Off Topic Question

First, before you all tell me to use the general forum, I want to state that this thread is very off topic from CFA material. I am posting in here because I’ve spent the most time reading and “talking” to you all for the past 6 months and I really don’t know anything about the general forum. I trust all of YOUR advice. My question has to do with annual discretionary bonuses. I graduated in May of 06’ and started working for a small firm around August of 06. At the end of 06 I got a small bonus for “doing a good job” etc. etc. but it was more of an atta boy because I was training the entire time. My contract says that I am eligible for a discrecionary bonus at the end of the year. Now it has been a full year and our firm declares bonuses in December, not February. We are small enough and I play a key enough roll to know with about 90% assurance the amount of money the firm netted this year and how much of it correlates to my direct involvement. Now, because this is my first full year in industry, I was wondering if it is normal to discuss the bonus figure when they call me in. I’m not sure if it’s something where they give you a number and that’s that or there is room for discussion. Perhaps it is different at every organization and different for various positions in the firm. I don’t want to be rude or presumptuous but I also don’t want to be undercut. Can any of you share your experiences and maybe give me some advice? Should I “present” all the data I’ve collected or just take what they give and either be happy or start looking elsewhere. If it makes a difference, all of the partners have extensive experience in banking, servicing, and consulting and each deffected from a bulge bracket. From my experience and from talking to friends at bulge brackets, it appears as though they have set up this firm similar to what they are acustomed too for the most part.

If your contract explicitly stipulates that you’re eligible for a bonus after one year, then I wouldn’t think you’re out of line if you bring it up, especially if you have a great working relationship with the management and they think you’re doing a good job. It’s really important what the culture of the place is and co-workers that have been there for a while might be able to provide an inkling as to how management handles these situations. Is there anyone you can talk to about that? Some firms have policies that are more rigid than others and that plays a role as well. In terms of prep for performance reviews, it never hurts to put together a list of stuff you’ve done well (remember to provide EXACT dates, #s, etc that’s crucial - keep a log of stuff you want mgmt to know about and bring it up without being presumptuous at your next perf review), better be overprepared than underprepared. Most importantly play it by ear, no substitute for that, since there’s no one size fits all advice here - do your homework and see which way the conversation goes when you sit down with them and act accordingly. good luck.

my comments are from employer’s perspective after many hundreds of bonus discussions with staff: Think of your bonus as a business plan, not an entitlement or promise or part of a contract. To get a bonus of $x you need do demonstrate that you made the firm (or saved) double that. And that means over and above your normal job, because that’s what you get your salary for. Go to your boss with a 1-pager (with attachments that show details) that looks like a business plan. Make a convincing case and they can’t say no to you. In fact if you think you want say $10k bonus, then aim for $20k and make up a good case for it. Even in the back office you can demonstrate how you’ve added value - streamlined a process, automated a system, fixed errors or problems, prevented clients from leaving after FO stuff-ups, helped/trained new staff, reduced compliant numbers, etc. If you can’t demonstrate how you’ve added value or made (or saved) the firm money somehow, then you’re probably approaching your job the wrong way. Start working on this from now on and set a date in say 3 months to try again. Avoid common mistakes like taking credit for others’ work. Instead show how you worked as a team, etc. Don’t be vague and indecisive - walk in and say “I am seeking a $20k bonus because I earned/saved the firm än extra $40k and here’s how…” The aim is to make it easy for your boss to justify to his/her boss why you should get the bonus. If they say no, then ask spefically why, and what you need to do to get one. Don’t settle for next year, get them to set specific targets for 3 months, then go and do it. If you’re in a booming sector where anybody with a pulse is highly sought-after, then you’ll probably get a bonus just so you won’t leave for more money somewhere else. But in most parts of the industry you need to demonstrate why paying you a bonus makes commercial sense for the firm. At the monent you probably view the firm paying you a bonus is a COST to the firm. Instead , start viewing it as an INVESTMENT which more than pays for itself in the value you have added. Plus if you demonstrate that you are thinking like this you will probably get promoted as well!! good luck…

great post null&nuller, am kinda facing the same situation but with my salary review. i currently work in the BO for a large investment management company. i have been here for 10 months and i think ive accomplished multiple objectives. i was thinking on asking for a 12% increase in base, but dont know if this number makes sense or not. cart

cart10, same goes for pay rises. when you say “I think i’ve accomplished multiple objectives” - are they the same as your job description or your department’s objectives? or your own personal objectives - which might not be the same thing. When the boss says “why 12%?” you better have a good answer… Why 12%? why not 10% or 14%? You need to find out what you’re worth to the market and what you’re worth to the firm. Back to putting a value on the value you add to the firm, then selling it to your boss. BO is harder to value than FO in many ways, but not impossible. BO gets kicked from all sides (FO, regulators, auditors, clients, IT, finance, etc) so your BO boss also gets kicked from all sides as well, plus staff to worry about. What the firm wants is a clean, efficient, streamlined, hassle-free, cost-effective, no surprises back office. Ask the boss what his/her biggest problems are (just hope he/she doesn’t say “you”!) and then set out to solve them. You’ll get the pay rise and the promotion… cheers…

agreed null&nuller, actually, i had my year-end review. It was as i expected it, very good. i received postive comments on my overall performance and the special projects I did throughout the year. probably i did word my question properly, but what i would like to know is if 12% is doable number? have you seen people in the BO getting that or a higher percentage? i have been in the market for 10 months, as a result, my experience in this type of situations is zero. cart

cart10, Your boss has a total figure to give out for the whole department. If that total figure is 12% across all of you, and if you are “average”, then you may get around the 12%. In the back office the number will be tied to what the overall firm is making. But in any market, 12% average rise for the BO is big, so 12% is a big ask. That means you’ve really got to sell yourself and have a good story. Also depends on what sector your firm is and what part of the cycle. I started out in the recession of 82 and everything was flat. The only way to get more was move up or out, so I did. Same again in early 1990s. Your job is not about the money. The most important thing is get experience and learn. What they pay you is really just a reflection of what they think of you - and whether they are likely to give you more responsibilities & bigger roles in the future - that’s what really counts. In most places getting 12% more for the same job is unlikely - unless you are really underpaid now. Since you’ve only been there for 10 months, sounds like you might be an intern or on probation, so you are basically on trial for them to have a look at you. From that situation I’ve seen people get 50% or even double their salary when they go off probation onto the real salary scale, once they prove themselves. Find out what other people around you earn - or ask HR for the general pay scales for the roles. If you are paid say 30% below the normal rate for the role, then 10 months is usually enough. Ask to be put on the normal scale because you’ve proven yourself - and have the facts to back it up. If you’re already on the normal pay scale, what you will need to focus on is demonstrating that you are adding more value than the 12% you will cost them. This means more projects, more responsibility, bigger role, etc. hope this helps cheers…

OT is dead and gone.

null&nuller – thanks for sharing all your thoughts on this topic. I think it will be of great help to many of us who don’t have as much experience in the industry and don’t know how to go about asking for raises/bonuses. Cheers!

yeah, it looks like he has 20+ years of experience, while i only have 10 months. I will keep his thoughts when meeting with manager re rise and year-end bonus. i think am being underpaid and definetely will bring this to the table.