If you are a CEO or a human resources manager, two words you never want to put in the same sentence are “compensation” and “lottery.”
Let’s repeat that, in capital letters, for managers at companies that call themselves the “friendly skies” with completely unconscious irony. NEVER USE “COMPENSATION” AND “LOTTERY” IN THE SAME SENTENCE.
I’ll provide a more detailed explanation to improve my chances of getting the message across.
You rely on your employees to take care of your business, which starts with taking care of your customers. Your employees rely on your business to take care of their families. These goals are complementary when managed properly. A successful business can provide a more stable, as well as a more lucrative, livelihood for its work force. Employees crave stability, often more than they crave higher compensation, because it allows them to take on commitments such as mortgages, childrearing and higher education with less stress and greater satisfaction. Satisfied employees, in turn, are more likely to treat customers better, not to mention one another. It’s a virtuous circle.
When you introduce random factors that materially influence an employee’s compensation, you erode that vital sense of stability and security. There is nothing more random than a lottery. I am not talking here about March Madness office pools, or chances to win a holiday turkey or a company-paid trip to Aruba. I am talking about material, official changes in a compensation structure that take out something relatively controllable, like a bonus based on individual or company performance or other reasonable factors, and replace it with a winner-take-all lottery.
I repeat: There is nothing more random than a lottery. Or, in this context, more unfair. While nearly everyone who pitched in to make the company succeed gets nothing, some randomly chosen individual receives a potentially life-changing windfall that they contributed very little toward earning.
I can’t think of a better and faster way to destroy workplace morale, which is why no capable manager in her or his right mind would ever propose such a system.
This brings us to United Airlines. The carrier renowned for beating up passengers and breaking guitars last week rolled out a plan practically designed to make employees turn on their employer and on one another, not necessarily in that order. They might as well award bonuses based on cage fighting skills.
The airline’s president, Scott Kirby, issued an employee memo on March 2 saying existing quarterly performance bonuses would become a thing of the past. The replacement would be a “core4 Score Rewards” system, including prizes better suited to a game of “The Price Is Right:” luxury cars and vacation packages in addition to cash awards ranging from $2,000 to $100,000. United would hold a drawing every quarter that it met at least one of its performance goals.
Kirby described this change as “exciting,” an especially tone-deaf characterization for a change that meant many employees who previously qualified for bonuses of about $1,200 per year would finish the quarter empty-handed. Those without perfect attendance records would not even make it into the lottery pool. Kirby seemed to envision this change as consistent with the airline’s push to build a more caring image overall.
Of course, to the surprise of no one (possibly excepting Kirby), employees found the change upsetting.
Almost as interesting, in a pathetic way, as the original plan is what happened after employees protested in droves on social and mass media. First, Kirby announced on Monday that the airline would be “pressing the pause button” on the lottery scheme. The only way hitting “pause” on this harebrained idea could make sense would be if the “eject” button was booby-trapped with explosives.
Yet when the pause was announced, many United employees publicly reacted with gratitude and expressions of love for the boss who issued the original proclamation in the first place. It immediately brought to mind the gratitude of a dog toward an abusive master when the beating stops.
The lottery system may have been the final straw for some employees, but it was not the only grievance that went public. A Change.org petition that drew more than 1,000 signatures also cited planes with dwindling employee areas and inflexible sick leave policies that led workers to come to work with the flu. When your employees publicly and angrily draw parallels to “National Lampoon’s Christmas Vacation,” you know you have a morale problem. The original poster later removed the petition, possibly under pressure from the airline.
That this witless lottery idea got so far and persisted so long makes me strongly suspect that it originated with Kirby himself. Why else would he have approved it? Why else would no HR manager have turned over Kirby’s computer or smartphone to the airline’s notorious baggage handlers for some tarmac TLC to stop it from seeing the light of day?
And for the love of everything under those friendly heavens, where are company CEO Oscar Munoz and the 14 other members of the Board of Directors? These people get paid to serve on two overlapping boards, for the airline and its parent, United Continental Holdings, Inc. Are they so overwhelmed by the strain that they can’t provide at least enough supervision after the fact to jettison this foolishness once it hit the media?
Everyone celebrates “thinking outside the box.” Some things are left out of the box because they are just going to leak, make a giant mess and ruin the box’s contents. So it is with the lottery idea. It’s the sort of thought that might occur to anyone during their morning shower. Most managers with any experience would have dismissed it before they had time to towel off.
The gratitude of United’s employees upon getting a reprieve from this foolishness is telling. We will know things have actually improved at that company when we can see signs that its workers are raising their expectations.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book
The High Achiever’s Guide To Wealth.
Posted by Larry M. Elkin, CPA, CFP®
photo by David Mulder
If you are a CEO or a human resources manager, two words you never want to put in the same sentence are “compensation” and “lottery.”
Let’s repeat that, in capital letters, for managers at companies that call themselves the “friendly skies” with completely unconscious irony. NEVER USE “COMPENSATION” AND “LOTTERY” IN THE SAME SENTENCE.
I’ll provide a more detailed explanation to improve my chances of getting the message across.
You rely on your employees to take care of your business, which starts with taking care of your customers. Your employees rely on your business to take care of their families. These goals are complementary when managed properly. A successful business can provide a more stable, as well as a more lucrative, livelihood for its work force. Employees crave stability, often more than they crave higher compensation, because it allows them to take on commitments such as mortgages, childrearing and higher education with less stress and greater satisfaction. Satisfied employees, in turn, are more likely to treat customers better, not to mention one another. It’s a virtuous circle.
When you introduce random factors that materially influence an employee’s compensation, you erode that vital sense of stability and security. There is nothing more random than a lottery. I am not talking here about March Madness office pools, or chances to win a holiday turkey or a company-paid trip to Aruba. I am talking about material, official changes in a compensation structure that take out something relatively controllable, like a bonus based on individual or company performance or other reasonable factors, and replace it with a winner-take-all lottery.
I repeat: There is nothing more random than a lottery. Or, in this context, more unfair. While nearly everyone who pitched in to make the company succeed gets nothing, some randomly chosen individual receives a potentially life-changing windfall that they contributed very little toward earning.
I can’t think of a better and faster way to destroy workplace morale, which is why no capable manager in her or his right mind would ever propose such a system.
This brings us to United Airlines. The carrier renowned for beating up passengers and breaking guitars last week rolled out a plan practically designed to make employees turn on their employer and on one another, not necessarily in that order. They might as well award bonuses based on cage fighting skills.
The airline’s president, Scott Kirby, issued an employee memo on March 2 saying existing quarterly performance bonuses would become a thing of the past. The replacement would be a “core4 Score Rewards” system, including prizes better suited to a game of “The Price Is Right:” luxury cars and vacation packages in addition to cash awards ranging from $2,000 to $100,000. United would hold a drawing every quarter that it met at least one of its performance goals.
Kirby described this change as “exciting,” an especially tone-deaf characterization for a change that meant many employees who previously qualified for bonuses of about $1,200 per year would finish the quarter empty-handed. Those without perfect attendance records would not even make it into the lottery pool. Kirby seemed to envision this change as consistent with the airline’s push to build a more caring image overall.
Of course, to the surprise of no one (possibly excepting Kirby), employees found the change upsetting.
Almost as interesting, in a pathetic way, as the original plan is what happened after employees protested in droves on social and mass media. First, Kirby announced on Monday that the airline would be “pressing the pause button” on the lottery scheme. The only way hitting “pause” on this harebrained idea could make sense would be if the “eject” button was booby-trapped with explosives.
Yet when the pause was announced, many United employees publicly reacted with gratitude and expressions of love for the boss who issued the original proclamation in the first place. It immediately brought to mind the gratitude of a dog toward an abusive master when the beating stops.
The lottery system may have been the final straw for some employees, but it was not the only grievance that went public. A Change.org petition that drew more than 1,000 signatures also cited planes with dwindling employee areas and inflexible sick leave policies that led workers to come to work with the flu. When your employees publicly and angrily draw parallels to “National Lampoon’s Christmas Vacation,” you know you have a morale problem. The original poster later removed the petition, possibly under pressure from the airline.
That this witless lottery idea got so far and persisted so long makes me strongly suspect that it originated with Kirby himself. Why else would he have approved it? Why else would no HR manager have turned over Kirby’s computer or smartphone to the airline’s notorious baggage handlers for some tarmac TLC to stop it from seeing the light of day?
And for the love of everything under those friendly heavens, where are company CEO Oscar Munoz and the 14 other members of the Board of Directors? These people get paid to serve on two overlapping boards, for the airline and its parent, United Continental Holdings, Inc. Are they so overwhelmed by the strain that they can’t provide at least enough supervision after the fact to jettison this foolishness once it hit the media?
Everyone celebrates “thinking outside the box.” Some things are left out of the box because they are just going to leak, make a giant mess and ruin the box’s contents. So it is with the lottery idea. It’s the sort of thought that might occur to anyone during their morning shower. Most managers with any experience would have dismissed it before they had time to towel off.
The gratitude of United’s employees upon getting a reprieve from this foolishness is telling. We will know things have actually improved at that company when we can see signs that its workers are raising their expectations.
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