By now, you’ve probably heard just about enough about the mega-bonuses, averaging $76,000 apiece, going to every employee at Kingston Technology Corp., a Fountain Valley, Calif., maker of computer-memory products.
And you’re really sick of the tales of juicy rewards on Wall Street, where investment bankers and traders are expected to get year-end bonuses that are 30 to 50 percent more than last year’s, bringing pay for those in the upper echelons into a range of $2 million to $5 million.
Well, join the club. If regional and national surveys are accurate, the average American worker will get just about what he or she received last year, which for many was a big fat zero.
And if the party line being espoused by leading pay consultants is any indication, it’s only going to get worse in years ahead–unless you happen to be a Type A superachiever who has mastered the corporate pay-for-performance game.
The scenario at Kingston “is not what our survey found for employees in the Midwest,” said Marcus W. Acheson, head of commercial banking for Bank of America Midwest.
In fact, 66 percent of the 579 midsize firms surveyed by the bank in November indicated they will spend about the same on bonuses as they did last year, with another 20 percent planning to spend more and 12 percent planning to spend less. “It’s steady as she goes,” Acheson said.
Steady, yes, but at a fairly low participation rate, according to a separate study by Bureau of National Affairs Inc., a Washington publisher. Its survey of 375 employers nationwide shows just 35 percent will give gifts or bonuses, virtually unchanged over the last few years. Likewise, the percentage giving just bonuses or cash has been stable, at just 14 percent.
These numbers are undoubtedly on the low side. They do not include profit-sharing and incentive-based awards, which many companies are taking pains to disassociate from the holidays. As well, pay experts say much of the old-style holiday giving–hams, turkeys, an extra week’s pay or cash–goes on at very small businesses, oftentimes unreported.
Yet the numbers indicate that bonuses, particularly at larger corporations, are hardly widespread anymore.
“It used to be that employers would give a turkey or a check for $500,” said Rob Heneman, a professor of management and human resources at the Fisher College of Business at Ohio State University in Columbus. ” `Everyone share and share alike’ was the philosophy.
“But as employers have become pushed on costs, they need a return on their investment, namely their employees,” he said. Thus the emergence and growing presence of pay-for-performance plans.
In addition, “many companies have tried to disconnect payouts from the holidays,” said Ken Abosch, global compensation leader for Lincolnshire-based consultancy Hewitt Associates. “They would like people to understand that the focus is on business results as opposed to the fact that the temperature is dropping, snow is falling and lights are going up.”
Major employers in the region–Sears, Roebuck and Co., ServiceMaster L.P., Burlington Northern Santa Fe, to name a few–are in step with these trends, offering incentive plans based on company and/or personal performance, rather than Christmas bonuses.
Burlington Northern Santa Fe, based in Ft. Worth since it took over Schaumburg-based Santa Fe Pacific Corp. last year, has an incentive plan for its 5,100 salaried employees in which bonuses are paid out Jan. 31, based on company performance in the prior year in three areas: net revenue from operations, on-time performance and safety.
“We try to maintain a competitive edge in the market,” said Chris Hetrick, manager of compensation who works out of corporate offices in Schaumburg. “We’ve tried to reduce fixed payouts in terms of base salaries and to move toward more variable pay based on how the company does. It keeps people focused on what our goals are through the year.”
He said prior to the merger, Santa Fe Pacific Corp. had some good years with 100 percent payouts and that he expects the payout this January to be 65 to 70 percent of potential amounts. .
The bulk of Burlington’s 50,000-member work force is unionized, and the bonus plan does not apply to that group, whose pay is determined by labor pacts. This two-tier setup is commonplace.
“Bonuses are more common in white-collar jobs,” said Acheson, of Bank of America Midwest, noting that they are more prevalent in banking, investment banking and other types of financial firms than in other sectors. “There is always an elitist color to stories about bonuses. Typically you’re not writing about bonuses that production-line workers share in.”
There are exceptions, of course–cases where bonuses apply to those below the ranks of management. At First Chicago NBD Corp., for example, every full-time worker below the level of vice president will receive a $350 contribution on Jan. 15 to their investment plans as thanks for their help in merging First Chicago Corp. and Detroit-based NBD Bancorp Inc. over the last year.
In the years ahead, however, elitism in bonus distribution is destined to grow. Companies are now tinkering with bonus systems to provide better rewards for the hotshots and lesser bonuses for the slugs.
“There is a growing feeling among companies that the truly outstanding performers need to be rewarded more than in the past,” said David Hofrichter, managing director in the Chicago office of The Hay Group, a compensation and organizational consulting firm. “In order to give the truly outstanding 8 to 10 percent, the number of people getting zero will have to go up.”
Yet for all the movement toward performance-based bonuses, the old-line, Yuletide sweeteners still play a valuable role at some firms, often the smaller ones.
“Generally, they serve the need for a feel-good,” said Abosch of Hewitt. “And they seem to serve that purpose quite well.”
At companies that give traditional gifts and bonuses, the median value of bonuses or cash gifts was $225 for management employees and $175 for non-management workers, according to the Bureau of National Affairs 1996 survey.
One believer in the old-time bonus is Chicago entrepreneur Anne Luthi, whose two firms employ six people.
“I kind of go with my heart,” said Luthi, who generally gives a week’s pay, or a bit more, as a bonus to employees at her ad agency, The Difference, and her typesetting studio, Pilot Type, both on Chicago’s North Side.
“I want our employees to know I appreciate them, that they mean something to me other than just getting the work out,” she said.
Her employees receive a bonus regardless of the firm’s financial performance in a given year, she said, adding, “It’s not their fault if I’m not doing well.”
Other firms in the area try to blend a bit of the old-fashioned holiday spirit with newer incentive-based programs.
Like many large companies, Chicago-based R.R. Donnelley & Sons Co. favors incentive-based rewards for management and a profit-sharing program for hourly employees rather than a traditional holiday bonus, according to Robert Keller, director of worldwide compensation for the commercial printer, which has 40,000 employees.
Yet, in a tradition started in 1903, every employee and customer gets a first-edition book from a collector’s series printed by the firm’s Lakeside Press. The Lakeside Classics were designed “to be small enough to read on trolley cars and are first-person narratives about American history,” he said.
And at Chicago ad agency Leo Burnett Co., the year-end bonus distribution, while not officially linked to the holidays, has evolved into a full day of festivities, kicked off by the Burnett Breakfast, which was started by the founder 35 years ago.
At the breakfast held in early December, executives “discuss the good, the bad, everything,” said a company spokesman. Then it’s back to the office, where direct supervisors hand out bonuses in small ceremonies, and on to department lunches and parties.
“People are free to celebrate the successes for the year,” said the spokesman.
