Bonuses and OKRs at Gtmhub
When introducing OKRs, businesses often wonder how do they fit in performance appraisals or bonus schemas. Every organization will have its own take and in this post, I am going to share how we are doing this at Gtmhub.
No individual bonuses
We are a relatively small business, so this works well for us. Namely, the bonuses are given every quarter, but everyone in the company gets the same bonus percentage (based on their salary).
The reason we are doing this is that we are optimizing for alignment and teamwork. We want everyone to think how to help the company reach its targets, as opposed to optimizing for individual gains.
A valid argument against this could be that it’s not fair to the top performers. Our thinking here is that everyone at Gtmhub should be a top performer; those that are not – have a wide choice of big, boring companies where they can go into early retirement.
Shortly: we win together and we lose together.
All of us have one single – company target – per quarter. This could be new sales, MRR, churn, expansion MRR, usage metric and so on… whatever we deem is the North Star metric for that quarter.
This is always a number.
Typical objections we’ve heard here is that for example, a software engineer cannot influence MRR – it should be sales. Our thinking, as well as experience, is different. We are all here to make our customers successful, and there is a super strong correlation between MRR and customer success. Timely answered support question, quick bug fix, good performance of the software… have as much influence on MRR as salespeople, if not more.
We have six levels of bonuses:
The way we come up with those is to take our bonus target and simply divide that number by the number of grades. Achieving our target equals 25% bonus. So, for example, if our target is to sign 100 new customers in a quarter, bonuses would be given as follow:
- >= 20 customers – 5% bonus
- >= 40 customers – 10% bonus
- >= 60 customers – 15% bonus
- >= 80 customers – 20% bonus
- >= 100 customers – 25% bonus
This makes the bonuses very predictable and objective, as any subjective bias is removed. On the other hand, this makes managing business very simple – as we are basically putting a price tag on achieving our target. As a small side note, we budget for maximum bonus achievement.
OKRs and bonuses
So, we come to the relationship between OKRs and bonuses. In our case, it is almost non-existent.
If a member of our team achieves all of the OKRs, but we don’t hit our bonus targets – that team member will not get any bonus, just as no-one else in the company.
Again, we win together and we lose together .
So, what’s the point of OKRs?
OKRs are our blueprint of how we, together, plan to achieve our bonus target. They are also a reality check – which we use to see how well our strategy and execution translates into results.
Now, if someone quarter, after quarter does not deliver on the OKRs – that is obviously a topic of conversation – unrelated to bonuses, rather to a general viability.
All that being said, our company OKRs do tend to have a very high correlation with our bonus targets.
At Gtmhub, we don’t give individual bonuses. Everyone gets same bonus percentage (from 0% to 25%) depending on attainment of the bonus target.
There is no direct correlation between bonuses and OKRs. OKRs are a roadmap for achieving the bonus target.
We fully understand that this schema may not work well for large organizations, but for us, it works really well.
Lastly, we do recognize difference between bonuses and sales compensation plans. 🙂