I had my annual performance review yesterday, and all in all it turned out pretty good. I met most of my goals for the year, and the one goal I didn’t meet was mostly due to other people not getting with me despite my efforts. I made a point to take on more responsibilities during the year that were outside the scope of my actual job description, and that was recognized.
My review plays a part, albeit a small one, in determining if I get a bonus, and how much of one I will get. Theoretically, I can get anywhere from 0 – 10% of my base salary; realistically it’s going to be much closer to the 0% than 10%, or even 5%.
My company has two different incentive plans, one for grades 11 and up, and a different one for grades 10 and under. Since my position is a grade 6, I fall under the second plan. I don’t know exactly what metrics are used for each plan, but the higher grades always tend to get a bonus based on overall profits as well as goals set for them individually. The lower tier’s bonuses are based first on earnings per share for the company, then on our own performance.
So no matter how well I do my job, if the company doesn’t meet a vaguely identified mark for EPS (seriously, we’re not even given a number until the end of the year) I won’t make a bonus. I am directly involved in setting my own goals (with my supervisor), but have no input (nor do any of us) in the EPS goal; that is set by people much higher up. People who are in the other incentive plan, in fact.
Where my bonus depends on EPS, the other tier’s depends on profits earned by the company as a whole (or, perhaps, profits earned by their specific divisions.) Our CEO crowed, and rightly so, about record profits for the year, based on the strength of our third and fourth quarters. Except for some areas that underperformed, my company as a whole kicked some serious ass last year. So profits were up, and significantly so, for the year. Unfortunately, EPS was down.
Oh, no wait, shareholders wouldn’t put up with that at all. EPS was NOT down last year; EPS was up to the tune of around $.60 per share. When this was reported in January, it was made clear that, though good, it did not quite meet the goal set at the beginning of the year. We weren’t told at the beginning of last year what the EPS goal was, but we’re assured now, when it’s being reported, that the goal was more like $.70/share. Man; we missed it by THIS much! (Imagine Maxwell Smart holding up two fingers millimeters apart.)
Based on publicly available records, our CEO made almost $2 million dollars in bonus in 2012, just under a third of his total compensation for the year, and the other executives’ bonuses were in the high six to low seven figure range. All of them received raises of their base salaries in the 20% to 40% range in 2012.
My full-time employment started in 2013, so I had no expectations of a raise or a bonus, of course. But I know my coworkers here who fall in my tier were disappointed by not only the lack of bonuses, but apparently raises were either minimal or non-existent. I’m not sure how those in grades 11 and up fared for raises, but I know my coworkers here who fall into that tier, managers and most of the engineers, received something in the way of bonuses. I wasn’t being nosy; some of them excitedly talked about the bonuses they got (not the amounts, just the fact that they got them.)
So in a year when my tier was told “sorry, goals weren’t met so there’s no money for raises or bonuses for you”, the other tier (especially those really high up on the ladder) seemed to make out pretty good. All indications are that 2013, though a much better year profit-wise than 2012, will wind up being much the same; great profits but so-so EPS means tier 1 should do just fine while tier 2 will just have to suck it up another year and hope for better outcome next year.
Now I like my job, and get fairly compensated for the work I do. And I don’t begrudge anybody the wages or bonuses they earn, but something is definitely wrong with this scenario. I’m not going to walk out in protest over the situation, but there is a big problem and it’s pretty blatant. I’m not saying I think the government should step in and tell any CEO how much they can be compensated and how much their workers should get paid, but “free market” and capitalism simply don’t address these inequalities.
In a perfect world, no executive officer in a company, big or small, would feel right about rewarding themselves based on one set of criteria while telling the “lesser” employees that there’s not enough to go around based on another set of criteria. Of course we all know this is not a perfect world, and there are far too many people absolutely willing to do just that. I don’t know what the right answer is, but our current system isn’t working for the average Joe. Does it hurt me? Yes, a little, but the wife and I both are working and we don’t have kids, so we’ll get by just fine.
But there are a lot of people who bust their backs for big companies like mine, year-after-year, and whose wages have remained mostly stagnant. I’m not talking about lazy malcontents who don’t apply themselves; these are people who are good at their jobs, and collectively are as important to a company’s success as anyone else. Yes, their positions are perhaps easier to fill, but that doesn’t mean they should get overlooked when it comes to fair wage increases and, yes, bonus pay-outs.
It’s easy to say “if they don’t like it, they should quit and work for someone else” but that’s bullshit; In America we’ve let things progress to the point that most medium-sized companies and up practice the same type of unequal policies. Besides which, the drive to keep shareholders happy (and profits up high enough to justify the upper tier’s raises/bonuses) has led to lay-offs, downsizing, “rightsizing”, etc., which means jobs are scarce. And those lucky enough to keep their jobs wind up overworked, still underpaid, and stuck right where they are. They know it, and employers know it, and in America employers have carte blanche to practice whatever pay inequalities they wish.
And you know what the really crazy thing is? It’s not surprising that people who benefit the most from the status quo work towards, or won’t work against, maintaining it. The crazy thing is the number of people who are negatively affected by it who support the status quo! Their reasoning is “well, I want to be rich like that and benefit the same way.”
Heck, I guess most of us would like to be rich like that; if not CEO rich then at least well paid enough to see stock options, bonuses, etc. But I just don’t know what to think of people who support a system that rewards some workers at the direct expense of the group of workers they belong to. I can’t understand the mindset that says “It’s okay for me to experience this inequality now, because I too aspire to be in a position to get more and more by taking it directly from the pockets of others like me.” It’s the same attitude I saw in the Army; NCOs who treated their troops like shit because it was how they were treated before they became NCOs. It didn’t make sense to me in that context, and it certainly doesn’t now in this one.
But if I’m against executives getting more and more at the expense of the “average Joe” worker, how can I justify taking away from the executives to give to the workers? It’s the same thing in reverse, right? Isn’t it hypocritical to be against one but for the other?
The best way I can explain it is this: if someone receives enough food every week to feed their family for a month, I don’t feel bad asking them to sacrifice half of that in order to help five or six families that are struggling to eat three days a week. Those who do so voluntarily are to be commended, and applauded. Unfortunately, there are far too many who don’t.
I don’t much like labels, especially politically driven ones, but if this makes me a Socialist, then so be it.
My review plays a part, albeit a small one, in determining if I get a bonus, and how much of one I will get. Theoretically, I can get anywhere from 0 – 10% of my base salary; realistically it’s going to be much closer to the 0% than 10%, or even 5%.
My company has two different incentive plans, one for grades 11 and up, and a different one for grades 10 and under. Since my position is a grade 6, I fall under the second plan. I don’t know exactly what metrics are used for each plan, but the higher grades always tend to get a bonus based on overall profits as well as goals set for them individually. The lower tier’s bonuses are based first on earnings per share for the company, then on our own performance.
So no matter how well I do my job, if the company doesn’t meet a vaguely identified mark for EPS (seriously, we’re not even given a number until the end of the year) I won’t make a bonus. I am directly involved in setting my own goals (with my supervisor), but have no input (nor do any of us) in the EPS goal; that is set by people much higher up. People who are in the other incentive plan, in fact.
Where my bonus depends on EPS, the other tier’s depends on profits earned by the company as a whole (or, perhaps, profits earned by their specific divisions.) Our CEO crowed, and rightly so, about record profits for the year, based on the strength of our third and fourth quarters. Except for some areas that underperformed, my company as a whole kicked some serious ass last year. So profits were up, and significantly so, for the year. Unfortunately, EPS was down.
Oh, no wait, shareholders wouldn’t put up with that at all. EPS was NOT down last year; EPS was up to the tune of around $.60 per share. When this was reported in January, it was made clear that, though good, it did not quite meet the goal set at the beginning of the year. We weren’t told at the beginning of last year what the EPS goal was, but we’re assured now, when it’s being reported, that the goal was more like $.70/share. Man; we missed it by THIS much! (Imagine Maxwell Smart holding up two fingers millimeters apart.)
Based on publicly available records, our CEO made almost $2 million dollars in bonus in 2012, just under a third of his total compensation for the year, and the other executives’ bonuses were in the high six to low seven figure range. All of them received raises of their base salaries in the 20% to 40% range in 2012.
My full-time employment started in 2013, so I had no expectations of a raise or a bonus, of course. But I know my coworkers here who fall in my tier were disappointed by not only the lack of bonuses, but apparently raises were either minimal or non-existent. I’m not sure how those in grades 11 and up fared for raises, but I know my coworkers here who fall into that tier, managers and most of the engineers, received something in the way of bonuses. I wasn’t being nosy; some of them excitedly talked about the bonuses they got (not the amounts, just the fact that they got them.)
So in a year when my tier was told “sorry, goals weren’t met so there’s no money for raises or bonuses for you”, the other tier (especially those really high up on the ladder) seemed to make out pretty good. All indications are that 2013, though a much better year profit-wise than 2012, will wind up being much the same; great profits but so-so EPS means tier 1 should do just fine while tier 2 will just have to suck it up another year and hope for better outcome next year.
Now I like my job, and get fairly compensated for the work I do. And I don’t begrudge anybody the wages or bonuses they earn, but something is definitely wrong with this scenario. I’m not going to walk out in protest over the situation, but there is a big problem and it’s pretty blatant. I’m not saying I think the government should step in and tell any CEO how much they can be compensated and how much their workers should get paid, but “free market” and capitalism simply don’t address these inequalities.
In a perfect world, no executive officer in a company, big or small, would feel right about rewarding themselves based on one set of criteria while telling the “lesser” employees that there’s not enough to go around based on another set of criteria. Of course we all know this is not a perfect world, and there are far too many people absolutely willing to do just that. I don’t know what the right answer is, but our current system isn’t working for the average Joe. Does it hurt me? Yes, a little, but the wife and I both are working and we don’t have kids, so we’ll get by just fine.
But there are a lot of people who bust their backs for big companies like mine, year-after-year, and whose wages have remained mostly stagnant. I’m not talking about lazy malcontents who don’t apply themselves; these are people who are good at their jobs, and collectively are as important to a company’s success as anyone else. Yes, their positions are perhaps easier to fill, but that doesn’t mean they should get overlooked when it comes to fair wage increases and, yes, bonus pay-outs.
It’s easy to say “if they don’t like it, they should quit and work for someone else” but that’s bullshit; In America we’ve let things progress to the point that most medium-sized companies and up practice the same type of unequal policies. Besides which, the drive to keep shareholders happy (and profits up high enough to justify the upper tier’s raises/bonuses) has led to lay-offs, downsizing, “rightsizing”, etc., which means jobs are scarce. And those lucky enough to keep their jobs wind up overworked, still underpaid, and stuck right where they are. They know it, and employers know it, and in America employers have carte blanche to practice whatever pay inequalities they wish.
And you know what the really crazy thing is? It’s not surprising that people who benefit the most from the status quo work towards, or won’t work against, maintaining it. The crazy thing is the number of people who are negatively affected by it who support the status quo! Their reasoning is “well, I want to be rich like that and benefit the same way.”
Heck, I guess most of us would like to be rich like that; if not CEO rich then at least well paid enough to see stock options, bonuses, etc. But I just don’t know what to think of people who support a system that rewards some workers at the direct expense of the group of workers they belong to. I can’t understand the mindset that says “It’s okay for me to experience this inequality now, because I too aspire to be in a position to get more and more by taking it directly from the pockets of others like me.” It’s the same attitude I saw in the Army; NCOs who treated their troops like shit because it was how they were treated before they became NCOs. It didn’t make sense to me in that context, and it certainly doesn’t now in this one.
But if I’m against executives getting more and more at the expense of the “average Joe” worker, how can I justify taking away from the executives to give to the workers? It’s the same thing in reverse, right? Isn’t it hypocritical to be against one but for the other?
The best way I can explain it is this: if someone receives enough food every week to feed their family for a month, I don’t feel bad asking them to sacrifice half of that in order to help five or six families that are struggling to eat three days a week. Those who do so voluntarily are to be commended, and applauded. Unfortunately, there are far too many who don’t.
I don’t much like labels, especially politically driven ones, but if this makes me a Socialist, then so be it.
I can honestly say that 10 years ago I would have been one of the people that was totally for the execs getting all the bonuses because of the risk, the level of responsibility etc, (and I also listened to Limbaugh all the time back then), but now I realize it is nothing more than profiting off the backs of the hard work of others. I totally agree that a small business owner deserves much more than his/her unskilled employees because of the risk, investment, etc. But that isn't what you are describing. I used to think of them as bleeding hearts when I would see these companies who install a ratio that the highest paid worker cannot exceed the lowest paid bu whatever, 5 to 1, as bleeding hearts. Now I admire them.
ReplyDeleteAnd by the way, this applies to government service. I promise you, in this era of furloughs and continuing resolutions, the highest level government employees got bonuses, and the rest got shit. I did get a bonus (which confounds me given the budget situation) but many of my deserving peers did not, and more importantly, way too many of the undeserving higher level executives got huge bonuses.
Unfortunately, James, the next thing is figuring out what to do about it. If I were a peer of yours and got a favorable yearly review but no bonus, I would wonder why you got a bonus and I didn't. I don't believe (like some do) that everyone deserves a raise/bonus no matter what, but if two people get a comparable review for their respective jobs and one gets a bonus because the company had record profits and the other doesn't because the company stocks' ESP was lower than the "goal" (after the fact), or by whatever differing criteria there might be, then it's a broken system.
DeleteI agree that basing your bonus on things that are beyond your control is unfair, unless it is across the board. But, your conclusion that capitalism and free markets do not address this is just plain wrong. You just refuse to do anything about it. If you (and others) are willing to leave over the bonus system, and you let your reasons for leaving be known when you leave, the company then has two choices. 1. They can keep doing things the same way, and watch as their best talent walks out the door. Or 2, they will change to keep the best people. I have left a job over the bonus system, and you and I went to school with the owner of that business. It wasn't the only reason I left, but it was the last straw. There are many companies both small, medium and large that treat their employees fairly. That does not mean that the executives would be judged by the same criteria as those under them, that would be impossible I think we can agree. But it does mean that pay, and bonuses are directly related to job performance and things under that persons (or teams) control. The idea that there aren't companies out there that take care of their employees is just ludicrous. There are plenty of jobs available, just take a look at the want ads. Considering your skills, you could have any number of jobs, but it easier to say that there are none and that most medium to large companies treat their employees this way. If anything is, that is the bullshit. Don't complain about a system that is broken when in reality, you aren't willing to use the system. Your company may be short sighted, but that doesn't mean every company is. I have worked for great companies and some pretty shitty ones. Of the shitty ones, the ones that are retail stores, I still will not shop there. So, they not only lost a great employee (don't choke on your coffee/beer depending on the time of day), they also lost a customer for life. Will my acts change the company policies? Probably not (OK, almost definitely not). But, even knowing that, I still will not support them.
DeleteI do have to agree with James, I also admire a company that puts in some kind of ratio for the executives, but I would not support a law to make that happen.
You say in your post that you don't understand how people can support the unfairness of your company. What you may be forgetting is that they may want to rise to that position so that they can make the changes necessary to make your companies pay/bonuses more fair. "If I were the CEO and making that kind of money, I would ..." Whether they actually would or not is up for debate.
So CuriousRob, if you think the system is broken, what is your solution? I don't think your complaints are "Socialist" unless you think that government is the solution. You say in your post that you are not for the government stepping in and telling companies what they can pay or what their bonuses should be, so how else can this be changed unless you are willing to do something about it? Maybe I am missing a third option, but I only see two at this point. The employees let the management know there is a problem and if they don't fix it you will leave, or government steps in and "fixes" the inequalities. What's the solution if the employees of a company are unwilling to try to fix it?
I think that you might be overestimating the power the average working Joe has here, or in any large company. Frankly, we in the lower tiers are not my company’s “best talent”; we’re good at what we do (remember, I’m talking about the people who are good at their jobs, i.e. they receive good performance reviews) and we do add value to the company. But being good at something this company finds valuable is not the same as having skill sets that will automatically mean there are other job opportunities out there for the taking.
DeleteWorldwide my company has around 60K workers, and though I can’t find a breakdown (yet) let’s say 40% of them (24K) are in the US. Of the 24K, my guess would be 15K of them are in the lower tier. These numbers could be way off, but just for gits and shiggles let’s go with them anyway. Walking out en masse (which is the only way the company would get the message) isn’t going to happen, because there aren’t enough jobs out there that most of us could walk right into making what we’re making now (not to mention the seniority that a lot of them would be giving up).
Talk about a first world problem; I can’t quit my job over an unfair/unethical situation because I won’t be able to find another job that pays as well. I know that makes it hard to feel a great deal of sympathy for us; hell, I don’t even feel all that much outrage over our situation. I’ve known about our bonus tiers since last year when people were complaining about it and I thought (and still do) that people should be more thankful that they have a job with a good company.
But do you think the non-management people working at Wal-Mart have it that good? Could they walk out in protest over how badly they’re treated? Hell no; in this economy, high school kids who are tired of flipping burgers, single mom’s looking for a third or fourth part-time job to make ends meet, and desperate, recently laid off workers (or those who walked out of a good job because the bonus scheme was unfair) who need something until they find a reasonable replacement job would be lining up around the block to fill the gaps. Wal-Mart purposefully picks most of their workers from those categories because they know those workers have no leverage. They’ll close down whole stores (so they threaten) if the workers there even consider voting to unionize; Wal-Mart doesn’t give a rat’s ass if the employees walk out (which they won’t because they are desperate) because they know there are plenty more where they come from.
I could go on, but this response is already becoming too long to be a reply.
You seem to think the problem is in my mind, but I disagree. You’re right that companies can’t get away with treating their top talent that way (and that group will be different from one company to the next.) I may be overstating the extent of the problem (partly because companies aren't even hiring people full time, so bonuses aren't an issue) but it’s clear to me that more and more companies are finding they can pretty much get away with treating the lower tier employees any way they want. You say I’m wrong about capitalism and free market not addressing these problems; I say I’ll admit I’m wrong when capitalism and free market do address (and correct) them. So far, that hasn’t happened.
You ask what the solution is if I don’t want the government to step in and the workers can’t (or won’t) do anything about it. Well, I just don’t know Ro… er, anonymous; maybe there is no answer and it will never be fixed and everyone will learn to live with it and we’ll just move on. If we had a competent and capable government, perhaps their intervention would be an acceptable answer. But it’s been a long time since we had that kind of government (if ever) and I doubt we’ll see it in our lifetimes.
“Anonymous” is a good friend of mine that I invited to comment on this post. We’ve had a lot of similar discussions in the past, and I thought my regular readers might enjoy the exchange. Please feel free to jump in if you have something to add, but let’s try to be civil while we’re at it. (Unless you can be really entertaining while you’re insulting one or the other of us; then please, let us have it!)
Delete(And for those wondering, he knows just about everything concerning L, so no surprises there. Some other things he may learn if he browses the blog may be a bit more eye-opening though.)
Let me first start by clarifying something: I actually like the company I work for overall. Outside of the bonus situation (and maybe the raise situation, but I don’t know enough about it yet and how it works to make a determination) they are a good company to work for. This post started out as me bragging about getting a good review, in contrast to an earlier post about some minor trouble I’d gotten into (which turned out to be even less an issue than I originally thought.)
My complaints against my company’s differing bonus plans are based not on its affect directly on me; I’ve only been here a year full time, which isn’t enough time to really be hurt by it. And apparently, until 2012, this wasn’t an issue; people on both sides of the tier line got bonuses, which were apparently more fairly meted out. I feel bad for some of my co-workers here at my building who’ve grown accustomed to the bonuses and suddenly aren’t getting them (despite working just as hard as ever, and seeing their co-workers on the other side of the tier line still getting bonuses), but nobody here is going to fall into the “working poor” category.
DeleteYou seemed to have missed my point about free markets and capitalism. You want capitalism to fix a problem that the solution is already built into the system. If you don't like the work environment, leave. No one is forcing you to stay there. (I understand that you don't think it is that bad, so this is mostly a theoretical discussion.) If you are in a bad situation you basically have three choices. You can stay, but tell your superiors what your problem is (knowing that that could jeopardize your future); you can stay, forget about it and continue to do your job well, or you can leave (with or without sharing your reasons). You may not like your choices, but you do have them. I guess there is a forth choice; you can stay, say nothing to your bosses, and then bitch about how unfair it is to you and others that work there, and eventually get so frustrated or disheartened, that you quit anyway.
Walmart is a bad example to use in this discussion for a couple of reasons. Walmart, like almost all retail stores, has a huge turn over of hourly workers. According to an article on pbs.org, over 70% of their employees leave in the first year (Google walmart employee turn over). So, not many people feel trapped there. One of the biggest problems that Walmart managers will tell you they have is finding people that want to work, not just get a job. If you do stay at Walmart, and you actually work, you have a good chance of moving up. Over 75% of Walmart's managers started out as hourly employees. And yes, lower tier walmart employees can walk out and find a job with the same or better pay. They have an entry level job, not a career. There are plenty of those available. On my drive to the office this morning, I saw 3 Help Wanted signs at places that would pay as much as Walmart, and you know my commute is only about 3 miles.
But to get back on topic, it is not the system that is the problem, it is the individuals or companies that have these bad policies that is the problem. The free market has the solution for you; stop working there, stop shopping there, etc. Find a better place to work, they are out there. Google "Best places to work" and put in your city. Then, set about trying to get a job there. So, yes, I see the problem as being in your mind. If you (or anyone else for that matter) wants to work in a better situation, the first place you need to look is in the mirror. As long as you see it as someone else's fault, the company's fault or the system's fault, that lets you off the hook. So you can say that there is nothing you can do. Which means there is nothing that you have to do.
The job that brought me into Virginia in 1980 gave bonuses each year that were vaguely based on profits, but mysteriously (or miraculously) worked out to be about 2 weeks pay. We were all thrilled to get this, and it was across the board, at least at our station (I'm sure the corporate people had another formula, but whatever). Then I went to the feds. There, you got raises based on time in service - "step increases". You could get merit raises, but the paperwork involved to give one meant that no supervisors would spend the time necessary to do that. Then I went back to private sector, and raises were based on performance reviews. I could live with that since I did my job well. Now, I work for local government, and given the economy and how much money is tied to personal property tax revenues, we're five years with only a single 2% raise about 3 years ago. We might get 1% in 2014/2015 (FY starting 1 July 2014). We shall see.
ReplyDeletePeace <3
Jay