Thursday, December 08, 2005

 

Executive Decisions: A utility theory of bonus allocation.

It's December, people are singing carols at train stations and shopping malls, letters to Santa are being written. Yes it's that time of year again - financial year end and bonus time, either this month or in the following months. A time of much heartache, emotional distress and intrigue. That's just the senior management side of things, imagine how the worker bees feel. The process in most firms is a mystery.Who gets what when and HOW much. Are they worth it? what I did I do wrong ? etc.The speculation of winners and losers in winning at the loser's game provides good fun well into the new year for all involved. The bonus, VICP, performance-related compensation, whatever you want to call it, is in most cases a purely discretionary gesture. There is no entitlement or obligation to pay anything. Why do so many people forget that?.

Here are some basic rules for a general theory of bonus pool allocation for senior managers :



Follow these simple guidelines outlined above and be merry.Don't worry about the long term. Manage for the short term, manage for the stock price, but above all be kind to youself.It's tough at the top.

RB

Excerpt from International Herald Tribune 28/11/2005 follows:

As an ambitious college student, Cassie Napier had all the right moves - flips, tumbles, an ever-flashing America's-sweetheart smile - to prepare for her job after graduation. She became a drug saleswoman.
Napier, 26, was a star cheerleader on the national-champion University of Kentucky squad, which has been a springboard for many careers in pharmaceutical sales. She now plies doctors' offices selling the antacid Prevacid for TAP Pharmaceutical Products.
Napier says the skills she honed performing for thousands of fans helped land her job. "I would think, essentially, that cheerleaders make good salespeople," she said.
Anyone who has seen the parade of sales representatives going through doctors' waiting rooms in the United States has probably noticed that they are frequently female and invariably good-looking. Less recognized is the fact that a good many are recruited from the cheerleading ranks.
Known for their toned bodies, small skirts and persuasive enthusiasm, cheerleaders have many qualities that the drug industry looks for in its sales force. Some keep their pompoms active, like Onya, a sculpted former college cheerleader who on Sundays works the sidelines for the football team Washington Redskins and who asked that her last name be withheld, citing team policy. But on weekdays, she urges gynecologists to prescribe a treatment for vaginal yeast infection.


Comments:
Thanks Oliver.
 
I discovered your blog through the above Bloomberg story, very entertaining and well written, please keep it up
 
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