All employees are part of a pool that evenly distributes a portion of the company's profits.
The employee's incentives become tied to what the company wants most: income.
This might create other incentives like trying to hire fewer people so as to not dilute the pool, but I can't think of a better heuristic than to tie the company's success into each of the worker's success.
What I'm saying is, I think the GP comment is right, that a bonus scheme is unlikely to materially affect performance.
It doesn’t really drive people to work 80 hour weeks, but that isn’t by itself valuable anyway.
If the bonus dollars are evenly distributed as proposed then it won't encourage competitive in-fighting that plagues some incentive systems.
I am not sure about that. I think the in-fighting would then come from people upset that other people that "did not contribute nearly as much as I did got the same bonus".
People will always find a way to no be happy about something.
If a company designs their bonus system to encourage individualism and thus explicit competition for scarce dollars, then it creates a game that people think they have to win at the expense of their peers. In these cases, they have a bonus pool (the "budget"), differentiated pay philosophy (pay for performance), and rarely have an objective criteria for assigning rewards (manager decides and makes a case). In that situation you get a lot more in-fighting because it's the way the game is designed.
If you remove the competitive angle by assigning rewards equally (say, at a certain level of seniority you get a fixed bonus %; or, the company assigns a 20% bonus to everyone to share in the profits), then you are no longer giving people a game to win against their peers.
And both are vital parts of a company. You can't have a bunch of co-located people without someone taking care of sanitation.
Of course, you may choose a 100% "remote work" company to avoid that issue but in this instance each employee is their own janitor anyway.
There is a flipside benefit too: the lesser paid people - other devs? You? Me? - will be happy to see the rockstar dev get such a wage/salary because they know they are worth it and it adds to their own company bonus.
And when people are not such a rockstar after all, they will see scrutiny on all sides.
A star performer should be getting "star performer" salary/wage.
I think it should be proportionate though. If you work for 1 year full-time then you get 1 portion. After all that person is giving approx. 1/45th of their working life to the company. ( Pro-rata reductions for people who work part-time )
It's a pity that the people who choose the remuneration would never go for it. They might not be able to afford their new BMW if they are sharing the bonus pie with the staff who actually help customers.
As an individual, that person should get their wage/salary too, so experience/loyalty etc gets factored into that.
They aren't a perfect company by any means, but they seem to be decent from current observations.
I think it helps people feel like they are benefiting from the company growing and doing well.
I think it increases retention because you are less likely to leave if a bonus is coming up.
If a company has a really bad year it helps them weather the storm without having to fire people or cut salaries.
Add to this that accurately rating employee performance is very difficult, and you get a huge disconnect between effort and reward. What this means it that employees will seek to game the system by identifying activities that give them a high gain in "review score" for the least effort. This leads to rent seeking, politics, stealing credit, and other such activities. Not everyone plays this game, but those that don't are at a huge disadvantage. I've seen people get the same performance rating where one of them did literally 5x the work of the other, just because of other factors.
Bonuses can only work when they are given soon after the work you do and are (at least somewhat) objectively-measurable. For example, sales commissions work well. I think signing bonuses are also pretty effective at luring a job candidate when they have multiple offers, because they get the money right away. But that's sort of a different scenario.