

Balsamiq and profit sharing. Should be read alongside Balsamiq on salary. - marklittlewood
http://blogs.balsamiq.com/team/2011/09/12/profitsharing/

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rapind
Seems fair except maybe for the part where compensation takes living expenses
into consideration.

If an employee decides to live somewhere cheap and it works out well, then
they should see the benefits of this decision. If it means the employer must
make certain sacrifices to accomodate this (telecommuting issues), then the
employee should bear some extra cost to cover that, but it shouldn't be
related to his living expenses.

If an employee chooses to live in Manhattan so they feel plugged in or w/e
then they're responsible for covering their exorbitant rent.

Only if the employer demands they live somewhere specific should living
expenses be taken into consideration.

~~~
skrebbel
Note that this is just the bonus. The salary is _not_ dependent on local
living expenses, but on average income for similar work in the area (plus a
little bit).

~~~
johnrob
Why should a bonus be treated any differently than salary with respect to
living expenses?

~~~
nknight
I see no more insanity in basing a bonus on cost of living than in basing a
salary on market rate. They're both outside the direct control of either party
and lack any fundamental relationship to the properties of the particular
company.

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marklittlewood
Read this alongside the _salary_ article that was posted
<http://news.ycombinator.com/item?id=2986379>

Balsamiq is a fairly unusual business and Peldi has grown something pretty
extraordinary. This is a highly profitable business that has made a conscious
decision to be great on its own terms, not on the terms that a Silicon Valley
venture capital firm might impose on the business.

If you want some more background, go and watch this video of the talk Peldi
gave at Business of Software last year. There is also a transcript you can
speed read if you don't have an hour to spare.

[http://blog.businessofsoftware.org/2011/08/do-worry-be-
happy...](http://blog.businessofsoftware.org/2011/08/do-worry-be-happy-peldis-
brilliant-talk-about-keeping-sane-as-a-software-ceo-video-transcript.html)

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stuff4ben
I've never worked at a startup that was consistent about giving out it's
bonuses. Usually they did some variation of the "making our numbers" policy
usually in place at larger corporations. As a startup, you hardly ever make
your numbers. So I've come to discount bonuses altogether (along with
worthless stock options) when negotiating my salary. Now that I'm at a bigger
company, having a consistent bonus every year is quite nice. There are
tradeoffs to be made though...

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palves
The impact of seniority in the profit sharing program is way too big, in my
opinion. I don't even exactly understand what seniority has to do with it, and
I'm a (very?) senior developer, working professionally for more than 10 years.

Isn't it an incentive for working less as you become a "dinosaur" in the
company? I mean, we can't make the time stop - this is actually an
automatically increasing prize, regardless of your performance or any other
thing whatsoever, and I'm a little uncomfortable with automatic prizes.

Besides, seniority is already reflected in the salary. Additional prizes
should be a direct consequence of productivity, which again, have nothing to
do with seniority.

In general, I'm very much in agreement with Peldi's ideas and admire the
openness he cultivates but I just don't get this one.

~~~
kelnos
_I don't even exactly understand what seniority has to do with it, and I'm a
(very?) senior developer, working professionally for more than 10 years._

The seniority portion is based on time working for the company, not on time as
a developer in general.

 _Isn't it an incentive for working less as you become a "dinosaur" in the
company?_

Presumably there are other checks on that, like performance reviews. If my
performance gradually degraded year after year, I'd expect to be talked to
about that, and fired if I didn't improve.

 _Besides, seniority is already reflected in the salary._

Sorta -- they base salaries on average where you live for a similar job + a
little bit. That's a different kind of seniority than the bonus depends on.

I question how "fair" a bonus structure really can be. At my last company
bonuses were entirely random, and weren't always fair: I received several
bonuses (that I do believe I deserved), but there were many others who should
have been recognized as well on different occasions who weren't.

The bonus here is sort of a macro performance level. Everyone gets to share in
the profits of the company when the company does well, and they share somewhat
proportionally based on how long they've been with the company. Assuming the
company is doing a good job of making sure everyone is performing well and not
allowing people to slack off, it's a reflection of your loyalty to the
company. And for a startup, it's also maybe a reflection of the amount of risk
you took on (employee #1 took on loads, employee #75 took on much less) when
you joined.

Then again, maybe I'm just jealous; I've never worked for a company with a
profit-sharing plan, but would like to. It feels much more equitable than the
traditional stock-option route most companies go for. Though the upside is
that for stock options, you just need to stick around until they vest, while
with profit sharing you need to stick around until the company is profitable,
and you only get payouts while you're still there. Pros and cons to
everything, I guess.

~~~
palves
I'm not questioning the profit-sharing, that's a great incentive (the best
IMO) and I'm actually working in a company with that incentive. I'm
questioning _automatic_ prizes.

Bonuses are incentives, and they only work if they make you work differently
that you would if there wasn't any. That's not what happens with seniority.

Maybe the incentive is not to work better but just to retain the seniors in
the company. But retention is a completely different problem altogether.
Bonuses tied to profits may not be the best way to retain people if you have a
bad year (no profits). I think competitive salaries are a much better
incentive for keeping people in the company (better pass the message that you
want them to work with you, regardless of how well the company's done on that
year).

And sure, performance reviews can be unfair but that's not a reason for
dismissing them - just keep improving the way you conduct performance reviews.
At a certain point, you'll have to have some kind of peer review, better start
now. There are many companies where these reviews actually work well.

The problem is that almost everyone who had bad experiences with performance
reviews in previous companies (which seems to be the case of peldi) tend to
dismiss them instead of improving them.

~~~
kelnos
Mmm, very good point. Perhaps (as you suggest) the bonus structure isn't
intended as an incentive to work harder/better.

But it does seem like a poor method to retain people... I feel like my bonus
growing over time wouldn't be much of a motivator to stay if the work wasn't
keeping me super interested, and my base salary wasn't growing enough to
remain competitive. Maybe that's just a bias of mine, though, not to consider
the bonus as a top criterion? Dunno.

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chanderson0
Back-of-the-envelope math:

Suppose Google were to implement the same policy. Their quarterly profits last
quarter were $2.5B, and had approximately 30,000 employees. So 10% of $2.5B
split among 30k employees means an average quarterly bonus of $8,300, or a
yearly bonus of $33k.

This seems like a pretty good bonus, particularly since if Google used
salary.com to define their salaries, an incoming software engineer in the Bay
Area would make $70k.

~~~
onemoreact
On day one you would only be getting 2.5% not 10% so 8,250$. However, if you
have 4x the average senority then you would get 33k x (.75 x 4 + .25) = 107k
which would be much harder to walk away from.

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jaryd
Have you guys considered opening up the books to the public as well?

Note: This question is partially relevant to the adjoining article "Balsamic:
Salary Policy"

