[mindvirus]

You have to know what you and others are optimizing for.

In big companies, it's rarely the success of the project. Usually it's a combination of keeping your job and growing your career.

Most big companies provide limited upside for success, and the downside risk is higher for the people. Consider:

1. The project is successful. You get a nice little bonus at the end, if anything. Maybe a promotion a year later.

2. The project is a failure and people can point part that you were responsible for. You get nothing, or worse, you're fired.

3. The project is a failure, but people can't point at you as the reponsible party. You keep your job, even get a small raise because you did your part.

Part of this is inevitable in my opinion, but organizations should really ask themselves what behavior they're incentivizing and rewarding, especially in a repeated fashion. If your people swing for the fences and miss -- what happens, and how does that compare to the people who bunt or stay on the bench?

[fnordpiglet]

First I would say most organizations aren’t optimizing for anything. They’re accounting constructs.

Second, however clumsily done, this is what equity incentives are supposed to achieve. The better you do, and its impact on the actual value of the company, the more your equity is worth. There are obvious problems in the model, but at least it’s slightly deeper thinking than the typical “you get paid don’t you?” model.

Wall Street, particularly front office revenue production, has very much a “you get paid proportional to the impact of your work” model. Often times when I worked in trading my total compensation could be many times my base salary (which while more than a teacher was less than say Amazon’s base salary). The problem though is the “impact” of one’s work can be manipulated by bias or short term acting, or worse what’s called trader option, where you take outsized risks assuming if it blows up and you get fired you can just work elsewhere, but if it doesn’t you make a lot more. But your firm carries the most risk because while your upside is uncapped your downside is capped - but your firms downside is not.

[p_l]

However, even being on a possibly company-critical project means little to value of one's equity, especially post-IPO.

There's little to no rationality involved in pricing of public shares, and nothing you do as individual contributor has any impact.

Now, if you were a high level manager and could order a layoff...

[mindvirus]

I meant what the people are optimizing for. However, even equity has its faults: equity has to vest for it to be worth anything (and later, be exercised for strike + AMT). The expected value of impact could be high, but if they have a higher chance of getting fired and losing their unvested equity, they might not. Many people are risk adverse - for example, would you pay $100k for a 25% chance to win $1 million? Entrepreneurs might say heck yeah, but most employees wouldn't.

I think incentives are part of the solution, but culture is the other part. The organizations views toward risks and failure are going to shape how people place their bets in their career.