At Bonus time, No One Can Hear You Scream*

For many investment banks, January is the month when it happens. The phone rings, the foot soldier trots down to the honcho's office, and, with a poker face worthy of Phil Ivey, hears about a dozen words and nods non-committally. A simple ceremony at the culmination of a year's warfare.

The bonus process starts around October. No, strike that.....what am I thinking. Unofficially its more like July....er..no, make that April. Yup. If you start making some decent money in April then you would be a loon not to start managing upwards with indecent haste. Managing upwards is the time honoured practice of ensuring that credit for good stuff is attributed to you and nasty reversals are studiously buried elsewhere. Preferably under some stooge who doesn't know the game is being played, let alone how to play it.

The best paid employees are always professional upwards managers - employing subtlety and immaculate timing. They also avoid making "dead" PnL from mid-November, wisely deferring it to the next financial year as bonus allocations have already been finalised. True talent is a secondary consideration to playing the game well. True talent knows how to turn the screw when other producers are bid away to other houses, ideally in big "team moves". Nothing scares a decent line manager in a good year more than a big chunk of his earning capacity hoofing off to a bulge bracket wannabe firm.

Yet in good times, the line manager's job - let's say "Head of Derivatives Sales" for example - is a breeze. Say the right things to the mob underneath, hire aggressively, let the market do its thing and get on with your own upwards management.

Due to the apparent ease of this management game compared to the grisly business of finding actual customers and making them want to do profitable business with you, it is no wonder foot soldiers vie to join management ranks. Of course there are never enough proper management jobs, so important sounding but irrelevant roles are invented to accommodate the dissemblers in good years. Yet everyone knows who pulls the strings, who is the only person that counts: the guy in front of you in January.

As markets inevitably turn, the tidemarks of competence recede under the weight of over-zealous budgets and stalling profitability. Dead wood masquerading as pseudo-management gets to spend a month replanting gardens before taking equally posh sounding jobs in sleepy second tier banks. Dear reader, of course they were simply fired for being rubbish - but if you meet one of these types mumbling about "interesting opportunity" or "heightened responsibility" it is wise just to nod sagely.

A few years ago this was the story of the equity world. It's not hard to suggest that today's bulge-bracket fixed income trading floors are strewn with human wreckage which will be reincarnated as tomorrow's "Unicredito Global Head of Globalness" types.

I digress. Let's return to the day when foot soldiers are informed of their "number" - use of this abstract word apparently softens the vulgarity of the event - Bonus Day. Closure of the only feedback loop that counts in the dynamic instability system of an investment bank.

I've experienced extremes of emotion in these sitdowns, not, hopefully, that anyone could tell at the time. So if I may, a couple of observations if it's your turn this January: (1) if you are getting handily overpaid for averageness, it is wise to look as if you've just been slapped with a wet fish; and (2) the words "well done this year, keep it up" combined with a pony(**) bonus are as close as it gets to an actual slap with said fish. Your upwards management stunk - must do better.


* "At Bonus Time, No one Can Hear You Scream" is a great book by David Charters which should be in the same required reading category as Liar's Poker.

** pony: cockney rhyming slang. Or a misprint for puny if you prefer.