Yesterday's post was on shareholder value. Here is another example of a company who values the shareholder (and themselves) above their employees.
Citigroup (C) announced a massive restructuring earlier last week. The headline from this restructuring is 17,000 job cuts! Wow, is this because the company has been mismanaged for so long? So one day you need 17,000 employees and the next day you don't? The company rids itself of "back office" employees like they are some sort of a disease. These same people are the workhorses that make people like the CEO, Charles Prince, as rich as he is.
So, who is going to do the work that is left behind? They certainly didn't get rid of all that work overnight, did they? 17,000 full time employees equates to 35,360,000 hours a year. It begs the question, what were these people doing and how will it effect the customer? Work doesn't just disappear. Less people doing the same, or even close to the same amount of work means mistakes and inefficiencies. With these mistakes come increased costs of doing business. Of course Citigroup won't tell you this. For them, it is all about the stock price.
Why all the job cuts? Well, Charles Prince was quoted as saying "nobody is more upset about the stock price than I am". I wonder why. He owns 1.6 million shares worth about $83 million. Maybe he is trying to get to $100 million. Why not upset 17,000 lives in the process to squeeze a few extra million to line his pockets.
Prince may get his wish in the short-term as the fools rush in to buy on the promises of the company. But will this provide long-term value to the investor? Does owning 1.6 million shares affect the decision making ability of a CEO? What do you think?
Sunday, April 15, 2007
Saturday, April 14, 2007
Shareholder value
Dell recently announced that they had identified a number of accounting errors and evidence of misconduct at their company. This news follows a bonus takeaway I talked about in a previous post. http://givemebigmoney.blogspot.com/2007/02/opportunities-in-guerilla-recruiting.html
The news just keeps getting worse at Dell, but Dell is similar to many other companies in corporate America. The difference is, Dell got exposed. Others won't be far behind.
So what drives this sort of behavior? One of the major culprits is executive compensation. Incentive plans that reward top executives based on the value of the share price is a recipe for disaster. The temptation to manipulate the books to prop up the stock price is very real when the executive stands to lose a boat load of money from reporting a quarter that missed "expectations". Yet most companies continue to reward their executives with stock options and restricted stock forcing executives to focus primarily on the stock price.
While it is important to continue to provide value to shareholders, short-term solutions that put the company at risk is not the answer. Top executives should be rewarded on revenue growth, employee retention, profit, leadership skills as determined by their employees, and ethical behavior as determined by an independent firm. These are things that will provide long-term value to the shareholders.
Taking care of the business will take care of the share price. A lesson many companies have failed to learn. It has already caught up to Dell, who is next?
The news just keeps getting worse at Dell, but Dell is similar to many other companies in corporate America. The difference is, Dell got exposed. Others won't be far behind.
So what drives this sort of behavior? One of the major culprits is executive compensation. Incentive plans that reward top executives based on the value of the share price is a recipe for disaster. The temptation to manipulate the books to prop up the stock price is very real when the executive stands to lose a boat load of money from reporting a quarter that missed "expectations". Yet most companies continue to reward their executives with stock options and restricted stock forcing executives to focus primarily on the stock price.
While it is important to continue to provide value to shareholders, short-term solutions that put the company at risk is not the answer. Top executives should be rewarded on revenue growth, employee retention, profit, leadership skills as determined by their employees, and ethical behavior as determined by an independent firm. These are things that will provide long-term value to the shareholders.
Taking care of the business will take care of the share price. A lesson many companies have failed to learn. It has already caught up to Dell, who is next?
Saturday, March 31, 2007
Bonus Pay??
Do you know the difference between bonus pay and variable pay? Chances are your bonus pay program is truly a variable pay program. Why does it matter? Variable pay that consistently falls short of the target is another way to tell you that you are being underpaid for your position.
A bonus is something paid to you that isn't part of your regular salary. It is an extra form of compensation (an addition to your regular salary).
Variable pay IS part of your regular salary. It is the portion of your regular salary that is "at risk" every year and often dependent on company and/or employee performance during the plan year. Of course your employer won't tell you that you have pay at risk. Instead they will often disguise this portion of your salary as a target in a bonus, incentive, or performance pay plan. Bonus, incentive, profit sharing, and performance pay programs are all just other names for a variable pay program.
To illustrate, company XYZ is creating a new position for a Director of Finance. The HR department at XYZ will determine how the new position fits within the company's pay structure. They then will recruit and hire for this position offering the new employee a compensation package and within that package will be a base pay component and a variable pay component.
Let's assume that the HR department at XYZ values the new Director of Finance position at $120,000 a year. Of the $120,000, the company will pay $100,000 as the base salary and the other $20,000 will be a "target" in a variable pay program. If the employee in the position averages $10,000 a year over a five year period in variable pay, then the employee is being underpaid by $10,000 a year.
It is important to know your compensation structure or the worth of your job in the open market. Consistently being underpaid is a bad career choice and a lost opportunity. If the company you work for makes it difficult to earn your pay at risk, then you are being underpaid for your position. Goals to make the variable portion of your pay need to be obtainable. Unfortunately, many companies do the opposite and put stretch goals in place for employees just to earn the variable portion of their pay. This allows them to underpay their employees year over year.
To learn a little more on compensation or how getting that little extra a year will increase your overall wealth, visit http://www.givemebigmoney.com/base_pay.html
and
http://www.givemebigmoney.com/pay.html
A bonus is something paid to you that isn't part of your regular salary. It is an extra form of compensation (an addition to your regular salary).
Variable pay IS part of your regular salary. It is the portion of your regular salary that is "at risk" every year and often dependent on company and/or employee performance during the plan year. Of course your employer won't tell you that you have pay at risk. Instead they will often disguise this portion of your salary as a target in a bonus, incentive, or performance pay plan. Bonus, incentive, profit sharing, and performance pay programs are all just other names for a variable pay program.
To illustrate, company XYZ is creating a new position for a Director of Finance. The HR department at XYZ will determine how the new position fits within the company's pay structure. They then will recruit and hire for this position offering the new employee a compensation package and within that package will be a base pay component and a variable pay component.
Let's assume that the HR department at XYZ values the new Director of Finance position at $120,000 a year. Of the $120,000, the company will pay $100,000 as the base salary and the other $20,000 will be a "target" in a variable pay program. If the employee in the position averages $10,000 a year over a five year period in variable pay, then the employee is being underpaid by $10,000 a year.
It is important to know your compensation structure or the worth of your job in the open market. Consistently being underpaid is a bad career choice and a lost opportunity. If the company you work for makes it difficult to earn your pay at risk, then you are being underpaid for your position. Goals to make the variable portion of your pay need to be obtainable. Unfortunately, many companies do the opposite and put stretch goals in place for employees just to earn the variable portion of their pay. This allows them to underpay their employees year over year.
To learn a little more on compensation or how getting that little extra a year will increase your overall wealth, visit http://www.givemebigmoney.com/base_pay.html
and
http://www.givemebigmoney.com/pay.html
Monday, March 19, 2007
Goodyear
As a follow up to a previous post - http://givemebigmoney.blogspot.com/2007/03/guerilla-recruiting-goodyear.html
Here is an excellent example of a company who puts the shareholder above the employee. Of course, the president owns quite a few shares so the decisions made by the Board that he is on impacts him in a positive way. To top it all off, Goodyear is on Fortune's "Most Admired Companies" list. Their industry rank for people management is 2nd! After reading this story, you decide if they really are doing a good job for their employees or a better job at brainwashing the public.
Goodyear Tire & Rubber Co. (GT) Chairman and Chief Executive Robert J.
Keegan received executive compensation valued at $11.7 million during 2006 even though the company lost $330 million last year. Yes, a 3-month strike contributed to this loss, BUT when a company decides to do away with their pension and make retiree health care more expensive, do you think a CEO deserves $11.7 million?
Keegan received a base salary of $1.13 million, a bonus of $2.24 million (for losing $330 million), equity awards valued at $220,800 (nice bump in net worth from cutting benefits for the employees) , and $8 million through Goodyear's executive performance plan ($8 million on a performance pay plan.....for what?) for the period Jan. 1, 2004, through Dec. 31, 2006.
When the company loses a good portion of their talent pool and doesn't perform as Wall Street expects, what's next? A big fat severance package? And how will they pay for that?
He also received other compensation worth $93,377. This includes $32,760 for a
home security system installation and monitoring expenses, as well as the cost
of an annual physical exam, personal use of company aircraft and annual dues
for club memberships. Again, Goodyear did away with their pension plan for non-union employees and increased the cost of retiree health care. Perhaps the CEO could have taken a cut in pay and eliminated some of his fringes to save the company some money rather than shoving all the costs to the employees. What kind of message does this send to his current and former employees?
Here is what the company is changing for the employees. Make sure you read the quote below about retaining talent.
Really? So the company is going to reduce the compensation and benefit packages to save $90 million a year and they expect to attract and retain talent. Wow! What part of this math equation adds up to more for the employee that will make them want to stay? As far as attracting employees, if a company is "struggling", why would someone want a job at Goodyear? When they fail to please Wall Street, what will they cut next?
Brainwashing or looking out for their employees? You decide.
Here is an excellent example of a company who puts the shareholder above the employee. Of course, the president owns quite a few shares so the decisions made by the Board that he is on impacts him in a positive way. To top it all off, Goodyear is on Fortune's "Most Admired Companies" list. Their industry rank for people management is 2nd! After reading this story, you decide if they really are doing a good job for their employees or a better job at brainwashing the public.
Goodyear Tire & Rubber Co. (GT) Chairman and Chief Executive Robert J.
Keegan received executive compensation valued at $11.7 million during 2006 even though the company lost $330 million last year. Yes, a 3-month strike contributed to this loss, BUT when a company decides to do away with their pension and make retiree health care more expensive, do you think a CEO deserves $11.7 million?
Keegan received a base salary of $1.13 million, a bonus of $2.24 million (for losing $330 million), equity awards valued at $220,800 (nice bump in net worth from cutting benefits for the employees) , and $8 million through Goodyear's executive performance plan ($8 million on a performance pay plan.....for what?) for the period Jan. 1, 2004, through Dec. 31, 2006.
When the company loses a good portion of their talent pool and doesn't perform as Wall Street expects, what's next? A big fat severance package? And how will they pay for that?
He also received other compensation worth $93,377. This includes $32,760 for a
home security system installation and monitoring expenses, as well as the cost
of an annual physical exam, personal use of company aircraft and annual dues
for club memberships. Again, Goodyear did away with their pension plan for non-union employees and increased the cost of retiree health care. Perhaps the CEO could have taken a cut in pay and eliminated some of his fringes to save the company some money rather than shoving all the costs to the employees. What kind of message does this send to his current and former employees?
Here is what the company is changing for the employees. Make sure you read the quote below about retaining talent.
Benefit plan changes effective Jan. 1, 2008, include:"These changes allow us to continue to provide the kind of compensation packages that are competitive and will attract and retain talented associates," said Kathleen T. Geier, senior vice president of human resources.
-- Increasing the amounts that current and future salaried retirees
contribute toward the cost of their medical benefits,
-- Redesigning retiree medical benefit plans to minimize cost impact on
premiums,
-- Closing the company's Medicare supplement plan to new entrants and
-- Discontinuing company-paid life insurance for salaried retirees.
The pension changes include:
-- Freezing the current salaried defined benefit pension plans as of Dec.
31, 2008,
-- Replacing the defined benefit pension plans with enhanced 401(k)
savings accounts with varying levels of company contributions for
current associates beginning Jan. 1, 2009 and
-- Introducing company-matching contributions for the salaried 401(k)
savings plan at 50 percent of the first 4 percent of annual pay
beginning Jan. 1, 2009.
Really? So the company is going to reduce the compensation and benefit packages to save $90 million a year and they expect to attract and retain talent. Wow! What part of this math equation adds up to more for the employee that will make them want to stay? As far as attracting employees, if a company is "struggling", why would someone want a job at Goodyear? When they fail to please Wall Street, what will they cut next?
Brainwashing or looking out for their employees? You decide.
Sunday, March 4, 2007
Floor Burns
What are floor burns? Watch a college basketball tournament game and you will see players willingly suffer floor burns diving for loose balls. This is maximum effort.
Are your employees willing to suffer floor burns for the success of your company?
The competition for top notch talent is fierce. You need to go above and beyond as an employer if you want employees to do the same. So what can you do to get maximum effort from your employees?
Here are a few tips:
1. Recognize them for what they do. A simple thank you goes a long way.
2. Reward them with little extras. A gift card, a luncheon, or anything that simply says thank you is a very small investment. Don't bombard them with these types of extras or they will be viewed as an entitlement rather than something a little special.
3. Ask them, rather than directing them to do something for you. This style of delivery will earn you their respect. Employees want to do things for their boss. By asking them, they feel valued. Telling them what to do because you're "the boss" does not have the same touch.
4. Be upfront and honest. Your trust and credibility is at stake. People work harder for someone they trust.
5. Support and encourage their career development. The more people that get promoted from your team, the better you will be viewed as a manager.
As a leader, you have the opportunity to maximize what you can get out of your workforce.
These five little tips will have your employee's willingly diving on the floor for loose balls and suffering floor burns all for the success of the company.
Are your employees willing to suffer floor burns for the success of your company?
The competition for top notch talent is fierce. You need to go above and beyond as an employer if you want employees to do the same. So what can you do to get maximum effort from your employees?
Here are a few tips:
1. Recognize them for what they do. A simple thank you goes a long way.
2. Reward them with little extras. A gift card, a luncheon, or anything that simply says thank you is a very small investment. Don't bombard them with these types of extras or they will be viewed as an entitlement rather than something a little special.
3. Ask them, rather than directing them to do something for you. This style of delivery will earn you their respect. Employees want to do things for their boss. By asking them, they feel valued. Telling them what to do because you're "the boss" does not have the same touch.
4. Be upfront and honest. Your trust and credibility is at stake. People work harder for someone they trust.
5. Support and encourage their career development. The more people that get promoted from your team, the better you will be viewed as a manager.
As a leader, you have the opportunity to maximize what you can get out of your workforce.
These five little tips will have your employee's willingly diving on the floor for loose balls and suffering floor burns all for the success of the company.
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