A Healthy Perspective on Compensation – Focus on the Future, Not the Past

Disclaimer: this post represents my personal philosophy toward pay and does not necessarily reflect the opinions or practices of my previous employers. Also, I am neither a lawyer nor an accountant; I'm just a former manager who has dealt with compensation issues (pay, stock, bonuses, and profit sharing) for teams comprised of artists at every skill level.

Why you should learn about compensation

There are plenty of tutorials about developing specific skills, but very few that help an artist become a happier, less distracted one. This is unfortunate, because being focused is crucial to improving every skill, and artists who misunderstand how they are compensated are unnecessarily distracted. Reducing your non-creative concerns, such as worries over compensation, will lead to better job satisfaction and faster career growth. 

Your income is a tool that allows you be creative; it shouldn't be a roadblock to happiness or career satisfaction. Despite this, I've known many artists who suffered simply because they expected to receive regular, sizable raises every year or immediately after shipping a title. They mistook their annual salary update as a kind of high score tally – a measure of the good work they performed – when it's really an incentive for future work, limited by the studio's financial position.

Pay for future work

A raise is not a direct measure of your previous achievements, regardless of the feedback received during an annual review (or whatever review period your team uses). Although your work history is very useful and important data, your compensation is actually based on a prediction of the value of what you will do, not the work you've done. This may be counter-intuitive, because a raise or bonus usually follows an achievement in the past review period. But the salary and bonus you’re offered is commensurate to the income your employer thinks you can bring into the business moving forward. Your past contributions are an indicator of your future performance and your raise represents that value.

Did you get a bonus after shipping the last game? Well again, the amount probably wasn't determined by how much crunch you endured. Instead, it was an incentive to encourage you to come back for the next project. It's offered because you're the kind of employee who would work hard to ship another great game and they want to keep you. That's also why you don't usually get payouts after you leave a company, even if the game continues to sell. Again, think of your salary and bonus as an incentive to keep you working tomorrow, not as payments for the work you did. 

If that still doesn't make sense, try this: recall when you were last hired and the incentives offered to you at that time. You negotiated a pay rate or salary. Perhaps your new studio also covered the cost of your move, offered a stock grant or options, and maybe even gave you a nice signing bonus? Was there an earn-out or vesting period associated with any of these things? If so, there can be no doubt that your pay and bonuses were negotiated in anticipation of your future work, not because you did awesome work in the past. The same goes for your annual review; you’re essentially being hired again for the next year.

When a big raise isn't a good thing

Even if it is not reasonable to expect a sizable raise every year, it is fair to expect incremental raises as your performance brings greater financial value to the studio. Be wary of companies that habitually give employees big raises upon promotion. An irony facing managers who consistently demonstrate the value of their team members to the company is that their direct reports (employees) are always paid what they are worth at any given time. In this scenario, when a company promotes an individual once she has demonstrated a consistent ability to perform at the next level, she is already paid appropriately. Most management groups will still find a way to grant a raise, even a small symbolic one. But expecting a 10% raise with each promotion is not realistic under these circumstances.

When a manager works with someone to develop her skills, resources are used to cover the inevitable learning curve. That investment will continue until the promoted team member is at the mid-point of her new role’s performance and salary range. Let’s say a senior artist is promoted to a lead position, because she consistently mentors new artists and helps her lead perform quality-control work. But as a new lead, she often takes on other people’s work, because it’s easier in the short-run to fix their problems, rather than coach them. Her manager will have to spend time and money managing her fatigue, diffusing team frustration, and supplementing her team’s training. She went from being a fantastic senior artist to an average lead. That’s perhaps why she may not get a giant raise the moment she’s promoted. This dip in productivity is a natural, well-documented phenomenon in business and technology cycles and it applies to individual careers as well. 

On the other hand, if her manager was not paying her what she was worth before her promotion, the company has room to reward her with a nice fat raise. But, she’s probably still going to earn fewer total dollars than if she were paid fairly throughout her career. Sometimes a big raise is like a big tax refund. It means the studio was using money that an individual could have had earlier. This doesn't change the fact that it’s nice to receive a windfall, but the truth is an artist benefits more from small-but-fair raises along the way, rather than a big one at the time of promotion. (Important exception: good employers who recognize they were under-compensating an employee will grant a raise and bonus to “true-up” the employee.)  

Growth yields personal satisfaction first, then maybe dollars

New responsibilities, skill   mastery, and personal sacrifices occur routinely during a project. But did you ever work hard on a game, only to receive a disappointing bonus or raise afterward? Before you let that affect your morale, ask yourself what your extra effort accomplished for the project above your core responsibilities, and how that indicated your ability to increase studio profits in the future. If you can't come up with a clear and substantial answer, then there is very little your manager can do either. If you want a bigger number, then you and the studio need to cut costs and bring in bigger numbers. This doesn't sit well with artists, because they rarely define project scope, budget, or audience. Nevertheless, they will often take things into their own hands by working even harder or by broadening their skill set. If that decision was made without working with the appropriate manager to align the effort with the team’s needs, it’s a mistake to expect additional income for such work. Maybe your new Mudbox expertise isn't what your studio needs.

In short, killing yourself over work or learning a new skill may lead to a false expectation that you'll get a monetary reward simply for doing so. This will only happen if the next project will require the same kind of work, you saved the team a meaningful amount of time and money (e.g. your manager didn't have to hire another artist), or your assets had positive sales effects (e.g. you set the industry high-bar, increasing media impressions, metacritic score, and player interest). Otherwise, it's not reasonable to expect an increase for taking extra steps that weren't necessary to ship the game and didn't bring in additional profit – unless you and your manager agreed to it in advance. 

Going above-and-beyond the requirements of your role brings pride, the admiration of your peers, the euphoria that comes with mastery, and perhaps most important, recognition from your manager that you might be ready for more responsibility. Just don't make the mistake of thinking those good vibes will be converted into dollars immediately; it takes time for your manager to work with every other discipline manager to ensure the company is assigning value to everyone’s work fairly.  And don’t forget your current earning potential is only part of the value you receive from work. You have compelling creative challenges, great tools and coworkers, travel and training opportunities, and other fringe benefits. Don't let your professional happiness depend on whether or not you're receiving ever-increasing dollar amounts. There are too many external financial and market factors that you can't control. Instead, if you seek creative satisfaction by fulfilling the needs of your team, fair compensation will follow.

Pools of money and industry competition

Hopefully by now, you understand that your compensation reflects the financial value you are expected to bring over the next review period. But it’s not possible to draw your salary from a pool of profits that doesn't exist yet. Instead, payroll is taken from what's currently available to the studio, minus amounts necessary to ensure smooth company operation over time. Your office, hardware, software, insurance, snacks, travel, training, holiday and ship parties – and especially a safety reserve to cover future salary and studio expenses – draw from the pool of currently usable money. 

Therefore, it would be a mistake to think you're guaranteed a big bonus or raise when your studio ships a successful project. Think of the aforementioned costs. Did your team grow significantly over the course of the project? What if this is the last time your studio will be shipping a title with that IP? What if the revenues from previous titles tapered off? How long until your studio is paid its share of the profit by the publisher? What if studios similar to yours closed recently? This last question is a tricky one, because it isn't directly related to your studio. But it’s important nonetheless. Not only do those studio closures indicate that games made by companies like yours are risky, it means there's excess talent available. Should your manager continue to pump up the cost of her team, while your remaining competitors exploit the supply of talent and lower their average cost per artist? Hopefully, your manager is going to ensure long term survival and prosperity for the team and not overspend during periods of industry contraction.  

Publishers are more interested in their portfolio needs rather than the unique abilities and culture of your studio. If a publisher can choose from a number of developers to fill a particular portfolio gap, they'll select a team the same way people buy a gallon of milk. Do I recognize the brand, is the store close to me, and is it cheaper here than elsewhere? Your studio needs to compete in that environment. More studios have closed over the years because of high overhead, rather than an inability to do good work.

The other guy

Angst regarding your compensation relative to everyone else is a common morale problem that stems from not knowing if peers and disciplines are evaluated against sensible common standards. If this is bothering you, ask your manager how the review process allows her to offer fair incentives for working on the next project. Don’t be nosy about your peers, but you should feel free to ask general questions. If a reasonable system exists and you trust your manager, there’s no reason to worry about the other guy.

During periods of transition or difficulty, misgivings may occur when someone is asked to leave the company and rumors of an overly generous severance package abound. Any such package is a private matter. Do yourself a favor and keep in mind that continuing salary payments, promises of future profit sharing, or stock vesting represents a smaller cost than keeping that individual on the team. Your manager is trying to free up resources – including your time and energy – by making it comfortable for someone else to leave.

When things are tough, it may be tempting to start slacking-off in hopes you’ll receive a sweet, sweet severance package too. But the drag on your morale in the meantime, awkwardness at your next job interview, and impaired friendships are not worth it. You’re better off continuing to work diligently, even if you eventually decide to take another position elsewhere. Leave them wanting more and better compensation will follow, no matter where you go.

Talk to your manager

Request a meeting if you still find yourself distracted from your work, because of compensation issues. Let your manager know in advance that you’d like to talk about it, just as you’d like to know in advance when you’re going to discuss your work with your art director. Compensation is a complex problem and managers are only human; they need to prepare their thoughts. Otherwise, you might put your manager in a defensive or adversarial position, when you’d rather approach your concerns as a team.

Prepare yourself too. Think about why compensation is bothering you. There are some insecurities or lifestyle choices that only you can address. Define those and set them apart from the conversation. Your manager can’t help you afford a new car or pay school loans. But she can show you which roles within her organization command higher salaries and how you might get there. 

I hope this blog post helps you understand compensation better, frees you to do your best creative work and achieve fair compensation for it. Nothing beats being able to spend every day making beautiful art and developing new skills without distraction. Good luck, and please let me know if you have any questions or comments.

-Michael

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