One more post about AIG

Posted March 19, 2009 in Latest News & Insights

Here I am, guilty of adding to the online clutter about AIG…I’m sure there are a million blog posts ranting about the bonus debacle… here’s my take:

You can throw money at anything as a way to “engage and retain” people, and eventually it’s going to bite you on the behind.

You just have to participate in any Management 101 program and you’ll here the message that money is NEVER the number one motivator and that it won’t actually keep people.

In my experience, money is never the issue UNTIL it’s the issue and then it’s the ONLY issue.  And, usually, money becomes an issue when an organization does one of two things (there’s probably  more, but here’s my observation and experience):

1) They aren’t consistent with how they dole out $… they give some employees signing bonuses and not others; they hire new people on at higher rates than others (when the skills are comparable) and don’t make adjustments to the exisiting staff’s packages… etc, etc. 

All this inconsistency leads to the de-motivational behaviour of “comparison other”.  We (the non-well compensated types) start comparing ourselves to those who are better compensated…and we start obsessing about it.  Let’s face it, because most organizations aren’t terrific about recognizing employees, our compensation plans are one very visible way that we measure our “worth” to the company.  It doesn’t matter if the difference between our package is $500 or $5000, it will stick in our craw if it isn’t made clear to us why the other person is making more $$ than us.

2)  They don’t fix systemic motivational problems, infrastructure issues, or improve processes.  I’ve been part of and witnessed organizations that are continually wanting increased performance out of their staff but stick their heads in the sand when it comes to fixing or investing in the right infrastructures to allow people to do their jobs.  Sometimes this is buying new equipment, sometimes this involves overhauling team structures and processes… regardless, the problems are using big and require time and thinking.

So, instead of doing this “heavy lifting”, and to appease employees who start actively pushing back on their ability to deliver around increased performance targets, the solution becomes… let’s just throw more money at them.

Before you know it, you find yourself in a situation where employees have inflated compensation schemes and you’ve built a culture of entitlement.  You may be grinding out the results you wanted, but your margins are gone and you generally find yourself feeling over the barrel because the only thing keeping your top players there is $$.

I personally don’t buy the arguement (as put out by AIG) that you need to throw money at people to keep them.  I think what AIG needs (and what any company who’s spiraling needs) is some leadership with the courage to do what’s right.

To avoid the money trap, leaders need to:

a) be transparent and consistent with how they handle compensation and,

b) not try and fix system problems in the organization by throwing money at it (aka a band-aid solution).  Bite the bullet, do the hard work on fixing the infrastructure… take a short term dip in profit to produce a long-term return.

Personally, I don’t buy the AIG arguement that they needed to throw bonuses at people to make them stay and help with the “restructuring”.  This is just an excuse for not having the courage to wrestle with what are some obviously huge internal issues… with leadership (or lack of it) being at the top of the agenda.

Now, that’s my opinion. What’s yours?

Happy leading!

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  1. matt says:

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