset that employers are all psychopaths - not only is it not true, but it will damage your career thinking this way.

Yes I'm in total agreement with this. I see many people here who get absurdly passionate about programming that they forget a lot that management is not as much. The business world is brutal so you gotta hedge the odds in your favor. Busting my ass for the potential to make a significant bonus isnt worth it. As is going above and beyond. Just game the system and wait for management to figure it out. And if your managers don't monitor you, exploit the hell out of that. This is why I consider the Gervais Principal one of the greatest reads of this modern world for office laborers.

> Never forget that your employer will gleefully lay off their most loyal employees if doing so is somehow in alignment with some executive’s comp.

I work at a global mega corp run by private equity guy. This is definitely not the way our management works. From my manager up through our BU head, people are valued as a long term investment and are not casually discarded. Yes, if you are not productive, you can be dismissed. But valuable people are not taken for granted at any level of seniority in my experience.

I've made the opposite experience (in germany). No company will ever fire anyone. If they really need to, they give you a generous leaving package. The only exception is if the company going bankrupt, in which case the state might help (Kurzarbeit or bail out).

Op got robbed. Not only did he work way more hours to meet a milestone but in the end he got the bonus because it was structured in such a way that he did not have sufficient control of the outcome. It always surprises me how genius level folks can’t do simple math to realize that salaried employees get compensated on the compensation/hours worked formula and if compensation is fixed and hours increase you are getting a screwed.

The manufacturing folks got the better deal because they worked at fixed hourly rate and got and equally sad bonus

    structured in such a way that he did not have 
    sufficient control of the outcome

Yeah, I worked at a job once that tried an incentive program that failed miserably for this reason.

We were supposed to hit X number of billable hours per month. For the first few months I worked my ass off and achieved this.

However I wound up with almost zero bonus. It turned out that the actual bonus was based on what the clients actually paid, and when they paid it.

We had clients fail to pay, or they paid late, or had been given discounts. So most of my hours didn't count, or were shifted to subsequent months... which also happened to be months were sales wasn't able to provide enough billable hours to us for us to reach our bonus.

Total BS.

As you say... and similar to the linked article... I worked my butt off for the bonuses, and fulfilled my part of the bargain. But was then denied, for reasons 100% out of my control.

I quit. Even as a 23 year old that was obviously crap.

Right, as I read it they worked themselves to exhaustion and relations between teams were breaking down. It sounds miserable, and even if the full bonus had been actually achievable it wouldn't have worth the risk of burnout.

And presumably this was the intention, tricking people into working unreasonably hard for an uncertain reward. I was surprised the ending was a note about gratitude and not about leaving the company and its abusive management.

This is literally a plot point in Christmas Vacation.

Is also why I think it is silly for startups to provide too many perks. It sets obvious precedent and will upset more folks when you stop. Find ways to invest in the company so that success is it's own perk. If the company truly has more, work that into raises where you clearly tie the income to the success of the company.

> success is it's own perk

aka, equity compensation. Because i sure aint gonna consider it a perk if a CEO (or owners) to get richer, while i just get praise for making the success!

> Is also why I think it is silly for startups to provide too many perks

Should the opposite be true as well? Startup employees going home at 5 and fighting unreasonable schedules?

> This is literally a plot point in Christmas Vacation.

Ha! You're totally right. I'd forgotten about that. He acts out what everyone wished they could do. :)

The typical startup problem like the above is a more extreme example of people mailing it in until bonuses are out: people mailing it in until the startup is acquired or goes public because the company is doing well and they lose their shares/options if they quit

> It sets obvious precedent and will upset more folks when you stop.

Isn't another solution to make perks not variable, and clearly outlined in the contract as part of the employment package? You only have to worry about what your employees will do if you take away a perk when it's actually something you can consider taking away. If you treat it as part of the guaranteed compensation, you'll budget for it accordingly just like your employees do.

If you want to give bonuses, like the parent said make it a flat guaranteed amount, or tie it to a number based on company performance that people can see and make plans for (profit sharing with published numbers at regular intervals, preferably more often than it's paid out).

We detached this subthread from https://news.ycombinator.com/item?id=26848549 to make the thread less top-heavy.

" I think it is silly for startups to provide too many perks."

Short term, if they need to attract talent or die they better attract talent. People getting pissed off when startup gets big is a "future problem".

> Is also why I think it is silly for startups to provide too many perks.

Bonuses are a form of variable compensation, not a perk.

Presumably they're doing that because they rarely have much to offer just in terms of comp and benefits.

Bonuses always seem like a perverse way to do compensation anyways; if a worker requires a bribe to do their job properly, they should be fired.

Why do workers even want to be paid at all, right?

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