Same Dances in the Same Old Shoes – The Eagles

by  

Print | 1 Comment | Share/Save

Expert Perspective by Grahall’s OmniMedia Editorial Board

expert perspective telescopeAs Bloomberg’s Peter Eichenbaum shares (in his September 24, 2009 article “American Express Plans to Reverse Compensation Cuts“)  “American Express Co., the credit-card issuer that repaid the U.S. bank bailout program, plans to reverse compensation cuts imposed seven months ago because the economic outlook has improved.   Annual merit increases and contributions to retirement plans will resume in January, and a 10 percent salary reduction for managers in the senior vice president ranks and above will be rescinded, according to a memo from Chief Executive Officer Kenneth Chenault to employees.”

That announcement likely put smiles on the faces of many American Express employees. And as a public relations move it might also have eased some investors’ minds with its suggestion that American Express’s financial outlook has improved.  But we wonder if the “same dance in the same old shoes ” really is the right step for American Express?  Is the company missing a great opportunity?

Paraphrasing Stanford economist Paul Romer’s quote from 2004 and Rahm Emanuel’s from earlier this year while channeling Dan Quayle “It is a terrible thing to lose one’s crisis”. (For more on these famous and famously misquoted quotes, read Jacks Rosenthal’s July 31, 2009 On Language column in the New York Times “A Terrible Thing to Waste”.)

For a company the size of American Express, reversing a 10% salary reduction for SVPs and above would represent a significant amount of money spent.  Perhaps this was an opportunity, now lost, for American Express to review, refine and renew its compensation structure and to be certain that this cash resource would be effectively deployed.  Even with economic recovery glimmering on the horizon, we doubt the wisdom of spreading money like peanut butter across large groups of employees. 

Grahall’s distinctive approach to compensation design is “more surgical” and structured to help a company to select, retain and mobilize not just its best people, but the people best suited to drive success in the future. The result is more than likely a new dance, new shoes, and maybe new partners than those rewarded in the past.

As we mentioned in our blog “Sameness is the mother of disgust“: A surgical approach requires a clear understanding of business strategy and what strategy segment the company will pursue.  Grahall has been at the forefront of designing surgical compensation strategies around appropriate market attachments that create true incentives to drive desirable and risk-appropriate behavior.

And from our blog “It’s Better to be on the Bus than Under it”:  Never has there been a better time to differentiate packages by using a surgical approach to reward key personnel in meaningful ways  – all the while managing risk. But before you take a surgical approach or consider the components of pay to include or revise in an “attract or retain package,” you need to do a careful analysis to determine who really is important to your organization. Who are those people who drive the successful delivery of your business strategy? 

We expect that for American Express, every single “SVP and above” who according to the announcement will be getting his or her 10% pay reduction restored does not meet the criteria of “vitally important to drive business success.”  Those in that group who ARE should get more than their 10% restored. Those who ARE NOT – well, we are sure you get the picture.

Contact Grahall’s Editorial Board at edie.kingston@grahall.com


1 Comment

RSS Follow this discussion

Post a Comment