And now, three words about retention bonuses: Are you serious?
Take the badly misnamed Best Buy (or, as a friend calls it, “Amazon’s showroom”), whose board of directors has awarded big piles of cash and restricted stock to its CFO, EVP/HR, President/International, and President/U.S. to encourage them to stay with the company instead of jumping ship to join Best Buy’s founder, Dick Schulze, as he attempts to take over the company.
Understand, I’m jealous. Can you blame me? Nobody has paid me anything remotely like this for screwing things up badly and repeatedly. Heck, nobody has paid me anything like this for doing a good job.
I should probably leave the EVP/HR out of this. She’s hardly responsible for Best Buy’s failure to provide the best buy … or anything remotely close to it … and its consequent ever-increasing decline in marketplace relevance, especially as she’s only had a couple of years to do any damage. But then, what impact is she likely to have on Best Buy’s future competitiveness that makes her worth a retention bonus like this?
But, the presidents of U.S. and international operations have their names all over Best Buy’s failures. And its CFO, who joined Best Buy in 2003, has been in his current role since before the start of the Great Recession. If the CFO position is important enough that a retention bonus is in order, that means its occupant has been involved in the planning and decision-making that has led to Best Buy’s steady decline.
All of which leads to two questions. The first: Is it a good idea to bribe top executives to stay? And second: If you’re going to bribe some top executives to stay, should they be the ones whose names are all over past failures or who won’t have a significant impact on future success?
The second question is, of course, rhetorical. The first is worth serious thought.
That the sums in question are bribes is by definition. Best Buy is paying a lot of money specifically to get these people to do something they wouldn’t otherwise do — to stay with the captain of a sinking ship instead of joining the band of mutineers (pick a different metaphor if you don’t like this one).
So the question is, should a board of directors want top executives who will only stay if they’re bribed to do so?
Regular KJR readers know my position on this: No (see “Is it time to end incentive pay?” KJR, 4/23/2012). Any executive who doesn’t consider their opportunity to achieve something important to be an incredible privilege is an executive you’re better off encouraging a competitor to hire.
As for Dick Schulze’s attempt to take over the company, here’s a question for anyone considering an alliance with him: Why would you do that? He’s the guy who, when he had the chance to crush Amazon.com when it first expanded into consumer electronics and, oh, by the way, to crush Circuit City as an afterthought, instead chose to view Circuit City as the competitor that mattered?
Taking shots at Best Buy is easy and fun. Behind the fun is a question you might find yourself having to deal with in this era of frequent mergers and acquisitions: Whether to offer retention bonuses of your own.
That answer is, yes. There are times when retention bonuses make all kinds of sense, for example, when a company has been acquired, key positions are being consolidated, and you need the services of the good employees who hold those positions in the meantime, to ensure a smooth transition.
That’s assuming, of course, that while these employees are good enough to help with the transition, they aren’t good enough … or a good enough fit … to be worth finding a role for in the consolidated enterprise once the business integration process is complete.
So if you have employees like this — ones who will be essential to a smooth transition but who aren’t worth investing in as long-term highly desirable employees — you only have two ways to keep them on board — either bribe them, or lie.
Unless you lie, they’ll know that when the deal is done they’ll be out of a job. They’ll have no reason to do more than the minimum for you while finding a new place of employment that offers more stability.
If you need them and don’t want to lie, it’s the only solution that will work. Make the amount big enough to work, and no bigger.
Just don’t pretend that you’re doing anything fancy.
You’re offering a bribe.