Corporate culture and hiring incentives

01/28/13 22:53:00    

By Michael Mealling

One of my tasks at Pipefish as co-Founder is setting the company culture. One part of that is how you setup and frame incentives. Incentives can take all sorts of forms. Some are performance based: did someone meet or exceed a performance target. Some are for aligning motives with the company: stock options with a vesting schedule.

One incentive that some companies get very wrong is the signing bonus. For some the signing bonus is a way to preserve internal salary ranges or compensate an employee for something they are losing by moving. Neither of these are an incentive. They're simply accounting techniques to rename parts of base salary.

Where many companies go wrong is providing a signing bonus with terms that require repayment of some portion if the employee leaves before some period. No one really expects to get that money back. The idea is to create fear in the employee that if they leave they will be on the hook for some large repayment. Not a great way to start a relationship.

One important alternative that many overlook is signing bonuses in forms other than cash or stock options. These types of bonuses can go along way to setting expectations AND culture. Here are a few examples:

• attendance at a professional conference
• free trip to Comic-con
• archeological expeditions in Colorado

Being a space nut the one I'm going to try is a free zero gravity flight. Its about the price of a typical signing bonus and its one hell of an experience. It also sets one of the cultural parts of the company that I want to push: We are a company of smart engineers that see the power of technology to improve and enrich the human experience.

So if you're a Rails developer or a machine learning expert and you want to help change the world, come join us.

Update:

Matthew Maley at TheTechCPA picks up the theme and discusses the tax consequences of signing bonuses like the ones above. The gist is that bonuses like this are taxable to the employee so they would need to be gross up the bonus so the employee doesn't have out of pocket tax consequences.