Bonuses caught in crosshairs (Editor’s notes)

HR must prove value of bonuses and recognition in tough times
By Todd Humber
|Canadian HR Reporter|Last Updated: 04/02/2009

Employee bonuses are under fire, thanks in large part to the bungling of American insurance giant AIG. The firm is facing a public relations disaster over its payment of more than $200 million US in bonuses to workers after receiving hundreds of billions of dollars in rescue aid from the United States government.

Unfortunately, this isn’t just AIG’s problem — it’s also your problem because solid HR practices everywhere are taking collateral damage in the wake of the justifiable public outcry. Until a few weeks ago, most people outside HR didn’t know much about retention bonuses. Now, thanks to the spotlight of the 24-hour news cycle, everyone knows what retention bonuses are — and the public sentiment towards them isn’t exactly positive.

Reuters news talked to ordinary Americans about the bonuses last month and the reaction from Dave Blank, a medical supplies salesman in Wisconsin, pretty much summed up the mood: “I always thought bonuses were contingent on a job well done, not for simply showing up or mindlessly driving the company over the cliff.”

But more than retention bonuses are being targeted. As reported in the March 9 issue of Canadian HR Reporter, businesses that are the recipients of government bailouts in this brutal economy are having to slash valuable HR programs. In a letter published as a full-page ad in numerous newspapers, Wells Fargo CEO John Stumpf lamented he couldn’t properly recognize his workforce because of what he called “deliberately misleading” news coverage that led the public to believe every employee recognition event was a “junket, a boondoggle (or) a waste,” something he said was utter nonsense.

“For many, it’s the only time in their lives that they’re publicly recognized and thanked for a job well done,” he said. “This recognition energizes them. It inspires them and their team members to want to create an even better experience for our customers.”

There is a danger this anti-bonus, anti-recognition sentiment could creep into industries and companies that remain healthy and haven’t had to run to the government for a bailout. Shareholders, enlightened by all this media coverage, could start turning up the heat on bonuses — who gets them and why. They might start to question the need for employee recognition, especially when times are tough and people should feel “lucky just to have a job.”

But this is where the news gets better. This is a fight HR can win handily. All these programs are justifiable and HR is starting to get real metrics to back up what it has always known in its heart to be true — good HR practices contribute to the bottom line.

Taking heat for retention bonuses? Start talking about losing your top people, the astronomical cost of customers following them out the door and other associated turnover costs. (And, no, AIG can’t use this argument. A company that loses $61 billion US in one quarter has no top people.) Getting flack for recognition programs? Start talking about the effect morale has on the workplace and on productivity and sales. Mention performance bonuses and how they act as a powerful incentive to push talented employees to go above and beyond.

The public is having a knee-jerk reaction, that’s understandable. But Stumpf is right, most of the criticism is nonsense. HR needs to remain its calm, cool, steady self and talk honestly about why these programs exist. There were good reasons for implementing the programs, and none of those have disappeared.

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