Just under a week ago United announced that they would be eliminating quarterly bonuses for their employees, which were up to $300 per quarter when United met their goals.
Instead they planned to replace this with a lottery system that includes quarterly prize drawings, ranging “from $2,000 to $40,000, luxury cars, vacation packages, and a grand of prize of $100,000 awarded to one eligible employee per quarter.” This drawing would happen each quarter as long as United reached at least one of their performance goals.
This was clearly a cost saving measure on United’s part, when you consider that they have 88,000 employees. United’s president spun this change as a positive, suggesting that this was an “exciting new rewards program,” and a United spokesperson said that they believed this “new program will build excitement and a sense of accomplishment as we continue to set all-time operational records that result in an experience that our customers value.”
On top of that, this new program was out of touch. If someone makes $10 per hour and wins a “luxury car,” how are they supposed to pay the taxes, insurance, and maintenance on it?
United employees were livid, partly because they were having a consistent bonus taken away, and partly because management was trying to spin this as a positive. It’s one thing if United were struggling and they needed to cut back, but what this really boiled down to is United management saying “hey, we’re doing as well as we ever have, we’re so proud of you, and to reward you we’re going to cut your bonuses.”
This story went surprisingly viral in the mainstream media. I’m not sure exactly why, since it seems no different than any of the other garbage that big companies in the US try to pull on a daily basis. This forced United to reconsider. United said that they’d be “pressing the pause button” on the program. To me that doesn’t mean that they’re reverting to the old program, but rather they’re going to come up with a friendlier way to market this negative change.
The original communication was from United’s president, Scott Kirby, who performs best when working on spreadsheets, and not with people. Meanwhile United’s CEO, Oscar Munoz, is an employee favorite.
Munoz is probably the most loved CEO we’ve seen at one of the “big three” US airlines in a long time, though the more we’ve seen his performance, the more it seems like there’s not much substance to him, and he’s mainly there just to cheerlead employees. Maybe that’s what a US airline needs, though, since most of the United employees I’ve spoken to love the guy, which is rarely the case (at least that was the case shortly after he was appointed).
It’s not surprising that the negative communication was from Kirby, since they didn’t want employees to turn on Munoz. Now Munoz has stepped in a little, and they’ve sent follow-up communication to employees with the headline “a message from Oscar and Scott: Quarterly Operations Incentive Program.” I’m guessing the message is still from Kirby, and they’re just trying to make employees hate the content of the message a little bit less.
Here’s what the note to employees says:
Dear United team,
Following Scott’s note on Monday, both of us wanted to provide an update about our quarterly operations incentive program. As we said, we are going to take some time to reconsider our program and gather additional input.
Next week we will begin a series of listening sessions across the system with you and our leaders in order to get feedback and ideas as we structure a new program — one that has confidence across the company, makes people excited to come to work and deliver their best performance and sets the entire United family up for success.
In the meantime, the first quarter is coming to an end, and we know there are many questions about what we will do in the near term. So for the first quarter of 2018, we will maintain the same criteria for the operations incentive program as in the past, which you can find on Flying Together.
As you can see, United is maintaining the same incentive program for the first quarter, but beyond that they are creating a new program. What’s noteworthy (and not at all surprising) is that United hasn’t once addressed why they’re introducing a new program. It’s clearly a cost cutting measure, though instead they’ve suggested it will build excitement, which it clearly won’t.
I’ll be very interested to see what United’s second version of this program looks like, now that everyone is watching…
I suggest you all read "The Lottery," a short story by Shirley Jackson. One of my favorites.
Please discuss.
Takeaway message: You're getting your bonus for Q1, but we're still taking it away later in the year. Gotcha. That makes it all better.
Do whatever improves employee morale. I want happy staff on my next flight.
@Donna, United was in the bankruptcy years ago, so they don't pay any tax in recent years. So the tax cut does not affect United's after tax profit.
Next time, maybe do some research before making worthless comment?
I'm surprised this stuff isn't collectively bargained.
@KeninDFW - thankfully that is a matter of public information. FY17 is not released yet, but in FY16 total executive compensation (salary plus stock awards plus bonus) was about $52mm. Almost 90% of that is in the form of stock awards, which while substantial, are non-cash and thus cannot be compared to cash bonuses to employees. My point is not to start a debate over executive pay or corporate governance. I am glad that you...
@KeninDFW - thankfully that is a matter of public information. FY17 is not released yet, but in FY16 total executive compensation (salary plus stock awards plus bonus) was about $52mm. Almost 90% of that is in the form of stock awards, which while substantial, are non-cash and thus cannot be compared to cash bonuses to employees. My point is not to start a debate over executive pay or corporate governance. I am glad that you found your current position!
Any thoughts on this new policy vis-à-vis minimum wage?
I'm totally against what United is doing, but the title of this post is very misleading. There is no confirmation of a new program just yet, despite what the post of this titles suggests.
"Listening sessions"? Seriously?
Is that the best BS terminology that the "beloved" Oscar could think of? Why not call it a "collaborative", and really put some lipstick on that pig?
The "O" in Oscar is for Out of touch.
@Andy K - let's see. I wonder what the executive suite's bonuses are for the year. I wouldn't be surprised if it's around $100MM also. Looks like they're trying to keep executive bonuses but push employees out. Typical activity. I think the airline is already seeing the writing on the wall, a reset is coming and they want to phase out bonuses now instead of later. Of course, they could just raise all the metrics...
@Andy K - let's see. I wonder what the executive suite's bonuses are for the year. I wouldn't be surprised if it's around $100MM also. Looks like they're trying to keep executive bonuses but push employees out. Typical activity. I think the airline is already seeing the writing on the wall, a reset is coming and they want to phase out bonuses now instead of later. Of course, they could just raise all the metrics to get the bonus so no one gets one. That's what always happened to me until my current position.
I for one think it’s impressive that Oscar will be giving up all his non-base pay of about 17million for a chance to enter the lottery.
Of course they will. Executives will now make a show of "listening" to employees and then do what they were going to do anyways.
I read it as "We are creating a new incentive program. We heard you that the proposed one sucked. We're still committed to creating something new, but you will have a voice. Note: It's not a democracy, so it still might suck, but you have a voice."
Isn’t United getting a huge windfall from the Trump tax cuts? Instead of throwing a bone to their employees they’re giving them what amounts to a pay cut and trying to spin it as “exciting.” Shame on them!
Doing some high level math, if 88k employees each earn an average of 1200 per year, that's about $100mm. That's no small sum and amounts to 3% of earnings before taxes ($3bn). One issue that is likely affecting this decisions is the ever-increasing minimum wage. If United was willing to pay a $10 per hour employee a $1200 bonus (would amount to about a 6% bonus), employees in certain states will soon be subject to...
Doing some high level math, if 88k employees each earn an average of 1200 per year, that's about $100mm. That's no small sum and amounts to 3% of earnings before taxes ($3bn). One issue that is likely affecting this decisions is the ever-increasing minimum wage. If United was willing to pay a $10 per hour employee a $1200 bonus (would amount to about a 6% bonus), employees in certain states will soon be subject to a $15 minimum wage (a 50% bonus of sorts), which the Company needs to somehow pay for.
To be fair, it's already generated a good deal of excitement.
A fucking lottery... these people have their heads so far up their asses it's almost impressive.
Listening is what United management should have done before they rolled out the lottery.
It went viral because United is a company that has consistently failed to invest in its employee and customer experience and as a result has had several high profile customer related incidents.
“Listening sessions” What a joke.
They’ve already made up their minds