Amazon and the Compensation System: Brilliant or Unfair?

Today, I'll discuss how compensation and performance reviews work at Amazon (AWS), and how it differs from the approaches of other major companies. We'll analyze what it means to be a "total compensation company" and how performance review scores affect your income.

First: How it works in other companies?

For example, at Google, everything is quite transparent. There's a base salary, which is slightly above market average, and performance reviews are conducted twice a year. Based on the results, your salary can increase, and you may receive cash bonuses and stock options. It all depends on your performance review score, ranging from "meets expectations" to "exceeds expectations." Getting a high score is not easy, but the system is generally clear and understandable. A similar approach is used in other Big Tech companies.

It's important to note that your results are evaluated for a specific period, and if you perform better than others, you immediately see the benefits in the form of bonuses and stock options. This motivates you to strive for more, as you can use the money for vacations, buying a car, and so on.

Now, about Amazon: A brilliant system without bonuses

Amazon, unlike the companies mentioned above, is a "total compensation company." What does this mean?

1. Everything you receive in a year is specified in your contract.
There are no surprises or bonuses for extra effort. Want to work overtime on weekends? It's your decision, but you won't be paid extra for it.

2. Performance review scores affect stock options, not bonuses.
The performance review takes place once a year. Your manager evaluates:
* your performance,
* your potential (especially if you're new).

The final score affects your "total compensation" – the total amount, which includes your base salary and the value of your stock options. If Amazon's stock is rising, the stock options can be valuable. If it's falling, that's your risk, and the company won't compensate you for it.

3. Delayed benefits.
Even if you receive a high score, you won't receive additional stock options immediately, but only in the following year. And your base salary will only increase slightly.

Why does this work?

From a management perspective, this system perfectly shifts all the risks onto the employees: the economic situation, the stock price, and a poor performance review – these are all your problems.

However, there are also drawbacks: the difference in compensation between regular employees and top performers is not that significant, even though their contribution to the work may be enormous.

Conclusion

The compensation system at Amazon is a long-term game. It may work for those who are willing to wait patiently and believe in the growth of the stock. But if you're used to direct motivation – "I'll work hard now and get a bonus and reward myself" – you'll find it difficult here.

It's up to you to decide whether this is a brilliant approach or corporate exploitation.

P.S. This was one of the main reasons I left Amazon.

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