HR News & Trends

Weekly Wrap: Should You Pay Employees For Just Sticking Around?

Illustration by istockphoto.com

Let me be up front about this: I’m not a big fan of Best Buy.

There are a number of reasons for that, but mainly, it’s because I’ve found the customer experience at Best Buy to be slightly better than terrible, and I’ve got a ton of friends and family members who feel the same way.

My guess is that lots of others feel that way, as well, because the giant electronics retailer seems to be slowly sliding south (it’s stock has lost 20 percent of its value this year) and is following in the footsteps of Circuit City and other rivals that have long since gone to the great corporate beyond.

Lots of key employees have left, from the CEO (who was involved with a subordinate) to the company’s founder, and frankly, it’s probably not a place that really talented executives want to hang around at.

Why a retention bonus works – and works well

So, how do you slow the senior talent exodus and keep things from getting worse? Well, one time-honored way is to offer your at-risk managers a retention bonus to keep them in the fold and give them some financial reason NOT to make a run for the door. This is what Best Buy did, and, given the type of year Best Buy is having, the smart retention strategy promptly blew up in their face.

Here’s what happened, according to the Minneapolis Star-Tribune:

A compensation consultant to Best Buy Co.’s board quit after the electronics chain awarded more than 100 managers retention bonuses without tying them to performance, said three people with knowledge of the matter.

Don Delves, who worked with Best Buy’s compensation committee for seven years as an independent consultant, was opposed to the payments, said the people, who asked not to be identified because the situation is private…

Chief Financial Officer James Muehlbauer and Michael Vitelli, head of the U.S. division, were among executives awarded extra pay as incentive to stay while Best Buy seeks a replacement for Chief Executive Officer Brian Dunn, a June regulatory filing shows. The retailer’s stock had sunk 22 percent this year through July 20, torpedoed by the first annual loss in two decades and a scandal tied to Dunn’s conduct.

“There were no performance criteria or metrics tied to it at all, which is sort of unusual,” said Frank Trestman, chairman of Richfield-based Best Buy’s compensation committee for 12 years until he resigned from the board in 2010. “You always try to tie it or at least couple it with some other offer that is performance-related so it’s not just a matter of sticking around.”

Best Buy said the incentive pay is “intended to ensure leadership continuity,” according to an e-mailed statement…”

Keeping managers in the fold

I’m not a compensation expert, but as someone who worked as a senior executive and was once offered a similar “stay put” bonus, my experience is that these sort of things are usually “just a matter of sticking around,” because that’s the whole point of the exercise — keeping top executives from stampeding out the door.

With me, I was a vice president at a well-known San Francisco Internet firm during the late ’90s tech bubble, and we reached a point where it became clear that the company might be sold or closed. We had already seen some executives depart, so what should management do to keep even more from leaving and making the situation worse?

You know the answer: give the at-risk executives a retention bonus.

I was offered a year’s compensation that was payable if I stayed on board and a “change of control” — a sale or closure of the company — took place. The bonus helped ease my mind that I wouldn’t be left high-and-dry should something happen, and it kept me in the fold and working hard until we closed the doors for good. Most of all, there was no performance criteria attached to the stay-put bonus, but I think the assumption was that as professionals, we would continue to give the company our best effort as long as we were there.

That’s what I see happening at Best Buy, and that’s why I can’t fault its management team for trying to stem the brain drain and keep executives on board who might be able able to help get things back on track.

I can’t read the minds of those Best Buy managers getting the retention bonus, if the situation is anything like mine, it’s a fair trade-off for agreeing to stick with a sinking ship. Maybe that compensation consultant who quit knows something he’s not saying, but to me, that in itself was reason enough to consider the retention bonus a smart play for the company all the way around.

Getting $89k per month NOT to work

Of course, there’s a lot more going on than just Best Buy’s retention bonuses. Here are some HR and workplace-related items you may have missed. This is TLNT’s weekly round-up of news, trends, and insights from the world of talent management. I do it so you don’t have to.

  • Labor showdown? How about vacation first? Leave it to the French to always make sure their priorities are in order. According to Bloomberg Businessweek, “In an effort to stem widening losses, (French automaker) Peugeot announced it would lay off a total of 14,000 workers, one of the biggest industrial downsizings in the country’s recent history. French President Hollande called the plan “unacceptable,” and his government ordered an independent expert to deliver an emergency report by the end of July. What happened next helps explain why Peugeot — and much of France Inc. — struggles to compete in the global economy. On July 30, the government announced that the Peugeot report would be delayed until Sept. 10. The reason: Most of the union leaders and government officials who were to be consulted on it are on vacation. Never mind that the fate of one of the country’s biggest private employers hangs in the balance.”
  • Who will stay home with the baby? Columnist Chris O’Brien of the San Jose Mercury -News asks a question no one else seems to be asking when he writes, “The discussion around the hiring of Yahoo CEO Marissa Mayer clearly hit a cultural nerve. Can a woman have it all? How will she balance work and raising a baby? Are these topics inherently sexist? But I have become far more fascinated by the question that almost no one seems to be asking: Will Mayer’s husband stay home with the baby?”
  • A cool $89,000 per month NOT to work. Here’s a severance package to die for, according to The Wall Street Journal: “John Krenicki is giving up his General Electric Co. paycheck. But he’s going to be collecting an allowance. As part of a deal to keep the veteran executive from joining a competitor for an unusually long three years, the conglomerate has agreed to pay Mr. Krenicki $89,000 a month until 2022. The payment to Mr. Krenicki, who is 50 years old, was dubbed a retirement allowance by GE and is worth $1 million a year.”
  • Kronos Time Well Spent cartoon. Kronos, the company that probably makes your organization’s time-and-attendance systems, publishes a regular Time Well Spent workplace cartoon by Tom Fishburne. I post them here from time to time in the Weekly Wrap.
John Hollon is Vice President for Editorial of TLNT.com, and the former Editor of Workforce Management magazine and workforce.com. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices. Contact him at john@tlnt.com, and follow him on Twitter at http://twitter.com/johnhollon.