Strategic incentives are a good idea at the top. But getting everyone one in a large company on the same page is difficult, and it doesn’t always work. Here are a few current examples:
- United Airlines’ CEO Oscar Munoz reportedly has $500,000 of his bonus tied to customer satisfaction questionnaires. You’d hardly know it from the nearly unbelievable physical ejection of a passenger, and United’s follow-up to the incident. Some background: In 2010, United began a botched merger with Continental. In 2012, United had 43% of all airline consumer complaints, and has been a leader in complaints since then. On January 14, 2016 Bloomberg’s article, “United’s Quest to be Less Awful” was published. Clearly things have needed to change for a long time.
- Apple’s Tim Cook made less money last year (only $10 million in salary and bonus!) than the year before. That reflects the downward trend of the iphone business, which might pick up this year with a redesigned phone. But Cook isn’t betting on riding the iphone into the future. As in the past, the company’s prospects are secret, but you can bet they are working hard on innovation and disruption in other industries, continuing the path that Apple has taken throughout its history. That’s what his focus and challenge is, and what his future bonuses will depend on.
- Ford Motors’ board wants CEO Mark Fields to accelerate the company’s transformation and profitability beyond SUVs and pickups. They’ve put into place a $2.5 million “strategic incentive grant” designed to reward both innovation and growth. He received a reduced bonus last year as revenue and quality slumped. The board realizes that making the core business more profitable won’t be enough — they need innovative solutions for the future.
Obviously, sometimes incentives get everyone on the same page, and sometimes they don’t. Even the largest companies can’t seem to nail it, in part because transforming such large companies is a significant challenge. But significant incentives can provide significant focus at the top.
What kinds of incentives are you using at the top? Are they operational or strategic?
© Copyright 2017 Bob Legge
Bob Legge provides organizations with the ability to exceed their most ambitious goals. I work with leaders of Fortune 500 companies, small and mid-size companies, nonprofits, education, and government. Together, we drive strategy, lead successful change, develop high performance cultures, improve individual and organizational performance, and produce faster, sustainable growth and value. Contact him at firstname.lastname@example.org