The eye-popping numbers involved with annual bonus payments in the securities industry each year leave even hardened veterans agog. But gone, at least for this year and a few more to come, will be much of the usual gut-wrenching suspense and pathos at bonus time. Pleasant surprises, in the world of compensation management, are a waste. The key challenge for financial firms most of the time is to meet the expectations of their people, and to pay no more.
"The only time I've ever seen a grown man cry," says one amused consultant, "was when an investment banker received a $3 million dollar bonus." They weren't tears of joy. The banker, it seems, had been expecting $5 million for the year on top of his salary. And Wall Streeters like him don't forget their disappointments. They have a nasty habit of walking out.
"Bonuses are misunderstood," says Alan M. Johnson,...
