ABCs of Variable Pay – How Product Managers are underpaid in India

Indian_Rupee_symbolIn many companies in India today, variable pay is an important technique to reduce cash payouts (OpEx) during slowdown. It typically varies from 10-25% of your total compensation with 20% being the new norm today. The variable part depends on the company’s performance and occasionally, is also used as a performance management tool.
So why is this a big issue?

A. Accountability

In many offshore R&D centers, it is seen that the engineers do not have any variable pay, while Product Managers do. While engineers have no say over the product performance (and the firm’s performance), in R&D centers, the PMs do not have any control either. Hence, a 20% variable pay for an offshore Product Manager is definitely unfair to him. Additionally, sometimes the PMs quarterly payout is tied to the product release date, whereas in reality, the release is dependent on a host of issues, which can only be monitored by program managers. So docking performance pay for PMs when other managers get their full payout is not a good practice.

B. Benchmarking

A few IT services and startup (e-commerce) firms are notorious for using variable pay to pad up the CTC offered to prospective employees. It is only after joining that they find out that the notional variable pay on their offer letter is the high water mark, and typical payout is only about 50-75% of that. This automatically reduces the total compensation in comparison to other firms.

C. CTC or “Cost to Con”

In India, if a firm offers a large amount of stock options or has 20-25% variable pay, then it is very suspect behavior. It is likely that your tenure in the firm will be short and you will see neither variable pay nor stocks. Sadly, this is actually arranged by the senior management, in partnership with HR, to control costs. So the PM does not really get to see the full benefits of his efforts, while the firm claims to offer competitive compensation. The fact that they regularly churn product managers and have very few long timers is a clear indicator of this.

So how do you protect yourself from these? Here are a few suggestions:

1. Do your research

Sites such as Glassdoor offer insights into salaries and contain employee reviews. Keep adding your own experiences and review the content there before accepting a job offer.

2. Let firms compete for your talent

A Computer Science engineer from IIT Bombay told me last year that he had 7 offers to choose from before selecting a new job. While a PM’s bargaining power is limited, it always helps to shop around. And while an offshore PM role is lucrative, the growth options are severely limited.

3. Ignore the salary!

A PM in the Indian market can easily get noticed and get promoted/poached. I know a few people who started in product management (post MBA) at 5-6 lakhs and within 4-5 years reached 20 lakhs CTC per annum. They only extra effort they incurred was to promote themselves on social networks and learn the skills needed to rise up.

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