Compensation Thoughts - from a life in Product Management

For one brief slice of his career, the Dude had a really awesome compensation plan. Unique in the product management world, it influenced behavior well

For the vast majority of the Dude's product management career, he has had fairly consistent compensation plans. In fact, he would wager a White Russian that your experience is similar.

That compensation is a fair base salary, with an annual "performance" based bonus. The ratios change, and the criteria for the bonus changes, but in a nutshell that is usually how compensation works.

Now that isn't the only compensation model in the world. In the Investment Banker world, you get a minuscule base salary (seriously, not enough to live on even in Mississippi) and all of your nut is in the annual bonus. This motivates i-bankers to compete very aggressively all year long, awaiting their share of the bonus pool. In fact, they measure themselves against their peers by how they rank in the pool.

Fortunately, product management isn't that brutal, and common main-line product management bonus is in that 15-20% of base, with some potential of upside for an exceptional year, or standout performance.

But for one short period of time, the Dude had a really kick-ass comp plan.

He had a generous base (he and his recruiter negotiated well) but the leadership of this company believed that the product team should have some skin in the game. This is akin to sales and their comp plan, were sales targets were tied to a lion's share of their comp.

For product, it was tied to revenue. The Dude got one half of one percent of the recognized revenue for the products under his guidance. This lasted for a little over two years, and was confusing as hell to the Dude at the time.

Then the checks came in. The lowest monthly check was about $800, but the average was closer to $2,000, and at times they topped $3K. EVERY MONTH.

Now, the Dude could have tracked every cent, and in fact one of his peers did, to make sure he got all he was entitled to. Instead, the Dude used it as a bell-weather to gauge performance of his products, knowing that he couldn't do much to directly improve it, but a lot to indirectly influence it.

How? Build better products. Help manufacturing engineering make it easier to build, with less rework (more and faster shipments meant more $$$), remove barriers to closing orders with the channel (we were mostly sold via Reps), improve collateral and marketing efforts/efficacy to grow reach.

And it worked. That first year the Dude had a hefty tax bill (there weren't any Federal taxes taken out of the revenue split - ouch) but he funded lavish vacations to both France and Italy on this skim.

Sweetness.

Alas, a new EVP came to town, this was eliminated for a straight percentage bonus, tied to both personal/product performance, and overall corporate performance. The Dude probably doesn't need to tell you that he overachieved on the personal and product performance, but corporate could never really get this act together, and thus for the last 4 years at this company, he got near 50% of the target bonus.

Boo.

That was probably the best slice of time for compensation that the Dude experienced in product management. The company was small enough to let that happen, and it really made a big difference in the Dude's life.

The irony: After it was removed, the finance team went out of their way to ensure that the Dude would get every penny from orders that were qualified (it took about 15 months to work through) but the Dude really didn't stress about it. He knew they were honest, and in reality, he never counted on it, or tracked it, it was a general meter that measured the health of the product, and you know what? It worked.

What spurred this reminiscence of times past?

This AM, the Dude got a notification of a piece by the incomparable Cory Doctorow on "Bait and Switch" where he lays out the insincerity of John Deere in its claim of $60K salaries that are really $40K, because management tilts the deck to ensure that performance related triggers are never met.

Worth a read.

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