Product Managers: Q3 is Ending. Are you Going to Miss Your Bonus Again?
As the third quarter draws to a close, many product managers are asking themselves “Am I going to miss my bonus again?” Product manager incentive compensation is always a tricky thing. Product managers have responsibility but rarely have authority. It is hard for them to directly influence events and performance. As a result, it is hard to ensure the achievement of bonus targets. By the end of the third quarter, most product managers know where they are going to land in regards to their annual bonus. What can they do so that the pattern of missing their bonus is not repeated?
Product Manager Incentive Compensation
Product management is a well-paying job. Salar.com reports that mid-level product managers in the U.S. earn on average $90,000 in base salary and $6,6450 in bonuses in 2021. An annual survey from the Pragmatic Institute broke down the typical factors to calculate a bonus:
Factors for Calculating Bonus (% Bonus Eligible PMs Reporting)
- Average Bonus: $14,800 (14% of base salary)
- 89% Company Revenue/Profit
- 61% Personal Objectives
- 34% Product Revenue/Profit
- 5% Market Visits
- 9% Other
Around 60% of product managers are eligible to receive some type of equity, like stock options or restricted stock units. The reality is that the days of hitting the stock option lotto are gone. Check out The Liquidation Preference Effect -Your Equity Could Be Worth Millions — Or Nothing. It does a great job of describing the reality of equity compensation in today’s market.
As noted in The Challenges of Product Manager Incentive Compensation some challenges include:
- Low Leverage. When only 15% of compensation is ‘at at risk’ there are not many reasons for product managers to excel.
- Total Incentive is Capped…