AIG should have stood up for itself in PR disaster
Back in the late 1980s I worked in the communications practice at a global HR consulting firm. One of my clients was the design group of an auto manufacturer. For one reason or another, the employees of the design group had participated in a retirement plan separate from the rest of the company, but were now being folded into the company-wide plan. The biggest fear in announcing the change was that the best designers would leave. “They’re constantly being offered jobs at competitors,” I was told, “and we just can’t afford to lose them.” Our job was to show this critical group that they would actually come out ahead as a result of the change.
I’ve encountered this situation countless times since then, usually from companies going through layoffs. Sure, they have to cut X number of jobs, but you can be sure the top performers aren’t being laid off—in fact, most of the time they’re offered incentives to stay and suffer through the bad times. The worst-case scenario for an organization in this situation is for the top performers leave and go to work for the competition.
This issue has been spinning around in my mind since I started reading about the outrage expressed over a retreat sponsored by AIG, to the tune of more than $400,000 at a California resort—the St. Regis Monarch Beach Resort in Orange County—after the company was bailed out by a multi-billion-dollar government takeover. The first report I heard called it a “junket,” and I was as outraged as anyone else as I imagined fatcat executives in 90-minute meetings before hitting the links. However, I later learned that it was, in fact, the event serving as reward/recognition for the top sales producer in the company’s life insurance unit.
Even accounts that accurately represented the nature of the retreat said that, in such circumstances, the reward should have been canceled. One colleague commented that everyone in the company has to share the pain. A report I read quoted an employee recognition specialist who suggested that AIG should, instead, offer seminars on how to manage 401(k) plans during a down market. I can just imagine the conversation at home:
“Honey, you know that California beach resort we were promised if I achieved sales that exceeded goal by 50%? Well, I blew that number away but now they’re telling me that we don’t get the vacation, but guess what? We get to go to a 401(k) seminar instead!”
Yeah, that’ll keep ‘em on the payroll.
The same report suggested that a day of community service followed by a picnic with sack races should suffice. Another post said that the fact that these salespeople still had a job was reward enough.
The problem is, the elite among a sales team don’t need the job. The very best employees can always find work; they’re probably getting calls from headhunters on a regular basis as it is, regardless of the state of the economy. That’s why organizations routinely offer special incentive packages to this small group in order to retain them when they are just as inclined to get the hell out of this depressing place and go to work somewhere where they’ll be appreciated. They’re probably getting a couple calls every week from headhunters as it is.
It’s a bitter pill to swallow, but the reality is simple. Sales people get paid a combination of base and incentive pay. That incentive often includes some kind of trip to reward the highest producers. The trip is dangled before them: “Exceed your target by at least X% and you’ll be sailing with your fellow top performers on a seven night Hawaiian cruise.” It’s one of the things that gets these people up in the morning.
Let’s be clear: At AIG, these were not the people who put the company into the position that led to the bailout. In fact, if anything, they’re the ones who kept things from being worse than they were. They’re the ones who can help the company claw its way out of the hole its leaders have dug.
In the wake of the backlash over the revelation of the trip to California, AIG has canceled another trip for top performers from other business units. While that’s what nearly everybody thinks AIG should do, it’s a long-term mistake. AIG needs its top salespeople now more than ever. Yes, $400,000 sounds outrageous, but how much revenue did this elite sales group generate? $25 million? $50 million? $100 million? $400,000 starts to sound like chump change compared to what they contributed—sales that might never have been produced if they were working for the competition. It’s easy to imagine what a company has when its best employees leave: mediocre employees who produce mediocre results.
AIG’s mistake was not in hosting the event despite the magnitude of the bailout, but in failing to recognize how the public would react and communicate proactively why this was an important investment in the company’s future. Not everybody would have agreed, but the shock and outrage would have been dampened as the company transparently disclosed its plans and the rationale underlying them.
10/14/08 | 18 Comments | AIG should have stood up for itself in PR disaster