Compensation · 3 COMPANIES

Individual bonus or profit sharing?

Which behaviors can reward systems unintentionally encourage?

Short answer

Individual bonuses sharpen focus on measured targets but can create local optimization and internal competition. Profit sharing strengthens shared outcomes but can weaken the link to individual contribution.

Shared patterns

01
The reward time horizon shapes the behavior time horizon.
02
If the formula is not understandable, rewards create speculation rather than trust.
03
A deliberate balance is needed between company outcome and individual contribution.

Important differences

Buffer emphasizes formula-based profit sharing, Bending Spoons strong fixed pay and long-term impact, and 37signals shared outcomes.

Trade-off

A simple formula looks fair but may flatten contribution differences; a complex formula becomes opaque.

Put it into practice

First decide whether the behavior you want to encourage exists at company, team or individual level.