Rethink Your Bonus Program
episode
“HR Heretics” | How CPOs, CHROs, Founders, and Boards Build High Performing Companies
16 min
2 speakers
8 chapters
transcribed 12 days ago
Transcript
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Transcript generated automatically by AI and may contain errors.
Why do early‑stage companies struggle with traditional annual bonus programs?
Hey everybody, how are you doing? Nolan and I are back here for another uh Dear Heretics, Nolan. Some people want some advice on some stuff. We're
back, baby.
We're back. Um all right, so this one came in. It's it's a great one. And by the way, keep 'em coming, everybody. I mean LinkedIn message us, text us, um, send us your, you know Your your your darkest thoughts and questions and and needs. Hate mail's fine. Send it to Nolan, not me. But these are great, so keep them coming. I think we have like four in the queue. So this one's about bonus programs. This question came in and this person says, Hey I'd love for you both to talk about, you know, what you've seen, what you think, what's happening with bonus programs right now. We don't have a bonus program at our company. We're thinking about doing it. The group's kind of split. What's going on out there? Gimme give me some fodder on this.
Yeah, it feels like every like Three to four years, there's like this like rotation back in, and everyone's like, We need to have an incentive bonus program. So I feel like we're right squarely like as that wave is peaking again. Here's my general take. I've built these. I think obviously for sales. It's obvious. Like you have to have this, not from day zero, but like once you understand the ICP and the motion, it's very well understood, like what the metrics need to look like, and then working backwards from those to build a compelling incentive plan for your sellers. That's obvious. This question, Kelly, is more around like what about everybody else? And how should we think about it? So the high level of the way I've thought about this is like
How does the cyclical sales‑incentive wave affect bonus design?
What stage is the company? And I find for early and mid stage companies, it is incredibly challenging to build one of these programs because the goalposts are always moving. And when you design one of these programs. Typically you are anchoring in like I want you to move these metrics in this way. And you know, as the old saying goes, incentives drive behavior. And so I find that bonus programs at the early and mid stage companies are very challenging to implement and then maintain because shit is just changing all the time. And it becomes like, oh, we wanna pivot or we wanna go run an experiment. Well, the next question then you have to ask is like, well, how does this fit in with our bonus program?
And are people going to feel compelled to do the thing that we want them to do? So that's thing one. Thing two is like Look, bonuses uh do drive behavior. It is just objectively true. I also think like we could solve this problem just by paying people really well to begin with, and then having a very high performance culture. And such that like we don't need to like, you know, coin operate every additional thing that this person does, which it does feel a little bit transactional to me. It's like the worst of human dynamics of like, okay, great, Nolan, I would like you to source 50 more profiles a week and I will give you five hundred dollars to do it. And like, fuck, I'll do it. But am I gonna do it because it's the right motivators?
Like, probably not. So that's my overarching take, Kelly. What's your take?
Yeah, it's it is complicated, man. Like I just talked about this with a company I was working with actually. Um So I got a I got a Radford report, right? With the short term incentive report and it's pretty crazy that like ninety two percent or ninety six percent of companies have a bonus program. Even like early stage, right? Kinda it it gave the you know, the distribution series A through E in public companies. I feel like a lot of companies, Nolan, f like it's a legacy thing. Do you know what I mean? Like everyone has one. So we have to have one because what happens in the recruiting process is the OTE, right, the on target earnings. They're just not equal.
What is the “coin‑operating” problem and why does it create people‑debt?
So all these candidates are like, Well, my base is two hundred K plus a thirty percent bonus. And then this company is trying to get them, doesn't have a bonus, so they're like, Shit, do we do a sign on bonus? Do we do hire guaranteed comp?
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Chapters
8 chapters
1
Why do early‑stage companies struggle with traditional annual bonus programs?
0:03–1:40
2
How does the cyclical sales‑incentive wave affect bonus design?
1:40–4:00
3
What is the “coin‑operating” problem and why does it create people‑debt?
4:00–6:00
4
Why is it hard to roll back a bonus program once it’s launched?
6:00–7:52
5
How do technical‑debt analogies help explain “people debt” from bonus programs?
7:52–10:36
6
What are sprint incentives and how can they replace rigid annual bonuses?
10:36–12:32
7
How do spot (surprise‑and‑delight) bonuses boost morale and performance?
12:32–14:19
8
What practical steps can leaders take to avoid people‑debt and stay agile?
14:19–16:02
Speakers
2 identifiedMore from “HR Heretics” | How CPOs, CHROs, Founders, and Boards Build High Performing Companies
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