7 years ago I wrote this post about how developing bad bonus programs, made me almost wanna quit. I wrote up exactly how I felt and how soul crushing that time was in detail, so now let me share more of what we’re doing now, and hopefully that will help you avoid that kind of heartache.
18 months ago I talked about when life changing money isn’t, and have been in a deep reflection ever since, so expect more posts like this one.
Couple of high level learnings here on our new approach to bonuses this time:
Fuck “Fairness” — someone is always going to have an issue, get some thick skin on that. One thing I realized is instead of trying to be “fair” I reminded the team that I own this company and could choose to keep the money, but that isn’t who I want to be now that we are in the 4th phase of my growth (see below).
But Limit Your Bias — Try to limit your bias, try to make a chunk something calculated vs done with your gut. To be honest I just don’t know all the wonderful things people do here. So create a pool for managers below you who are closer to their teams day to day.
Ewww, they are getting how much? — Be OK with the fact that some people are going to get a bit more than you wish they did, but you gotta stick to something that scales, or you start getting called out for favoritism.
Now here we are, bonus time.
I love to see us grow, so what do you do when you love to see your company grow, you still wake up stoked to go to work, but money / financial survival no longer becomes the motivation? Me, I start aggressively bonusing. That was my answer.
Which leads me to our bonus plan for 2018. Thank you to Joel Gascoigne, who gave me the courage to do this publicly.
In 2018 I invested $756,494 in profits and bonuses or ~19% of our Net Income back into the people. (There’s a gap between what I made available & what was deployed because people don’t take advantage of all our perks)
Charity @ $130,473 was also invested in our communities. Our offices are in places where we can’t deny that people out there need help, we are doing our part to not only invest our time, but also our $$ to help improve the communities we inhabit.
This bonus breakdown looks like this:
Kaizen budgets ~$215k, Note: This might not be considered by all a true bonus as some people might use it for a conference but others use their s for gym memberships and Pelotons, and I didn't have the time to separate it all out. (we take the tax burden of this which lets team members get the full benefit).
Vacation bonus ~$110k we made people use them, or book by end of year. Halfway through the year I was like we’re killing it, and the team is working their ass off, lets show them that we want them to take that unlimited vacation.
Student Loans ~$45k they suck, so I tripled the amount paid last year.
Manager Bonus Pool ~$250k (Originally was supposed to be 100k)
New Team Bonus Pool ~$250k (originally was only Kaizen Budget)
I think as any company you go through phases, and Seer is at a phase where I want to be a part of helping to put as many people who are supporting our culture and growth at Seer in the best position I can.
How do we keep this from being an expectation?
First this year I surprised most people with this, so we are not making this a definite next year, other than to say to the team, we’re in that 4th Phase and I’m going to ensure we provide between 10–20% of our profit as long as we’re in Phase 4 (see below).
I expect that in future years we may need to keep more to invest in innovation or grow the nest egg, but as long as we’re profitable and knowing that I don’t need the profit of the company I think we can reasonably bank on us investing $$ back to the people in this company in an aggressive manner.
I hope we eventually are at 6,8,10 million in profit someday because as long as I believe that the first 2–3 million in profit goes to the company for innovation and nest egg, I’m only going to have more and more to invest to the team and that makes me happy gives me purpose.
How did we communicate this to the team?
Here are some snippets to help articulate how we messaged and calculated our bonuses in a transparent way so the team know.
Here is the message & breakdown people got:
Then we wanted to share with the team how we calculated the bonus with some sights and sounds:
I intentionally try to remove my bias, so I like that 6% is purely driven by #s, and the 8% that is connected to our efforts to lead in big data, I am a decent proxy for that.
I recognize that while *I* am pushing us to big data and I chose to overweight that this year that my directors have their own goals and they have more visibility into their teams, so they were given the ability to bonus their teams, as I provided each director an amount they could invest.
Here is one from my dir of BD:
Bonuses create politics & politics divide teams
I’ve gotten stung by this BAD a couple times. So this time around I learned, surprise people. Let them know where your heart is, show them that you honestly want to share profits but I didn’t make the %’s and the levers known & I plan on changing them every 6–12 months.
Overall we say to people just do the things that we say are important, and we’ll be pulling those levers, so keep shouting out your co-workers, keep volunteering, keep growing your clients, keep finding ways to bring big data to our team, keep blogging, recruiting, etc. Every year based on what we value I’ll be picking 2–4 things that truly make me proud of this place and make me want to keep working here, and I’ll be seeking ways to invest our profits in our people as aggressively as I can who support those things.
I want to thank my exec team, especially Steve and Crystal whom I dropped all this on last minute after seeing our profit for the year, thank you so much!
And of course Joel Gascoigne and the Buffer team, you continue to inspire me and coach me (with your posts and occasionally answering my DMs) and the Seer team on how you are doing things, you offer blueprints we all can use and you keep showing us there’s a better way, thank you!
Extra note I moved to the bottom:
How did I get to this point?
The 4 Financial Phases of Running This Business
Phase 1 — Survive, I was getting underpaid, those first few years I started Seer I was getting paid WAY under market. I wasn’t not giving healthcare to my co-workers and they too are underpaid in the market, but somehow they decided to join the ride.
Phase 2 — Thrive, I’m finally paying myself market rates and my team is finally getting paid decent, healthcare is better and even covers families. We’ve been around for 5 years and oh snap, we didn’t go under! I’m starting to build a nest egg in this phase, to help make sure we can weather rainy days in the company.
Phase 3 — I’m Good Phase, this is the phase where there’s a nest egg for the owner(s) personally. This phase my stress is reduced b/c I’ve reached an “enough” point, where I have enough and don’t need to work to sustain my lifestyle. Employees don’t typically care about this, but when you are finding a way to dole out the Co’s profits at an aggressive pace, it now means we’ve hit a phase where I am working to help put others in an “I’m Good” Phase too. It’s not good enough for me to be in a good financial position I want to try to help others in my company get there too.
Phase 4 — Aggressively Start to Share the Wealth. In this phase I’m basically saying look I want to grow this business, but I am going to take less and less of the profit. I want to continue to grow our company nest egg so we can lose out largest client and be OK. I want to keep some for innovation, but after that lets create mechanisms to deploy it.
I hope by investing our profits in our people aggressively, I hope to help put a dent in the stressors of life for our people, student loans, mortgages, and college funds for those kids we keep on having :)