5 ms·

Honest question, what's a reasonable solution for a small company (since it's easier to do thought experiments on a small company). You're a business owner. Yo

Honest question, what's a reasonable solution for a small company (since it's easier to do thought experiments on a small company). You're a business owner. You hire 3 people. You pay them salaries. That year the company does really well. You want to thank your employees. You're not going to just give them raises because there's no guarantee you'll do as well next year It sounds by Netflix logic you should just keep all the money and not reward your employees. They got what they asked for.

dilyevsky 6y ago
By netflix logic you’re already paying top of the market so you should be good.
- 55555 6y ago
  Note the Netflix strategy only works for high profit per employee, highly scalable firms.
peteretep 6y ago
When I take dividends, 20% of the value I take gets distributed to the staff
- ipaddr 6y ago
  I think by pooling and sharing a fixed amount the reward is company wide not connected to individuals. That aligns everyone to work as a team to generate enough income that you will allow you to take a dividend. I like the approach for smaller business.
mst 6y ago
Find a project to call the justification for a bonus - that way the project is the thing, and there won't be a repeat expectation set up. (we paid december bonuses on exactly that basis once and then the next year wasn't as good and one of my team thought he'd fucked up to not get a bonus again, so the project oriented thing is way superior even if it's the same money being given to the same people for the same reasons overall)
Broken_Hippo 6y ago
You can decide to give a bonus because your company did well, and tell folks it is probably a one-time bonus. It is a bit difficult to then make this apply to Netflix, though: They are Huge at this point. If I remember correctly, they profit. They can probably safely give small raises, increasing overall financial security for workers. They can, however, still give employees a one-time bonus.
einpoklum 6y ago
Well, why don't you consult them? First set aside the amount of money you were thinking of paying. Now think of some options, e.g.: * Paying the bonus. * Improving office amenities. * Buying each employee an expensive present. * Funding a family vacation for each employee. * Making a sizable donation to a worthy cause (collectively or for each employee). * etc. Then have a meeting with them, and ask them which they would prefer. Try to reach a consensus they all say they can live with.
- loginatnine 6y ago
  This. At a scale of a small company, everyone could benefit from it the way they want and you get transparency and include them in the discussion. It doesn't really scale when you are bigger though.
- emodendroket 6y ago
  I can practically guarantee they are going to want the cash.
  - Viliam1234 6y ago
    Yeah, seems like a straightforward choice. > Paying the bonus. Gimme, gimme! > Improving office amenities. Not bad, but... it would depend on how much money we are talking about, and what office amenities it would buy. For example, once I got a new $1000 office chair that felt less comfortable than the old cheap one -- I definitely would have preferred the cash. On the other hand, once I had to work with a barely functional mouse, and I would gladly spend my own $5 to buy a new one, but that would be against the company policy, so I couldn't. In general, greater computer screens, more memory, more disk, better mouse -- good idea. (I have no idea what makes many software companies try to save money on this. It is a fraction of the developer's salary, and it can have huge impact on productivity.) Expensive chair, expensive table, art or whatever -- I would probably prefer its worth in cash, because companies typically buy stuff way more expensive than I would. Fit ball could be fun, though. At the end of the day, the cash remains mine, especially if I invest it wisely. The office amenities that company gives, the company can take away. And I can't bring them to my next job either. > Buying each employee an expensive present. Just no. If it's something I want, I can buy it myself. If you buy it without asking me, there is 99% chance it has zero value for me. > Funding a family vacation for each employee. Again, I can do this myself, if you give me money. And I prefer to keep my family separated from my job, thank you. > Making a sizable donation to a worthy cause (collectively or for each employee). Another thing I can do myself, thank you. Also, high chance the "worthy cause" will be something super politically correct, and I don't want to be that bad guy who publicly opposes it.
foogazi 6y ago
What about profit sharing? The first time I ever got stock options I discounted them as being worth $0. This was small private company. But the company paid out profit sharing based on all the outstanding shares including unvested ones. So if we made a profit everyone got a profit bonus early in the next year. We were all stakeholders.
jacurtis 6y ago
For a small company like that I would implement basic profit sharing. Set aside a certain percent of company profits (10-15% is fairly common) and those profits are distributed among the employees. The way you distribute it among employees can get tricky. If everyone is in a similar position you could split the pot evenly. Otherwise you can implement a points system. Maybe the lower level employees get 1 point each. The manager gets 2 points. At the end of the year the profit pool is distributed per share (so the manager would get twice the bonus of the lower level). This is the easiest way to manage it. You'd want to run some hypothetical numbers first and talk to an accountant, etc. But this is a good way for a small company to manage bonuses. Don't worry about Netflix. The Netflix strategy is that they are overpaying you to begin with, so bonuses become less important. They also have programs where employees can buy discounted public shares in the company and stuff like that. So it's a whole different ballgame they are playing. Don't even try to compare yourself to them. I am currently in the interview process right now for a position at Amazon and they follow a similar strategy to Netflix. You have public share buying program that allows you to do well with a growing public stock, plus the base salary they are offering is insanely high (higher than it should be honestly). So despite not offering a bonus program, it is still a good deal because they are paying you so much that the bonus doesn't matter. I worked at a small company of < 10 employees when I was first starting my career and they did a profit sharing program like what I listed above. A certain percent or profits were set aside and split among employees. I was a higher-level position so I got a significant portion of the profit pool. As the company did better the bonuses became VERY SUBSTANTIAL. I was getting under-paid with my salary, but after bonuses it put me in the top 5% for salary ranges for my job title. The owner was happy because he allowed me to be highly paid, without the risk of paying high salaries up front. Granted it wasn't all wonderful. I did hold a grudge that I felt like I had to wait out the bonus each year because if I didn't get the bonus than I was just getting a moderately low salary for my position.
mitchdoogle 6y ago
Isn't that the primary risk of operating a business? You don't know if you'll make as much (or anything) next year? I would just give them a little bit more than standard annual cost of living raise, maybe 4-5% instead of 2%.

dilyevsky 6y ago

By netflix logic you’re already paying top of the market so you should be good.

55555 6y ago
Note the Netflix strategy only works for high profit per employee, highly scalable firms.

peteretep 6y ago

When I take dividends, 20% of the value I take gets distributed to the staff

ipaddr 6y ago
I think by pooling and sharing a fixed amount the reward is company wide not connected to individuals. That aligns everyone to work as a team to generate enough income that you will allow you to take a dividend. I like the approach for smaller business.

mst 6y ago

Find a project to call the justification for a bonus - that way the project is the thing, and there won't be a repeat expectation set up. (we paid december bonuses on exactly that basis once and then the next year wasn't as good and one of my team thought he'd fucked up to not get a bonus again, so the project oriented thing is way superior even if it's the same money being given to the same people for the same reasons overall)

Broken_Hippo 6y ago

You can decide to give a bonus because your company did well, and tell folks it is probably a one-time bonus. It is a bit difficult to then make this apply to Netflix, though: They are Huge at this point. If I remember correctly, they profit. They can probably safely give small raises, increasing overall financial security for workers. They can, however, still give employees a one-time bonus.

einpoklum 6y ago

Well, why don't you consult them? First set aside the amount of money you were thinking of paying. Now think of some options, e.g.: * Paying the bonus. * Improving office amenities. * Buying each employee an expensive present. * Funding a family vacation for each employee. * Making a sizable donation to a worthy cause (collectively or for each employee). * etc. Then have a meeting with them, and ask them which they would prefer. Try to reach a consensus they all say they can live with.

loginatnine 6y ago
This. At a scale of a small company, everyone could benefit from it the way they want and you get transparency and include them in the discussion. It doesn't really scale when you are bigger though.
emodendroket 6y ago
I can practically guarantee they are going to want the cash.
- Viliam1234 6y ago
  Yeah, seems like a straightforward choice. > Paying the bonus. Gimme, gimme! > Improving office amenities. Not bad, but... it would depend on how much money we are talking about, and what office amenities it would buy. For example, once I got a new $1000 office chair that felt less comfortable than the old cheap one -- I definitely would have preferred the cash. On the other hand, once I had to work with a barely functional mouse, and I would gladly spend my own $5 to buy a new one, but that would be against the company policy, so I couldn't. In general, greater computer screens, more memory, more disk, better mouse -- good idea. (I have no idea what makes many software companies try to save money on this. It is a fraction of the developer's salary, and it can have huge impact on productivity.) Expensive chair, expensive table, art or whatever -- I would probably prefer its worth in cash, because companies typically buy stuff way more expensive than I would. Fit ball could be fun, though. At the end of the day, the cash remains mine, especially if I invest it wisely. The office amenities that company gives, the company can take away. And I can't bring them to my next job either. > Buying each employee an expensive present. Just no. If it's something I want, I can buy it myself. If you buy it without asking me, there is 99% chance it has zero value for me. > Funding a family vacation for each employee. Again, I can do this myself, if you give me money. And I prefer to keep my family separated from my job, thank you. > Making a sizable donation to a worthy cause (collectively or for each employee). Another thing I can do myself, thank you. Also, high chance the "worthy cause" will be something super politically correct, and I don't want to be that bad guy who publicly opposes it.

foogazi 6y ago

What about profit sharing? The first time I ever got stock options I discounted them as being worth $0. This was small private company. But the company paid out profit sharing based on all the outstanding shares including unvested ones. So if we made a profit everyone got a profit bonus early in the next year. We were all stakeholders.

jacurtis 6y ago

For a small company like that I would implement basic profit sharing. Set aside a certain percent of company profits (10-15% is fairly common) and those profits are distributed among the employees. The way you distribute it among employees can get tricky. If everyone is in a similar position you could split the pot evenly. Otherwise you can implement a points system. Maybe the lower level employees get 1 point each. The manager gets 2 points. At the end of the year the profit pool is distributed per share (so the manager would get twice the bonus of the lower level). This is the easiest way to manage it. You'd want to run some hypothetical numbers first and talk to an accountant, etc. But this is a good way for a small company to manage bonuses. Don't worry about Netflix. The Netflix strategy is that they are overpaying you to begin with, so bonuses become less important. They also have programs where employees can buy discounted public shares in the company and stuff like that. So it's a whole different ballgame they are playing. Don't even try to compare yourself to them. I am currently in the interview process right now for a position at Amazon and they follow a similar strategy to Netflix. You have public share buying program that allows you to do well with a growing public stock, plus the base salary they are offering is insanely high (higher than it should be honestly). So despite not offering a bonus program, it is still a good deal because they are paying you so much that the bonus doesn't matter. I worked at a small company of < 10 employees when I was first starting my career and they did a profit sharing program like what I listed above. A certain percent or profits were set aside and split among employees. I was a higher-level position so I got a significant portion of the profit pool. As the company did better the bonuses became VERY SUBSTANTIAL. I was getting under-paid with my salary, but after bonuses it put me in the top 5% for salary ranges for my job title. The owner was happy because he allowed me to be highly paid, without the risk of paying high salaries up front. Granted it wasn't all wonderful. I did hold a grudge that I felt like I had to wait out the bonus each year because if I didn't get the bonus than I was just getting a moderately low salary for my position.

mitchdoogle 6y ago

Isn't that the primary risk of operating a business? You don't know if you'll make as much (or anything) next year? I would just give them a little bit more than standard annual cost of living raise, maybe 4-5% instead of 2%.