Ask HN: Compensation at a firm with a cash cow

#1

Post by asbestoshft » Wed, Feb 15, 2017, 12:29 AM UTC

I work at a firm that has one product that is a very reliable cash cow. It is a small company so lets say the top half of the developers ( 15 out of 30 ) make a market rate salary and then a bonus of anywhere from $300k to $1 million for working on the cash cow. In a company like that how do you get some of those existing highly paid developers to work on a much more risky project?

It seems the options are: (1) Continue to pay them something close to what they are making even though they no longer work on the cash cow and until the next project makes money, which might be years if ever. (2) Try to get them to take a deal where they will get a percent of the profits of the new project which should be more than what they are currently making. Of course there is a chance the project won't ever make money so do you take the pretty much sure thing $500k bonus or do you take a chance on making $5 million/year on this thing that may or may not happen. $5 million/year is probably at the upper bounds of what is possible, it could be $10 million or maybe even $20 million but any more than that would really be dreaming. That is the whole point, it is risky in that the outcome is very much unknown. (3) Have them continue to work on the new project but also do some work on the cash cow so that they get some bonus from the cash cow but they are working on the new thing as well. The problem with this is that for the new project to succeed it will probably take complete focus, dedication and passion from the team involved so splitting time like that will probably doom the project from the start. (4) Force them to take some one of the above.

It isn't really possible to set up milestones. The only relevant milestone is whether or not the new project is making any money, everything else is meaningless.

Re: Ask HN: Compensation at a firm with a cash cow

#2

Post by Eridrus » Wed, Feb 15, 2017, 12:52 AM UTC

I am curious where you work; is it in finance?

I'm not sure I believe you when you say "there are no relevant milestones". From a business stand point it doesn't matter what technical milestones are hit, but almost every business in the world tries to determine if employees are doing as well as expected or better and there is often no clear link to the exact monetary value of any given dev work. There are obviously issues here, but I find it hard to believe any compensation structure exists that doesn't, if nothing else but because teamwork is hard to quantify.

If this project isn't expected to take more than a year to get off the ground, it doesn't sound significantly different from just having a very uncertain bonus.

In any case, if you have no preference in how they should be compensated, consider letting them decide how they would like to be compensated; in a bonus driven culture people may be quite happy to take a percentage they think is reasonable, or they may want to keep their existing structure.

If these developers are able to command such a salary elsewhere, I doubt you will have much luck getting them to take a salary structure they dislike simply because the stakes are so high.

Re: Ask HN: Compensation at a firm with a cash cow

#3

Post by asbestoshft » Wed, Feb 15, 2017, 1:02 AM UTC

Eridrus wrote: post #2

I am curious where you work; is it in finance? I'm not sure I believe you when you say "there are no relevant milestones". From a business stand point it doesn't matter what technical milestones are hit, but almost every business in the world tries to determine if employees are doing as well as expected or better and there is often no clear link to the exact monetary value of any given dev work. There are obviously i…

Yes, it is finance! Prop trading more specifically.

We could set up milestones such as (1) implement this exchange interface with this latency or (2) implement this trading algo with this latency but really none of that matters if you don't make money in the end. In fact you don't want people to focus too much on that. You don't really know what is important. Maybe latency really isn't very important. Maybe it is the most important factor.

I like the idea of letting them choose but my point is that they will choose to stay where they are unless you say that they can have their current compensation but then saying you get the same bonus you got last year regardless of how this new project works out defeats the incentive nature of having a bonus. Of course they would take that deal as they get the same amount as they would and there is some chance it will work out and they get more.

Re: Ask HN: Compensation at a firm with a cash cow

#4

Post by Eridrus » Wed, Feb 15, 2017, 1:57 AM UTC

asbestoshft wrote: post #3

Eridrus wrote: post #2

I am curious where you work; is it in finance? I'm not sure I believe you when you say "there are no relevant milestones". From a business stand point it doesn't matter what technical milestones are hit, but almost every business in the world tries to determine if employees are doing as well as expected or better and there is often no clear link to the exact monetary value of any given dev work. There are obviously i…

Yes, it is finance! Prop trading more specifically. We could set up milestones such as (1) implement this exchange interface with this latency or (2) implement this trading algo with this latency but really none of that matters if you don't make money in the end. In fact you don't want people to focus too much on that. You don't really know what is important. Maybe latency really isn't very important. Maybe it is the…

Some people are just completely risk intolerant, but if you can't convince anyone at your company to take a risk on something that could next them 10X their comp, then it seems more likely that they just don't think your idea will work.

One thing to consider is that you might not want the best of the best; their talents may be better utilised ekeing out small but highly leveraged gains on your cash cow. You may be better off with someone who isn't that great, but who can ask the more experienced devs for help.

Also consider that bonuses are not the only way to motivate people, most other industries manage to motivate people just fine without a huge sums.

Alternatively, if your goal is just to motivate people rather than conserve cash, let them get both; let them take the maximum of last year's bonus, or a cut of the new project; if they manage to make the new project work they do even better, if not the company eats the risk.