Parr: Upfront bonuses with clawbacks drive better performance than deferred bonuses
Sam Parr · How Roger Federer Became The First Tennis Billionaire (#367) · Sep 27, 2022 · at 10:01
Sam Parr argues that behavioral loss aversion makes upfront compensation tied to clawbacks significantly more effective than standard backend performance bonuses.
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“Another thing is you do clawbacks. So you get 50% of a bonus upfront. And if you don't achieve the goal that you said you're going to get done, then I'm going to do what's called the clawback and I'm going to take that money from you. So you could do this with kids where you say, Hey, look, Your allowance is a hundred dollars a week or a hundred dollars a month. I'm actually going to give you 50 now and the other 50 when you do your chores. But if you don't do your chores, you're giving me that 50 back. And that loss aversion is actually performs better than if I just say I'm going to give you a hundred dollars at the end of the month if you do X, Y, and Z. That's a hundred percent right.”
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