Annoyed Over How Your Bonus is Determined? Join the Crowd

by Darwin on February 9, 2011

My company has changed their bonus policy practically annually since my employment began.  Frankly, my bonus isn’t a large percentage of my annual salary anyway, as I’m not in sales or an executive position.  But it’s been kind of frustrating to see the weighting for determining the bonus size switch between things like my personal contributions to departmental contributions to how the overall company does and then back again.  It’s been a roller coaster ride between things clearly within my control like personal performance  versus things that I, as a mid-level employee only have some indirect impact over, like company profits.

Taking this a step further, I just read that Eli Lilly will actually start tying employee bonuses to the success of their pipeline (BusinessWeek).  Not only is pipeline development and success completely outside the control of the vast majority of employees in a large pharma, it would surely be difficult to measure and compare the results annually since so many pipelines are now tied to acquisitions, in-licensing, and the development lifecycles that span multiple years.  Does a production manager on a legacy drug product line out in the Midwest have anything to do with drug development and clinical trial success?  Probably not.  Upon reading the article, it seems apparent that the company isn’t going to be giving something like “extra bonuses” to all employees when a new drug is approved; I suspect this will come at the expense of some other portion of the traditional bonus.  They don’t appear to be in a position to be adding compensation to employees randomly when the industry is consolidating and laying off (market forces simply don’t support such a move).

This got me thinking about all the different ways people are compensated and rewarded.  Some people can pretty much expect the same bonus each year (but remember Grizwald in Christmas Vacation?).  Others are heavily reliant upon their bonus as a sizable portion of their overall income based on their sales accomplishments.  And then, many get no bonus at all.

What is Your Bonus Structure Like?

Does It Work For You?

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{ 9 comments… read them below or add one }

Financial Samurai February 9, 2011 at 12:21 pm

A LOT of firms have been changing their bonus structure thanks to the SEC and government regulations. PRetty nuts how it’s always a moving target. Oh well. Better than no bonus!


Gerry February 9, 2011 at 3:15 pm

I am in the small bonus crowd so I just take my bonus and say thank you. I don’t even care how its calculated. The management will change the formula to meet their predetermined budget anyway. It s just like merit raises. Their is a predetermined budget, so if you get more someone else gets less. In the end though the simpler the formula the better. Why bog down accounting with frivolous things like bonuses. Or, use no formula at all and make up a new reason every year to tell employees why they got what they got.


krantcents February 9, 2011 at 4:16 pm

Unfortunately there is no bonuses in teaching! Knowing how they manage things, there could never be one. A bonus program should be consistent which means it should change radically. It should be based on factors employees feel they have a chance of doing something about. If those two factors are always changing, I don’t think it can achieve the objective. Don’t misunderstand, the company may tweak it, but not constantly change it.


IPA @ February 9, 2011 at 5:40 pm

I work for a small company that doesn’t have a bonus structure. In fact they dismantled a profit sharing plan they had for the past 25 years. We get a gift card as a bonus. This last year it was a visa gift card which was nice.


leslie February 10, 2011 at 12:23 am

I have never worked for a company that gave out bonuses. I thought that only happened on TV!


Darwin February 10, 2011 at 9:28 am

I guess I’ve grown used to a bonus since our company has always had them, but true…most Americans don’t get one.


101 Centavos February 10, 2011 at 6:13 am

I agree w/ Gerry – best to say thank you and be thankful there is even one at all. In times of austerity, bonus programs are easy targets for cutbacks.
One of the more ingenious and motivating bonus schemes I’ve heard about was with a company cal TransOK, an Oklahoma gas pipeline company long since defunct (takeover victim). Each employee was required, each year, to recommend two fellow employees for a $100 bonus (all grossed up for taxes) as a way of saying “thanks for a job well done”. A hundred bucks may not sound like much, but there were a number of employees who received multiple bonuses, outside of the usual gaming of the system (e.g. recommending one’s friends).


Darwin February 10, 2011 at 9:29 am

True, during 08-09 Recession, many bonuses went away. Same with 401K match cuts and other measures.


retirebyforty February 10, 2011 at 6:41 pm

I work for a large tech company and we got a very nice bonus this year.
Our pay structure is skewed a bit toward the bonus so the company can be a more flexible during down turns. I think most rank and file workers’ bonus fluctuate between 5 to 20% of their total pay depending on profit and other factors.
I like this because the company can reduce cost a bit during lean years.


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