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)

To be frank, it doesn't matter how much sense it makes in theory when in practice it has obvious downsides.

I think it makes sense in practice too, if you accept some incentive scheme. Perhaps no incentive is the best incentive, but I don't know the data on that.

In my experience there was never a huge disconnect between an individual's performance and their expectation of their bonus.

Your starting point was based on your position - say 5% for junior positions and 10% for senior positions.

The thing you had control over was if that starting position went up or down. There are 5 performance review levels, and each has a matching percentage associated with it. A '3' is "doing your job satisfactorily" and gives your base of say 10%. A '4' might be 15%, '5' 20%, '2' 5%, and '1' 0% (I don't remember if they actually went to 0% or not).

The last important factor is the companies overall success, but that is largely out of your hands so it 'is what it is'.

The bigggest downside with this system is that it's not capable of handling everyone getting a '5'. If you really had a team of superstars it would be a hard and long battle to get them all recognised (though I did see that happen on occasion).

The issue with the scheme was that,

a) it was overly complicated and huge individual performances were just washed out in the larger mix

b) It had the appearance of giving a great deal of control to the employees in driving their 'bonus'. However, in the end, the decisions made at the highest levels made the entire process moot. For example, A goal for YoY rev increase of 100%, was a failure when it hit 80%. The hiring and spending required to try and hit that 100% growth target, made profit a 2nd priority.

As a manager, all the personal goals were interesting behavioral levers, but all that was lost when the bonus kept not being paid. "We're tracking all of this for our Goals, which informs our bonus, but our bonus never gets paid because the ceo says its ok we shouldn't be making a profit now cuz we're growing."

I always find it fascinating when employees try to justify these schemes. Both the bonuses and the rating systems.

Yes, all of your team can be 5s. They can all exceed expectations. And that's what each individually thinks too. He's gonna be so much better than everyone's else. Most people think that.

Of course the system is rigged. It's not really about exceeding your expectations. Even when they try to make it seem like it's possible. It's about making a nice bell curve of the ratings and assigning bonuses and salary increases based on it. If you're at the wrong company they also fire the bottom 10% or something like that.

Why they do this I will never understand. It kills intrinsic motivation (even for the 'exceeding' guys as seen in previous comments). Google the Oprah experiment. It kills morale if the company doesn't make it one time. It kills morale for the guys that don't get the bonus they wanted or makes them game the system. Which kills morale for the guys that are actually good at their job but don't care about gaming the system. So much to loose.

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.

s/can’t/shouldn’t

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.

Yep, Red Beads [0].

The system determines performance. Measuring variation within statistical process control and attributing it to individual effort is a mistake that keeps being made.

Many have made the effort to translate these ideas to knowledge work, so it's not like the manufacturing context is holding this concept back from being understood.

[0] https://deming.org/lessons-from-the-red-bead-experiment-with...

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.

Note the Netflix strategy only works for high profit per employee, highly scalable firms.

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.

I can practically guarantee they are going to want the cash.

Yeah, seems like a straightforward choice.

> Paying the bonus.

Gimme, gimme!

> Improving office amenities.

Not bad, but... it would depend on how much money we are talking about, and what office amenities it would buy. For example, once I got a new $1000 office chair that felt less comfortable than the old cheap one -- I definitely would have preferred the cash. On the other hand, once I had to work with a barely functional mouse, and I would gladly spend my own $5 to buy a new one, but that would be against the company policy, so I couldn't.

In general, greater computer screens, more memory, more disk, better mouse -- good idea. (I have no idea what makes many software companies try to save money on this. It is a fraction of the developer's salary, and it can have huge impact on productivity.) Expensive chair, expensive table, art or whatever -- I would probably prefer its worth in cash, because companies typically buy stuff way more expensive than I would. Fit ball could be fun, though.

At the end of the day, the cash remains mine, especially if I invest it wisely. The office amenities that company gives, the company can take away. And I can't bring them to my next job either.

> Buying each employee an expensive present.

Just no. If it's something I want, I can buy it myself. If you buy it without asking me, there is 99% chance it has zero value for me.

> Funding a family vacation for each employee.

Again, I can do this myself, if you give me money. And I prefer to keep my family separated from my job, thank you.

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

Another thing I can do myself, thank you. Also, high chance the "worthy cause" will be something super politically correct, and I don't want to be that bad guy who publicly opposes it.

"I can do it myself", "I don't need you" etc. - you're being slightly misanthropic here. Why are you assuming GP's employees don't want to do anything together?

Even about office amenities - you're assuming it's several units of something personal. Maybe it's setting up a recreation room, that everyone can use? Maybe people want to install a skylight for their workspace, or set up some indoor plants with water drips and stuff?

> you're being slightly misanthropic here

I try to keep my job separated from... well, everything else. I can be quite anthropic in my free time, with people I choose freely of economic consequences.

> Why are you assuming GP's employees don't want to do anything together?

If they do, then I have no objection. People are different, probably any choice is going to make someone unhappy.

> set up some indoor plants with water drips and stuff

Ok, I'd like this one.

(shrugs) Well, that's legitimate. In a different company it may be different. But this is not the point.

The point is that:

1. They get to to be involved in making the decision, and

2. This kind of a process will create a clear distinction, in their consciousness, between the bonus money and their salary - since the process for obtaining the bonus money is different and special.

This. At a scale of a small company, everyone could benefit from it the way they want and you get transparency and include them in the discussion.

It doesn't really scale when you are bigger though.

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

I think by pooling and sharing a fixed amount the reward is company wide not connected to individuals. That aligns everyone to work as a team to generate enough income that you will allow you to take a dividend. I like the approach for smaller business.

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!"

> "I have no idea how this gets determined; I've just been strongly incentivized to act randomly!"

that was certainly how i felt about raises at one job. good reviews every year, but sometimes a big raise, sometimes a tiny raise. no pattern.

once that realization sunk in, i basically checked out of the work.

raises continued with no pattern.

I've had that experience too. I've gotten a big raise, a promotion, and a tiny raise all off an employee "report card" that has had the exact same letter scores each time to the point I think the majority is copy pasted.

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

> very poor sad little came up to me asking for help

Never give to beggars. Ever. For any reason.

If you just feel you must give, give food--something that can't be converted to cash. Nothing pisses off "beggars" faster than giving them a sandwich.

1) Most of the time it's a scam.

Often the individual isn't really that badly off or, if they're children, the money is being skimmed by adults.

2) A lot of the time it's criminal.

Many of these encounters are used to snag your attention while you become the victim of a crime.

3) You are not solving the fundamental problem but you are making the area worse for the people who have to live there and deal with the beggars on a daily basis.

> Often the individual isn't really that badly off or, if they're children, the money is being skimmed by adults.

This is a comforting thing to tell oneself but I don't think it's true.

> the individual isn't really that badly off

I probably should have chosen my words a touch better. Beggars are certainly never in a good place in life irrespective of whether they homeless or not. I don't subscribe to the "welfare queens" rhetoric.

However, giving a small amount of money to that particular person right now does nothing to improve the situation. And, in fact, it makes the surrounding area slightly worse for the people who live there by creating an attractive nuisance.

Comforting? Not particularly. My mother had quite bad dementia. Without me around, I could have easily seen a path for her to becoming homeless. This is a huge indictment of our current government and economic system that having a mental health crisis can consign you to homelessness.

> if they're children, the money is being skimmed by adults

This one may vary by country, but I'll stick by it.

Once I saw kids begging and I wanted to give them money. But they pointed at the packed leftover food from the restaurant. Then I knew it was not a scam and it taught me about the living conditions in that place. Thank you for the chance to remember this incident.

Yeah, if someone actually asks for food, I'll probably help them out--certainly if I'm holding it in my hand. That's only happened once in all my years of walking around cities (and I generally walk a lot wherever I live--which is why I recognize all the habitual beggars).

For almost a half-dozen of my too sympathetic friends, I have introduced them to the local beggar population that they wanted to help by saying: "All right. I'll split it with you. Go there (whatever close food source), buy some form of sandwich and drink--no mayo, and come back and give it to him. He'll still be here; trust me on this."

They have quite the reaction when the cursing starts and the food gets thrown back in their face. It's been sadly invariant.

Supposing someone didn't want food, I don't see that it changes the fundamental reality that they are homeless and begging. In fact it's hard to blame them for wanting a drink in that situation.

The issue is that someone genuinely homeless will happily take the drink and sandwich and consume them later (thus the "no mayo") if they happen to not be hungry right now.

Someone who is panhandling wants money and they get very angry when you interrupt that process. At least in the US, the panhandlers tend not to be the genuinely homeless--they mostly tend to be scummy people. It's a semi-regular news occurrence for someone to follow a panhandler with a camera to find out they really aren't homeless.

It really makes the political discussion about how to help the "homeless" a lot harder because now you have to deal with "How do we make sure that we help the "homeless" instead of these scummy jerks?" And it's impossible to make the separation--the scummy jerks will always work your system better than the genuinely homeless. It's one of the reasons why I'm generally for the basic income kind of approaches--the scummy jerks can't work your system to the detriment of those who genuinely need it.

In the US at least, the "genuinely homeless" that you could actually help tend to be nearly invisible because they don't want to be seen--getting seen gets you noticed and harrassed.

> Someone who is panhandling wants money and they get very angry when you interrupt that process. At least in the US, the panhandlers tend not to be the genuinely homeless--they mostly tend to be scummy people. It's a semi-regular news occurrence for someone to follow a panhandler with a camera to find out they really aren't homeless.

My belief is that this is a very small percentage of beggars and the videos are so widely shared not because they reflect a common situation but because they make the people share them feel better about walking on by. I don’t actually think that you can determine that someone isn’t homeless just because they don’t want to accept food from you.

Maybe it's different for where you are, but I used to see several beggars park their car and unpack before lunch and repack and drive away once past dinner. One would bring a woman and 2 children to help panhandle. These aren't the exceptions--they're the norm.

Should we be helping these people? Yes.

Is panhandling money really helping these people? Not really.

Is their having a car meant to be proof they aren't homeless? And I would encounter several panhandlers just on a short walk to work in Boston; should this one anecdote from an unknown place be enough to completely change my perspective?

This article tries to find some numbers and should probably cast doubt on the rich beggar narrative: https://invisiblepeople.tv/how-much-do-panhandlers-actually-...

> If just feel you must give, give food

If you have the time, consider taking them out to eat if they're comfortable with it. A little food and time goes a long way.

Yup , yup and yup... 20 years ago many lessons learned

> 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?

That is a grossly over-exaggerated price for donuts imo.

Dunkin' Donuts are over €1/donut ($1.20) in Berlin, even by the dozen.

1 dozen krispy kreme glazed donuts is like $8

Isn't that a bit like evaluating the cost of coffee based on starbucks prices?

We also don't know how recent this story is. When I was a kid, in the days before gentrification and gourmet-everything, there was a doughnut shop nearby that was like $2 for a dozen. It was way cheaper than regular fast food. I remember thinking what a great discovery it was until I found I couldn't handle more than a couple of them before the sugar was too much for me.

I don’t think KK is quite as pricey as Starbucks. A Starbucks brewed coffee is about 2x the price by volume of McDs. As long as we’re talking about standard kk-sized donuts I think it would be difficult to find them for less than $6/dozen.

Are doughnuts different in America to other parts of the world? I couldn't imagine ever eating 12 Aussie-style doughnuts in 1 sitting, unless it was some sort of eating competition. It'd be like eating 3 hamburgers or 6 hot dogs.

I don’t think they are different. In my experience it’s common to buy them by the dozen because you’re taking them to some sort of event.

Counterpoint: a dozen chocolate covered donuts are under 3€ in Lidl. Same size as a KKD, made fresh in store that day too

Maybe this food is cheaper in the EU? At a Lidl in Virginia, a dozen donuts is still about $8.

Maybe. KKD glazed are still like 1,70€ a unit though.

1 dozen donuts from DD where I live is $13+tax

What about the supermarket? You can get those little white ones fairly cheaply.

Sure but those are also like 1/4 the size. Totally different product.

Most big grocery stores in the US sell day old donuts for half-off and in bulk, probably working out to something like $0.30/donut.

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.

Being the best served by the teacher is already a reward; no need to rub additional salt in the wounds of the students the teacher is failing.

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)

2009 leaked. Tweeted while most of us were still in line. Still got the screenshot.

<name> One thousand dollar impromptu cash bonus. I work for Google!!

... October 16th. Dumb.

Thanks Randy!

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.

Well the employee doesn't have to pay income tax or payroll tax on the money, so in that sense there is a tax break compared to if the money was given to the employee.

Not a tax break for the employee, since the net effect is still less money. Unless you consider losing your job and having no salary to tax also a tax break.

It’s not “still less money” compared with the situation where the employee gets the money AND donates the money. Of course if the employee was not going to keep the money not getting it is a net loss.

People were mainly just annoyed that rather than getting a free phone or some cash as a gift, they instead got the ability to choose a charity to receive a donation from Google (which has "value" but not monetary or physical value to the employee). The expected to receive a phone/cash so it felt like less compensation/bonus when they didn't receive it.

I doubt anyone was thinking about donation related tax breaks or anything like that. It was simply "sure I will have Google give $500 to this food bank, but why don't I get a new phone or cash bonus?"

Yeah, it depends on what situation you're comparing against.

If you're comparing against the employee getting a gift and keeping it, then yes, the employee was better off before.

But you're comparing against an employee who was previously donating the gift and getting a tax deduction on that donation, the employee is better off now.

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.

I don't know anything about sole trader taxation but corporations can make charitable donations that are treated as business expenses (hence not taxed). They pretty much have to be cash, not in-kind contributions though. Ianaa, etc.

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.

That’s probably correct but previously they were also paying your taxes on the gift for you (i know). Since they didn’t share all the details it was hard to figure out if how it played out financially.

I didn’t have a dog in that race bc I couldn’t stand android so I wasn’t even claiming my gift previously but it was interesting to watch the political pickle they got themselves in

If it is a thousand dollar donation, what am I going to do with the tax break? I still have to take a standard deduction. What am I missing?

Majority of goog employees were making high salary in California so very few people in head office were taking standard deduction especially before trumps tax changes

You didn’t get the deduction. It was just a way to direct company funds.

Charity is an above the line deduction.

No it's not. $300 can be an above-the-line deduction. Any donation beyond that is below the line.

https://www.aarp.org/money/taxes/info-2020/how-to-deduct-202...

It wasn't last year, now it is again, so people might've missed it. I thought you could only deduct $300 though.

Yes, it's limited to $300. So it's not very useful for people significantly more than that but still below the standard deduction.

Are you talking about California state tax? The $300 thing doesn't jive with my federal tax spreadsheet..

No, we're talking federally. There's a $300 federal above-the-line charitable deduction. Everything after that is below the line.

https://www.aarp.org/money/taxes/info-2020/how-to-deduct-202...

"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?

If you make a donation in someone's name, you get the tax deduction, not them. Google couldn't "pay" the employees in some non-taxable form and then let the employees take the $1000 deduction even if they wanted to (which they don't).

That’s my point. The donation is financially a corporate donation, but is being marketed to the employee as a perk of their employment. That it’s “their” donation.

The perk is your charity gets the money, the point of giving to charity isn't the tax benefits...

Again yes, that’s exactly my point. They are double dipping on the good will; first as an employee perk, second on their corporate annual reports.

If I care about cause XYZ and as part of my employment, my company gives $1000 to a charity that I picked which supports cause XYZ, that absolutely has value to me.

Bonuses to employees are compensation, so tax deductible to the corporation just like a charitable donation.

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.

In what universe are managers averaging less base salary than individual contributors? Aside from a few outlier engineers you see from time to time...

In 25 years, exactly once have I had someone in my team that was paid more than me.

It was someone who had been in the job 5-6 years longer than me, and consistently been one of the highest performers. I believe I was the one to give him a raise to a higher base than me.

So it does certainly happen, but as you say I think they're outliers.

Usually I think you'll see this happen because companies are poor at having a separate tech promotion track that doesn't lead into management, and so it sometimes happens with people that really ought to have been promoted, but that neither they or you want to become managers.

I see it quite a bit... Managers will often have larger equity or bonus comp.

Larry Page, Sergey Brin, Larry Ellison, Mark Zuckerberg each have a $1 salary.

https://www.investopedia.com/ask/answers/032315/why-did-larr...

They've already made more money than they or their descendants (probably for generations) will ever need and are very likely also getting capital gains on that wealth through one way or another.

The $1 salary is just posturing.

I wasn't saying whether it was moral or immoral or good or bad. I was just giving an example.

I'm curious, would you say it is better for them to have a $1 salary, a $100k salary, or a $100M salary?

It would be nice first of all for them not to be tax dodging assholes, who like in the case of ActiBlizz not only didn't pay tax to the US but also manipulated the tax system to get tax credits to the tune of hundreds of millions of Dollars in just a single year¹ while also kicking out hundreds of their employees for short term gain.

And if their companies already use the tax system as nothing other than toilet paper, why would one assume they as private persons would do anything different?

¹: https://www.fanbyte.com/news/americans-paid-activision-blizz...

I agree there should be less tax loophole exploitation. I think the best way to prevent it though is through law changes to remove the loopholes.

To compare against Blizzard's 2018 numbers, I checked out Google's 2018 numbers (full disclosure I work at Google, but my words are my own). I could be misinterpreting the document, but it looks like Google paid $14.5B in corporate income taxes in 2017 and $4.2B in 2018.

https://abc.xyz/investor/static/pdf/2018Q4_alphabet_earnings...

This is just arguing in bad faith.

I don't think I'm intending to deceive anyone. It's an interesting salary setup that popped into my mind when I read CamelCaseName's, ryandrake's, and supernovae's comments.

I'm sorry if it came off as deceitful or misled anyone.

In addition to being edge cases, the people you listed are not managers.

I think they are/were, or at least some of them have been at some points in time during which they had a $1 salary. Although maybe there are different definitions of the word manager and I'm not really familiar with them all.

>Typically, responsibilities include being a decision maker on business strategy and other key policy issues, leader, manager, and executor.

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

>"We've never been ones to hold on to management roles when we think there's a better way to run the company. And Alphabet and Google no longer need two CEOs and a President," their letter said.

https://www.bbc.com/news/technology-50653345

That was said when Larry Page and Sergey Brin were stepping back. So it seems to imply their old roles were management roles and their new roles aren't.

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

It's a standard sort of thing.

The idea is that a non-manager has minimal ability to affect the company's bottom line. While those further up have the ability (and now have the incentive) to affect the profit of their division or the whole company.

So a worker gets 100k with a 10% bonus, his boss gets $120k with a 40 percent bonus etc. In a good year the boss will get almost twice the worker but in a bad year he will make just 20% more.

Yes, 4x is a big gap, not just % wise, but dollar wise too. I'm sure they don't talk about it during the interview. But if somehow that information slipped in during interview, I would honestly just thank them for the time and walk out because I would never work for a company that believes in the large gap of the output of the 2 groups.

The compensation progression for a manager generally consists of a slow (if any growth) in base salary and most compensation increases come from stock and bonus. I believe this is generally the same for high level ICs. Some companies make it explicit that there is an IC level that corresponds to each manager level and both have the same compensation structure.

0.0004% is 4x 0.0001%. If it's a small amount then 4x really doesn't matter.

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.

The right way implement this is to tie a sizable chunk of the quarterly bonus to an ambitious company-wide goal that fails 30% of the time. If the company is hitting the bonusable goal 95% of the time, the bar is probably too low.

Considering typical turnover that's not possible unless you pay out the bonuses on a much more frequent than annual schedule.

He said they were quarterly.

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.

Indeed, and while it certainly makes a difference for someone who is living paycheck to paycheck, if a person has relatively stable finances in a stable economy and a cash cushion, then money is money.

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.

In many cases your variable comp ends up being like half or more of what you're paid which makes it hard to really adhere to that in reality.

I meant monthly expenses by financial planning. You shouldn't be missing bill payments because you only got base. Of course you will include it in your broader financial plan.

> 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.

I know people like that. And their lives are quite stressful as a result.

>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.

Well 1) no money to pay the bonuses out of if not 2) supposedly it's incentivizing you to act in the company's interests.

Its usually both. So you get into the great situation where you did great but the firm did poorly, so you get a doughnut. As you move up the ranks, the process becomes less murky.

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.

Was it because the target was set unrealistically high or because the company underperformed?

Does it really make a difference? Seems like it should be set fairly high, if your company is aiming for growth, and sometimes growth is slower for various reasons

> Does it really make a difference?

In my view, it does. Maybe this was a good company with reasonable management who set realistic targets. Maybe it was a not-so-good company, someone in management saw the line item for bonuses and decided to "solve the issue" by setting a target he was sure would not be achievable, just so they could reduce payroll costs with minimal hassle. I am sure both happen in the real world.

Pretty sure my old job did this. People on programs that were successful would get a little bonus. This ended up changing to “every program across every sector must meet all business goals for bonuses to be paid.” That made it impossible to get a bonus when some programs were experimental or R&D type things that were kind of expected to run on a deficit for a while.

The company underperformed.

If the target had been hit every quarter for a few years, if anything it was set too low.

Depends how scalable it is. For some products you need to accurately predict how much you can produce and sell. So targets are a matter of everyone executing their part on schedule.

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.

Companies often withhold a flat-rate on bonuses, and it's wildly different from your calculated withholding based on your actual tax bracket.

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