Premise
A professional is paid for what they do.
Natural consequences follow if that relationship is broken by companies or professionals.
The Mismatch of Bonuses and Research and Development
Bonuses in some companies are a lever to promote compliant and motivated behavior toward requested results. For sales, it is an article of faith that if you sell more, you earn more, and that using commission aligns the salesman's goals with the company goals. Executives are often rewarded with stock options that fluctuate proportional to the top goal the board of directors has set for them which is to increase stock holder value.
Product development and the remainder of the company sometimes share a third bonus methodology. The idea is to reward against a benchmark for profit. No profit, no bonus. Profit above the benchmark, bonuses for everyone. Desired behavior includes good teamwork, widespread ownership of being thrifty with company resources, alignment of worker goals with the goals of the chain of command, and industrious focused contributions by each person each day. These are great goals, even without a bonus system in place because they help the company survive and give employees better job security and opportunity.
What about a development team that labors three years to bring out a successful product? Value is created the entire time, but costs of a big project might hit the company bottom-line hard, resulting in no bonus. Sometimes, the directors give some of the executives the boot about this time, and it is no picnic for development managers or foot soldiers.
Let's say Q1 of the fourth year, the product releases and is wildly successful.
- The sales staff makes record commissions in the same month. Their reward is almost immediate.
- The market may lag a few months, but when Q1 sales are announced, the stock jumps, the executives sell shares, some after not much involvement. Their reward is not immediate, but may be pretty efficient WRT when the market identifies accomplishment.
- What about manufacturing employees? They get some overtime, and in Q2 of year five, the company wide bonus for year four will be paid. They wait about 12 months for their work to bring a bonus.
In contrast, for the R & D staff, no bonus is paid on their three years work unless they stay at their jobs until Q2 of the fifth year. It is not sinister, or part of an evil plot. It just works out that way. For people in our profession, this is mild compared to what happens with start ups and stock options. If there is a bonus for developers at time of launch, at least for those who worked on the project a while, it is probably well deserved.
Some Suggestions
The moral of the story?
- Revenue lags R & D expense, so we would need much shorter cycles in R & D to permit the annual bonus model to more fairly reward the involved rather than the uninvolved. Agile, iterative, incremental approaches give us some relief from the problem if we can put product into customers hands earlier and see profit hit the bottom line while our effort is still remembered.
- It is difficult and potentially harmful to reward someone for a project that is not complete. But we probably do need some recognition and reward for milestones and hard to measure things like focused and methodical effort toward a goal.
- Patents are a prime example of a huge lag between contribution and reward. It is very hard to value a patent at its time of filing, but it may take years if the reward is tied to the time it is granted.
- Knowledge workers like software developers can have a huge impact on the success of their companies. The reality of high turnover among developers makes stock options an interesting instrument. It can induce some to stay, but insures their reward cycle is separated from their contribution cycle. It also means that up and down cycles in staffing may often separate developers from their reward. Shorter vesting times or simply a shared expectation of pay-as-you-go salaries in which extraordinary work is compensated with overtime without the distraction of bonus talk.
