It’s too late to make any difference to your 2011 bonus if you work at a US bank, but if you’re at a European bank you might still be in with a chance of favourably influencing its size.
Contrary to what HR or line managers will tell you, your year-end bonus number is not at all to do with that clichéd list of 1) how well you’ve done 2) how well your team has done and 3) how well the bank has done. In fact, the link to these three factors is tenuous, at best.
This year, managers have done such a good job or perpetuating the myth that, with all the economic uncertainty and market volatility going round, the bonus is “still having a job by year-end”. End of conversation: let yourself out and pick up your measly bonus letter on the way.
It is easy to be fooled into thinking that senior bankers killed the golden goose, and that anyone who started their career in banking after 2005 will never make any real money again. The good times were very good to the generation of people which came before us. Even the moderately smart and slightly hard-working have houses in prime locations, luxury car collections, and all the trappings of wealth we can only for.
The nasty fact is that it will take our generation much longer to get to the same place.
The game’s not over though. Money is still being made in the City, although it’s anyone’s guess how long this will continue for. The difference now is that you need to fight harder for your bonus. Strategies need to be adopted. Strategies which weren’t necessary previously.
Actually, bonuses are paid according to the following formula:
Bonus amount = (perceived ability to generate money OR how invaluable you are perceived to be by those who generate money) x (willingness to leave if your bonus disappoints).
In other words, to keep the money train chugging away, banks will pay a premium, as long as they suspect that if they don’t, the cash cows will jump ship and leave them with a time-consuming and expensive recruitment process.
Another important point is that you don’t actually have to be the cash generator. Just as long as you’re close enough to the money-men, you’re golden. Management need to keep them happy.
Lastly, you can perform well, but if bosses think they can pay you a low number and you won’t make a fuss - either because you’re already so well off that you don’t really need the cash, or you’re simply too afraid to - then you’re running a real risk of getting a donut this year.
As the saying goes: the negotiations are only over when I say they’re over.
We juniors need to have subtle conversations with our bosses well before the bonus period begins, reiterating to them that the cost of living is going up and up in London. Rental yields are rising; inflation is hitting the moderately well-off more than the super-rich.
A good example of this is a friend who started on a low base salary at a London P.E. fund, on an unwritten promise he'd get a meaningful pay rise and a decent bonus if he performed well, which he did. The firm makes about £10m a year in management fees alone, and his bosses are already very comfortable - living in their own high net worth bubble, insulated from risingLondonrents and MBA debts, long repaid.
You can have this conversation during downtime in the back of a taxi en route from a meeting, or as you’re heading out in the evenings (a good time to chat since for the most part, senior staffs’ slate is clear and they’re relaxed), or at team drinks as you wait for your round. But make sure you have it.
You need to make the following two points: your own impact on P&L and how others aren't as good as you. Since bonuses are doled out on a ranked basis, you goal is to look better than your peers, and you need to plant those seeds of thought now. Hint at broader market knowledge (“our competitors at Deutsche Bank are doing XYZ by the way”, “Morgan Stanley’s desk has had a good year”) - this illustrates that you've been interviewing speculatively elsewhere.
Contrary to popular belief, letting them know this is not a bad thing at all. They’ll respect you more for it.
In the poker game that is your career, your goal should be to demonstrate that you’re committed, and worth keeping, but aware of the broader market.
The author works as a banker in London and has seen more bonus rounds than he’d care to remember