Most companies’ compensation models push their employees to optimize for the short term. Annual compensation incentivizes us to think about the next 12 months, not the next 12 years. Here’s how Amazon pays people differently to make them think differently.
In most companies, you set annual goals, pay employees annually, and tie bonuses to annual performance. As a result, every decision is about what helps in the next 6–12 months.
The problem with this structure is that it discourages risk-taking and long-term investments, while encouraging people to play it safe and protect their annual or quarterly metrics.
This comes at the expense of growth.
At Amazon, once you become a senior leader, your compensation isn’t based on hitting your annual target—there are no annual bonuses.
Instead, you get stock grants that vest over four or more years. And every year, you’d get a new grant, tacking onto the end of the last one.
That means if you have a great year in 2025, your “reward” won’t show up until 2029 and after.
There’s power in that. It aligns your incentives to the company’s long-term value and forces you to ask, “What will matter five years from now?” instead of “How do I hit this quarter’s number?”
This means you can take calculated risks, saying, “This won’t pay off this year—but it will have a big impact in the long term.”
That’s rare. Most orgs unintentionally discourage that kind of thinking.
You see this same thing at the industry level too. Movie studios knew digital streaming was the future, but they didn’t want to hurt movie ticket sales, DVDs, and cable deals by investing in streaming.
This thinking opened the door for Netflix, Amazon and Google to overtake them.
So Netflix, Google and Amazon won by thinking long-term, and in Amazon’s case, the compensation system rewarded that thinking.
If you want your team to think long-term, you have to consider it holistically, including compensation.
