The United Guide to Destroying Employee Incentives and Morale

Erik W. Charles
Erik W. Charles
In Incentive Compensation, Sales Coaching and Motivation, Sales Planning
Erik Charles is the Vice President, Product Marketing, at Xactly Corporation where he is responsible for driving the product strategy, defining the product vision, and developing a strong team of product owners and designers.

This month’s award for what must be the dumbest change to an incentive plan goes to United Airlines. Let’s start with the first public information in an article by Lewis Lazare at the Chicago Business Journal:

[United} is dropping the quarterly performance bonuses the carrier had been giving out to all employees qualified to receive them…the bonus payouts are being replaced with a new program which would include quarterly prizes like cash ranging from $2,000 to $40,000, luxury cars, vacation packages, and a grand of prize of $100,000 awarded to one eligible employee per quarter.

Hold it. So not more performance measures? Well, there IS a performance measurement of sorts. Per a United spokeswoman quoted in the Lazare article, “We announced a new internal program based on United meeting certain operational and dependability metrics as a way of offering meaningful rewards to our employees.”

The news didn’t get any better, with Market Watch picking up the story as well. I love Barbara Kollmeyer’s opening salvo from her article:

“Be extra nice to that United Airlines employee the next time you plan to “Fly the Friendly Skies.”

There’s a good chance they’re smiling on the outside, and fuming on the inside after a memo leaked late last week from the airline’s president, Scott Kirby, said the company will be canceling its quarterly bonus program, and replacing it with a drawing for prizes.

So let’s back up a minute. The formula for payout for a United employee based on reporting on this program is three things:

  1. Hitting certain airline performance metrics (this is a good thing).
  2. Having enough points that keep employees from taking sick days (I, personally, LOVE it when the flight attendant greeting me has the flu).
  3. Having your lucky number pulled from the hat.

This violates the concept of Line of Sight in building proper incentive plan. The employee should be able to see the direct payout from their positive actions. A lottery completely eliminates this, instead driving a culture where luck is more important than actions. Performance is simply a gate, the real payout comes from luck. Based on the numbers of employees, they might be better off just pumping a couple of dollars into the slots machines at the D gates of Terminal 3 when changing planes at McCarran International Airport in Las Vegas.

You can also add in that this will drive even more “free rider” issues, since the average employee’s ability to impact many of these global performance metrics is going to be minimal.  Looking into United’s “Shared Purpose and Values”, we can find their core cultural measures:

  • We Fly Right: On the ground and in the air, we hold ourselves to the highest standards in safety and reliability. We earn trust by doing things the right way and delivering on our commitments every day.
  • We Fly Friendly: Warm and welcoming is who we are.
  • We Fly Together: As a united United, we respect every voice, communicate openly and honestly, make decisions with facts and empathy, and celebrate our journey together.
  • We Fly Above & Beyond: With an ambition to win, a commitment to excellence, and a passion for staying a step ahead, we are unmatched in our drive to be the best.

Flying Together might be showing some stress fractures on the wings right now. Inc. picked up some great internal commentary from the airline’s own Flying Together website:

  • “If I wanted to play in a lottery, I would just go my local 7/11. I recommend United management reconsider this morale killing program.”
  •  “Awful idea. [Current] bonus program has everyone pulling in the same direction with a common goal. This is scratching a lottery ticket…”
  • “Respectfully…. there are many employees who depend on those bonuses and work their butts off to achieve them. Turning it to a lottery disincentivizes the hard work because most won’t see a penny.”
  • “This sounds like a game show with cash prizes and lets see who gets the spin of the wheel. This doesn’t sound like a plan that even attempts to show value, respect and appreciation for the work of its employees.”

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So here is my initial recommendation:

Unite behind a 3 measure program (NEVER more than 3–that is proven repeatedly in Xactly Insights research). Show progress towards the payout throughout the quarter, and pay immediately at the end of the period. You have to have transparent measures, timely reporting, and accurate payouts if you want to see employee behavior change.

People should be measured on things that they can actually impact, not on areas that are beyond their control. Surveys of passengers might be a better measure for flight attendants, efficient and safe flying for pilots. After all, customer satisfaction appears to be an area where United could stand to improve. Why not put that into the bonus plan? Especially for those customer-facing employees.

Measures to consider:

  • Corporate goal (profitability, revenue growth, stock performance vs peers)
  • Team-based goal (customer satisfaction, turnaround time, on-time arrival)
  • Individual goal (this could be further MBOs based on each job type).

I have no idea who designed United’s new plan, but this needs to be killed fast. United has now joined the list of corporations with some of the worst incentives:

I used to be a 1K flyer on United, enjoying the Red Carpet Club and the upgrades when on an international jaunt. I would be happy to spend a day with United to help them figure out a better way to develop a plan, set up the systems for measurement and execution, and finally have a means for on-going optimization to ensure that the plan drives the behavior that is desired.

Someone give Scott Kirby a copy of this and let him know United has plenty of flights to Chicago from my home airport in Orange County, CA. I am happy to lend a hand to save the Friendly Skies.

[Update: United quickly realized their mistake and pulled the program. So now the question remains—how WILL they drive better behavior from their team?]


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The United Guide to Destroying Employee Incentives and Morale

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