That sometimes works, if the company is large enough to have real profits but small enough for the individual's contribution to matter.
There's nothing wrong with incentives, really, as long as they are (1) meaningful, and (2) fair. But in practice, they never are, so Joel's points are all valid. Really, this is just another special case of "bad management sucks". A good manager in a good system is capable of providing incentives that motivate her employees. A bad one can't, but will do it anyway. So it looks like the bad incentives are the problem, when really it's the process that's flawed.
There's nothing wrong with incentives, really, as long as they are (1) meaningful, and (2) fair. But in practice, they never are, so Joel's points are all valid. Really, this is just another special case of "bad management sucks". A good manager in a good system is capable of providing incentives that motivate her employees. A bad one can't, but will do it anyway. So it looks like the bad incentives are the problem, when really it's the process that's flawed.