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March 20, 2009

Don’t Like AIG’s Bonuses? Try These!


No one has any sympathy for AIG – the huge insurer that needed a federal bailout to survive, and got it because apparently its collapse would have set off a cascade of other financial calamities that would have ultimately brought down the republic.


Or something.


All I know is this: Once you accept a bailout, you may have survived, but you are under the hot lights forever. You had a party? You painted your walls? You’re having the grass at your headquarters mowed three times a month? Hey! That’s our money!


You knew it would be something. What it turned out to be was retention bonuses. Long before the bailout, AIG had agreed to pay millions to a large number of employees for the simple favor of not quitting before a pre-established date. Well, they didn’t quit! And you know how you get upset when insurance companies decline to pay money they had previously agreed to pay? Well, with that in mind, they’re paying the bonuses.


Now, here’s the thing about retention bonuses. They are really stupid. If you have to pay someone a bonus just to stick around – regardless of how well they perform, and regardless of how well you are already compensating them – it doesn’t say much about your confidence in the person’s commitment to your company, nor does it say much about your confidence in how effectively you have made the person’s employment with your company advantageous to them.


If you think your best employees are doing you a favor by working for you, I suspect you have misunderstood the whole nature of the employer/employee relationship. This relationship will sustain itself so long as the benefits are roughly equal on both sides. Once the employee is producing too little to justify his or her compensation, you should end it. Once your ability to reward the employee is insufficient compared to what the employee could earn elsewhere, he or she should end it.


That sort of equilibrium is difficult to maintain for long periods of time, which is why people tend to change jobs as often as they do. But if you manage to maintain it, there’s no need to pay a huge bonus to the employee at an arbitrary point in time. The equilibrium itself will keep the employee around.


But employers tend to be insecure, and they love their bonus packages. They make employees’ faces light up like a kid on Christmas, and they make the employer feel like he or she “did something” to retain people, incentivize good performance or whatever it is they think they’re doing. They don’t really. People do what their nature compels them to do, and a day or two after the bonus program is announced, the employees revert to their usual nature. Then, five years later, you’ve suddenly got yourself on the hook for all these bonuses.


Good one!


Well, if employers insist on paying bonuses, I’d like to suggest some better ones. Paying people just to stick around not only makes no business sense, it’s also boring. So here are D.F.’s Three New Better Bonuses for Insecure Employers.


  • The Goatee Elimination Bonus. Good grief, it’s been at least 15 years since these face mullets began afflicting the American workplace. Enough already. Some of us have figured out that you goatee-wearers are just lazy and you’re trying to avoid shaving the trickiest parts of your face. Anyone who shaves a goatee – their own or someone else’s, using force if necessary – gets $5,000.


  • The Cliché-Spewing Colleague Humiliation Bonus. Does someone in your company openly boast that he “thinks in matrices”? Does someone refer to your market segment as your “piece”? Do the rest of you roll your eyes whenever these clichés start rolling? But who takes action? Stand up and humiliate this substance-starved jerk, and you my friend are the proud new owner of $4,000.


  • The Input Skipper Bonus. You have an idea. You know exactly what you want to do. But do you do it? No. You seek “input” from 50 people. You want to get their “buy-in.” By the time everyone has given their input and granted their buy-in, the idea looks nothing like the original. You started out planning to create a paper-shredder that would recycle the shredded remains into gift wrapping. Interesting! By the time you received all the “input” you wanted, you found yourself organizing the homeless to SCUBA dive for refuse in the company retaining pond. Yeah, the idea evolved just a tad, thanks to the input of all the “stakeholders.” First person who comes up with an idea and just does it without asking anyone gets $10,000!


The D.F. Krause Bonus Incentive Program. Let a congressman try to criticize these bonuses, and I can promise you I will be ready to rumble.


© 2009 North Star Writers Group. May not be republished without permission.


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