How large should an executive’s target bonus be as a percentage of their salary?
Getting these ratios wrong can hurt retention or misalign incentives of your top execs.
From 20% for VPs of HR to 100% for VPs of Sales
The results based on an analysis of 2,700+ execs:
Our data science team took a look at both the medians and the modes (most common) by executive role. And as a key caveat, this analysis only looks at executives with a defined target variable/bonus plan in place; it’s worth noting that many execs in tech are on a 100% salary cash compensation plan.
• VP of Sales: 100% (median), 100% (mode)
• SVP of Sales: 100% (median), 100% (mode)
• Chief Revenue Officer: 85% (median), 100% (mode)
• Chief Executive Officer: 50% (median), 100% (mode)
• Chief Financial Officer: 40% (median), 30% (mode)
• Chief People Officer: 40% (median), 50% (mode)
• Chief Product Officer: 40% (median), 50% (mode)
• Chief Technology Officer: 35% (median), 15% (mode)
• VP of Business Development: 35% (median), 25% (mode)
• VP of Customer Success: 30% (median), 20% (mode)
• VP of Engineering: 30% (median), 30% (mode)
• VP of Finance: 30% (median), 30% (mode)
• Chief Marketing Officer: 30% (median), 50% (mode)
• VP of Product: 30% (median), 30% (mode)
• VP of Marketing: 25% (median), 30% (mode)
• VP of HR: 25% (median), 20% (mode)
Takeaways:
1️⃣ Sales and revenue leaders typically have a 50/50 split. This is the most “aggressive” TTC allocation of any exec role.
2️⃣ Interestingly, Chief Technology Officers tend to have lower bonus percentages than Chief Product Officers. This likely reflects that the two roles have different risk-profiles and downstream incentive practices. Often, CPOs are expected to make large bets that can make or break company quarters whereas CTOs leaders tend to focus more on execution, quality, and long-term technical foundation.
3️⃣ The majority of other exec roles tend to have bonuses in the ~20-30% range.
4️⃣ One last key note from our data science team: today’s post lumps all company stages together into one sample set, but it generally *is* the case that variable pay as % of base gets higher as a company gets larger. We can look more at this dynamic in a future post.
Practical Suggestion for Compensation & HR Leaders:
Exec comp is both an art and a science. Use today’s post as a bit of scientific backing for your decisions as you craft the optimal executive incentive plans. What role-specific factors should influence your variable pay decisions?
