Also, the company probably only has to pay those $40k to $200k in salary costs for a few years, but the benefits derived from the work might outlive it. There's nothing stopping anyone from firing an employee just because they previously made a massive contribution to the company's financial success. Why keep the cow if you can get the milk for free?
So it might even be the full $500k in pure profits after the 2nd year.
* Does it require a big capital investment? the company provides that.
* Is it risky? The company gets a risk premium.
* Does it need a bunch of specialized resources? the company needs to provide those.
* More subtly, is it net-new or incremental value? Providing a company with something that boosts what they already do isn't evaluated on the incremental increase because you can't realize them without the previous baseline.
There are countless factors measuring value-add, making it extremely hard to allocate back to a single cog in the machine - unless you're a startup with very few cogs, hence they're responsible for all value (or costs).
If you want to be evaluated based solely on your individual contribution, put yourself into a situation where this is possible, i.e. do it all yourself. Otherwise join the broader team and take the benefits and costs that comes with that.
What if the advancement is in the wrong direction in the market? Like Windows Mobile was. You could have built a great system that delivered a few hundred million in sales, but two years down the road it cost the company a few billion in costs. Do you get to pay back your share?
I'm not advocating here for the work to be uncompensated - it's just when you get a risk shield, you also lose the payout shield.
Maybe a better culture of coop's would be a better solution.
If someone who can consistently deliver great value to a company is let go, they can go elsewhere and provide their value as a consultant or employee. You seem to think the company has no competition and doesn't need to compete with other businesses in the marketplace. I think you are also overlooking the fact that most interns are hired to see if they will be good to bring on full time. Some of them turn out to not provide substantial value. If an internship is how you are demonstrating your value to an employer, then your contribution is being average across all the interns that don't contribute anything or much of anything.
It isn't that we need to decide exactly who contributed proportionally and how much of the profits we get. We're really just reaching for something that increases wages faster than raises.
And really it highlights the issue that not only is it hard to get fair profit-sharing, it's also hard to get market-competitive raises.
But of course a company is going to say it's hard to decide who gets how much, because they have an incentive to pay their employees as little as possible, regardless if it's through base wages, raises, or profit sharing. There always seems to be an excuse.
not sure if you misspoke or I don't get your point
>> fair profit-sharing
"Fair" is just a trigger that one side uses to put the other on the defensive. Companies by their very nature a designed to share profits with their owners, i.e. legal shareholders. If you want profit sharing guaranteed join an employee-owned cooperative or alternative structured org.
If I can't get raises that keep up with inflation or competitive market rates, I'm going to try and argue that I should seek other options for making more money. One of those options would be profit-sharing. Another option is job hopping, which tech enjoys as a luxury.
I was with you until your last line. You don't have to build your own company - you can simply go after a job at a company that understands how beneficial it is to align the incentives of its owners and employees.
There plenty of ways to give workers a piece of the pie: there are full-on co-ops (at one end of the spectrum), and there are more watered-down implementations like stock options, ESPP plans, etc., all of which allow the worker to take on some of the risk and share some of the gains.
Plenty of companies also distribute simple profit-sharing bonuses, which (arguably) don't require the employee to take on any risk at all.
They are too large to give new employees significant stock options, yet too small to pay FAANG-competititve rates. So you're starting with less salary and no stock. If you now have an egomaniac boss who thinks his own personal brilliance is always the cause for the company's got fate, then there's a good chance he will just take credit for your invention and your bonus is gone.
And in slightly larger companies, chances are someone in the management chain will take credit for it and get the bonus. There's a reason why in most companies, you can never talk directly to the upper management: Middle management has strong financial incentives to prevent that.
Because of the guidelines of this community:
"Be kind. Don't be snarky. Have curious conversation; don't cross-examine. Please don't fulminate. Please don't sneer, including at the rest of the community.
Comments should get more thoughtful and substantive, not less, as a topic gets more divisive.
When disagreeing, please reply to the argument instead of calling names. "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."
Plenty of risk for the employee though!
First, in most companies it's very hard to say who exactly managed to increase the profit. Is it you who came up with the idea? Is it your boss who picked this specific idea out of fifty other ideas you came up with last week? Is it the QA team who managed to catch the bug which would've erased all the profits? Is it HR who hired you among other candidates?
Second, no, the remaining is not $460k. In a Big Greedy Corporation I work an average annual cost of employee in "primary" location is around $200k (pre-covid). It includes office space, technology, infrastructure, salary, taxes, fees, insurances and so on.
Third, that's the premium the company gets for the risk. Intern will get his salary no matter what. The company makes a bet though. You want to own part of that risk? Build your own company.