We don’t compare people, we just evaluate how they did relative to their goals at the start of the year. We give a number 1-5:
Not meeting expectations
Partially meeting expectations
Meeting expectations
Exceeding expectations
Rockstar
Bonuses are based on a mixture of that number, department performance, and company-wide performance. Before submitting ratings officially, we normalize them across business units to ensure everyone is rating people similarly, and each department has a bonus figure that gets split relative to that number (e.g. if most people get 4s, the 4s will be similar to 3s in other departments).
It’s relatively simple and fairly objective, so I like it as a manager. I would hate having to rank my report against each other, that just sounds awful.
Apologies for the wall of text, I started describing my company’s review and bonus process… and realized how foreign it might sound from an outside perspective.
In principle our review process is similar to yours. In practice… it’s bat shit convoluted. We effectively have a profit sharing scheme. People are awarded bonus “units” annually. One third of company profits feed into a bonus pool, there’s slightly more nuance here but not worth going into. These bonus units are entirely separate from company equity… which is a thing they also offer to senior people, but that’s outside my purview.
We have employee levels which represent seniority. Each level has a bonus unit target (i.e. level 1 = 10, level 2 = 25, level 3 = 50, etc). We compare all people in each level and rank them. We have to challenge and defend these rankings. People will often get ticked up or down. The end result is that bonus awards will be on a distribution around each level’s target (i.e. a level 3 person can technically get anything between 25 to 75 units though at the extremes they’ll likely just get promoted or demoted). There are several layers of these review meetings to normalize ratings across groups and layers of management.
Complicated enough yet? There’s more! The average value of these bonus units has been increasing over time so there’s active pressure from upper management to decrease the number units being award. Big picture it make sense that they don’t want to pay a multiplier of market rate, but it’s a shit message to deliver to people. The other nuance is that these bonuses are large, especially at higher levels. For my senior report, for instance, his bonus will be more than half his total compensation.
Wow, that’s complicated and honestly kinda fascinating. Our bonus is like 10% of our compensation, give or take a little, and the difference between a 4 and 2 rating is <5% (so the range is 5-15% for most people).
That means our performance review process is pretty low stress because it’s not a huge part of total compensation. It’s also not super motivating either. However, if you’re at 2 for 3 years in a row, you’re probably getting sacked, and if you’re at 4 two years in a row, you’re probably getting promoted.
My company is incredibly uncompetitive in pretty much every way, which makes for a good work/life balance and people tend to like each other.
Sounds a lot like my last job. I think the best I ever got was an 8% bonus, but stress and expectations were pretty low. There’s something to be said for that. Are you happy with the trade offs?
The pay is great at this place, but most people put in a lot hours, and, unless you’re the type A kind of person that finds this environment fun (I’m not), stress is high. I’ve managed to navigate it for about a decade at this point and I figure if I can ride it out another 3-4 years I can just be done working.
Yeah, I wanted stability and work life balance, and I got it. Our pay isn’t super competitive, but we’re above average and my boss is cool, so it works. I know I could make quite a bit more, but I have young kids and don’t want to put in the hours to do so.
Maybe I’ll get bored in a couple years, but so far I’ve been able to put that extra energy into side projects that may turn into a side business at some point. Either way, I’m looking at ~10 more years and I’m done forever.
That sounds terrible.
We don’t compare people, we just evaluate how they did relative to their goals at the start of the year. We give a number 1-5:
Bonuses are based on a mixture of that number, department performance, and company-wide performance. Before submitting ratings officially, we normalize them across business units to ensure everyone is rating people similarly, and each department has a bonus figure that gets split relative to that number (e.g. if most people get 4s, the 4s will be similar to 3s in other departments).
It’s relatively simple and fairly objective, so I like it as a manager. I would hate having to rank my report against each other, that just sounds awful.
Apologies for the wall of text, I started describing my company’s review and bonus process… and realized how foreign it might sound from an outside perspective.
In principle our review process is similar to yours. In practice… it’s bat shit convoluted. We effectively have a profit sharing scheme. People are awarded bonus “units” annually. One third of company profits feed into a bonus pool, there’s slightly more nuance here but not worth going into. These bonus units are entirely separate from company equity… which is a thing they also offer to senior people, but that’s outside my purview.
We have employee levels which represent seniority. Each level has a bonus unit target (i.e. level 1 = 10, level 2 = 25, level 3 = 50, etc). We compare all people in each level and rank them. We have to challenge and defend these rankings. People will often get ticked up or down. The end result is that bonus awards will be on a distribution around each level’s target (i.e. a level 3 person can technically get anything between 25 to 75 units though at the extremes they’ll likely just get promoted or demoted). There are several layers of these review meetings to normalize ratings across groups and layers of management.
Complicated enough yet? There’s more! The average value of these bonus units has been increasing over time so there’s active pressure from upper management to decrease the number units being award. Big picture it make sense that they don’t want to pay a multiplier of market rate, but it’s a shit message to deliver to people. The other nuance is that these bonuses are large, especially at higher levels. For my senior report, for instance, his bonus will be more than half his total compensation.
Wow, that’s complicated and honestly kinda fascinating. Our bonus is like 10% of our compensation, give or take a little, and the difference between a 4 and 2 rating is <5% (so the range is 5-15% for most people).
That means our performance review process is pretty low stress because it’s not a huge part of total compensation. It’s also not super motivating either. However, if you’re at 2 for 3 years in a row, you’re probably getting sacked, and if you’re at 4 two years in a row, you’re probably getting promoted.
My company is incredibly uncompetitive in pretty much every way, which makes for a good work/life balance and people tend to like each other.
Sounds a lot like my last job. I think the best I ever got was an 8% bonus, but stress and expectations were pretty low. There’s something to be said for that. Are you happy with the trade offs?
The pay is great at this place, but most people put in a lot hours, and, unless you’re the type A kind of person that finds this environment fun (I’m not), stress is high. I’ve managed to navigate it for about a decade at this point and I figure if I can ride it out another 3-4 years I can just be done working.
Yeah, I wanted stability and work life balance, and I got it. Our pay isn’t super competitive, but we’re above average and my boss is cool, so it works. I know I could make quite a bit more, but I have young kids and don’t want to put in the hours to do so.
Maybe I’ll get bored in a couple years, but so far I’ve been able to put that extra energy into side projects that may turn into a side business at some point. Either way, I’m looking at ~10 more years and I’m done forever.