United Eliminates Quarterly Employee Bonuses, Spins It As A Positive

Well, it’s not just frequent flyer devaluations that are spun as “enhancements.” Apparently the same is true of employee bonuses at United being eliminated in favor of a lottery system. The Chicago Business Journal reports that United President Scott Kirby has sent a memo to employees informing that their quarterly performance bonuses (of up to $300) are being replaced by a new program called “core4 Score Rewards.”

The new lottery system includes quarterly prize drawings, 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.” This drawing will happen each quarter as long as United reaches at least one of their performance goals. While a $100,000 bonus might sound like a lot, keep in mind that United has about 88,000 employees, so this is very clearly a cost saving measure.

Here’s what Scott Kirby and a United spokesperson had to say about this change:

“As we look to continue improving, we took a step back and decided to replace the quarterly operational bonus and perfect attendance programs with an exciting new rewards program called ‘core4 Score Rewards’,” Kirby wrote.

A United spokeswoman had this to say late today about the changes: “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. We believe that this new program will build excitement and a sense of accomplishment as we continue to set all-time operational records that result in an experience that our customers value.”

Perhaps the most ridiculous thing of all is that United believes the core4 program is “designed to make employees at United a more caring lot as they carry out their daily duties at the airline.” That’s right, cutting quarterly bonuses in favor of a lottery system will help United build an image as a more caring airline.

Suffice to say that this memo hasn’t been “building excitement and a sense of accomplishment” at United, but rather has left employees angry.

It just blows my mind how out of touch executives at certain airlines are. Why do they assume everyone is just dumb as a rock, and that you can cut something and fool people into thinking it’s a positive? I have another exciting new idea — how about bonuses for United executives be based on a lottery system as well (while cutting the overall compensation by maybe 75%)? I’m sure that would create a sense of excitement and accomplishment, no?

(Tip fo the hat to View from the Wing)

Comments

  1. Awesome article and appreciated sarchasm! Kirby was a disgrace at AA and is (will) prove so at UA as well. With Alison at its helm, AA has a much brighter future!

  2. LOL when the ones who make the rules do not subject themselves to the new rules, you know it’s not a win for the employees.

  3. By the way, Ben, you haven’t updated the map of the world showing where you’ve been on the trip report index for a while. Haven’t you been to Uzbekistan, Tajikistan, Armenia recently?

  4. I think you are missing a big slice of the pie Lucky.

    The core4 concept is a broad program that was launched across all departments at United in January including groups such as pilots which often don’t participate in customer focused training.

    While it might be all corporate hot air, regardless its a new take on how things are being done at United with pillars built around – Safety, Caring, Dependability and Efficiency.

    This new reward program actually ties these metric together, including employee own performance such as his or her attendance.
    Under old program employees were handed a blanket monthly $100 bonus based nearly all on a few DOT measurements, now a broader set of items will be considered including scores from customer surveys plus employee individual performance.

  5. I like the new program more.

    Instead of just handing you a $100 bonus per month for meeting DOT measures, UA has revised measure around its core4 program (be safe, caring, dependable and efficient), and will include other internal measures including customer satisfaction and employee attendance.

    Up to 5,000 employees will now earn more meaningful prizes, be it a car, vacation package or even $100,000 cash! In many ways this goes back to the CO way of rewarding employees cars.

  6. funny they framed it as positive. Now UA staff understand the passengers who received so many “positive” changes in the past from airlines haha

  7. i wouldn’t be surprised if James and Greg have the same IP address.

    replacing employee bonuses with a lottery has nothing to do with metrics, it really is just a cost-cutting measure. the united executives are hiding the overall reduction in compensation behind some shiny prizes that only few will ever get to enjoy. i think it’s time for united employees to let the management know they’ve gone too far.

  8. @ Greg — Hah. I’m curious, do you think United’s total spend on this lottery system will be more or less than under the old system of offering consistent bonuses? And personally I wouldn’t view the current system as “just handing you $100 bonus per month.” A lot of United employees aren’t very well paid, and an extra $1,200 per year is a significant amount.

  9. @ James — I can appreciate this is part of a larger program (and that’s great), though I’m not sure how switching from a system that rewards employees consistently to a lottery system is supposed to improve morale and make people feel more rewarded? It seems like that has very little to do with any other new program they’re introducing, no?

  10. Basic corporation BS! Wait and see how these disgruntled employees start chucking your luggage now!

  11. Also, I’m curious to those who are defending this (hi Scott!), how does United expect an employee who is barely making ends meet to pay taxes, insurance, etc., on a luxury car?

  12. Come on people. You would throw everyone under the bus as well if it meant you could make more money.

    Everyone is an asshole.

  13. Debit has a point. No one said free market capitalism was economic Utopia. It can be brutal. Would it make all of you feel better if United said just came out and said “this is a cost cutting measure at heart, but we’re trying to ease the pain on our employees of this new change”? Free market capitalism also means free labor markets. I know it’s easy to say “don’t like your company? You’re free to quit and work somewhere else,” but difficult to do that in real life. But, that is in fact the reality in America.

  14. Wow. Scott Kirby is just evil.

    Also, Debit is wrong. Clearly the answer is socialism. Just because you’re an asshole doesn’t mean that everybody else is. Capitalism makes people assholes, but socialism can change that.

  15. @ Ben — Well, this should ensure worse service and intentional employee efforts to miss these metrics. I won’t blame the employees one bit. Stupid, greedy move by UA executives.

  16. A lottery system does not a rewards system make.

    An employee can be at the top of their game, honest, on-time, caring, efficient, and still not win that new UA lottery. In addition, so what if someone wins a new car? They now have to pay taxes on it’s value, which devalues the prize. And, what if they can’t afford those taxes? On the other hand, a bonus check every few months can be spent the way the employee sees fit, meeting their financial needs; $1200.00 a year isn’t “crumbs.”

    The bottom line for me: a system where “winning” is based upon random chance isn’t a system I’d want to be participating in.

  17. Having spent lots of time with c-suite people at various F500 companies, i wouldnt be surprised to find out that their thinking went something like this:

    “$300 is peanuts. I’d much rather have a shot at bigger prices than a guaranteed $300.”

    They are so out of touch they don’t realize that’s real money to a lot of people. Even the choice of cars is telling. Giving away a mercedes is ludicrous. The insurance and maintenance for their cars would be a huge burden. They would have been better off giving out a more mainstream car.

  18. Correct me if I’m wrong here bc it’s been a few years since Psych 101, but It looks like Kirby is trying to take a play from Pavlov where it was found that a variable reward system has a stronger reinforcing influence than a constant reward system, in terms of a specific activity.
    The big problem here is that you’re not dealing with rats and cheese. You’re dealing with humans who have already figured out they’re being screwed. Multiply that resentment across the entire employee roster from maintenance to flight crews, and it’s a recipe for a friggin’ disaster.
    I’m flying UA to Asia three times in the next three months and I’m already anticipating awful trips.

  19. “It just blows my mind how out of touch executives at certain airlines are. Why do they assume everyone is just dumb as a rock, and that you can cut something and fool people into thinking it’s a positive?”

    I’m not defending United, but this is nothing new for corporations, and that is spinning a negative as a positive. Do you expect executives to call out negative changes? Why would they? Rather have one employee think this is a positive based than everyone know it’s not. I think the outrage over the word ‘enhancement’ needs to stop. We don’t live in a particularly transparent atmosphere right now.

  20. Despite the fact that some call this a “thrilling” measure in which some would rather give up $100/month for the chance at more, there’s no way at hiding the fact that this really is a cost saving measure.

    $100/month * 3 months * 88,000 employees is roughly $315,000,000 given out per quarter in bonuses.

    Even assuming these “lucky” employees get the maximum $40,000 in the “$2,000 to $40,000” stated and that 5,000 employees out of 88,000 will get this extra bonus (the number put out by Greg), 5,000 * 40,000 is $200,000,000. And that’s assuming that every employee chosen would get the most expensive prize. Chances are, the vast majority will get something in the $2,000-$5,000 range, reducing the number further.

    All United has done is cut bonuses by at least 30%, and there’s no way to hide it. Many employees need all the money they can get — if we go back to the article Congress sent American, they may be earning $10-$15/hour for a total salary of around $20,000-$30,000. Having $1,200 taken away means a lot (it’s 4-6% of their paycheck). When you’re living paycheck to paycheck, this could be the difference between paying the bills on time and losing power or water. Employees are not going to be happy about this, I can tell you that.

  21. I don’t play the lotto for a reason, I’d prefer my bonus program to not be structured as one.

  22. @ Andre — Well yes, I would like them to communicate transparently, personally. It’s not about whether they can fool one person into thinking something is a positive, but rather about the vast majority of people who are left feeling screwed, not only by their pay cut, but also by management treating them like idiots. To be clear, I’m not surprised to see this, unfortunately this is all too often part of corporate culture in this country. But that doesn’t make it any more acceptable.

    The worst part is that this isn’t being done out of necessity because the company is losing money, but it’s pure greed. And worse, it’s being done in the same email that the president claims the airline is shattering every record and doing as well as they have.

    It all comes down to whether a company views their employees as an asset or a liability. Look at Delta, for example. Their employees are largely paid better than at other airlines, the employees get generous profit sharing, and they feel invested in the company. Can the same be said at American and United?

  23. United, is, and continues to be a trash heap of an airline. I feel sorry for anyone who willingly flies them. Shame on you.

  24. Targeting pay to performance = kinda capitalist.

    Diverting 3/4ths of the original compensation from front line employees to 1% executives and shareholders = very capitalist.

    AA’s lucky not have this twit anymore.

  25. Targetting bonus pay to performance makes complete sense.

    But when an employee performs well and then they have to get lucky to win a bonus… Well, it sounds like plain stupidity.

  26. @BT – You are so right. The UA social media team is working OT this weekend monitoring this and other blogs. It’s so incredibly obvious what they’re doing. UA just keeps digging themselves deeper and deeper. It’s sad really, how a company with such a great legacy can be driven into the ground by inept management who “just don’t get it.”

    I can only guess who will be pulling the lottery numbers; UA management. Nothing suspect there!

  27. I get Lucky’s point and those made by others. Imagine if executives are held accountable. They should also join the lottery system. Their bonuses are tied into a lottery or performance-based system.

    Working for a Fortune 500 company, on one hand it seems all positive, but it is all negative in the other hand. What are the chances? Given my years here, I have never won anything. Imagine those folks there probably never winning it and it is only going to happen if they hit at least one of their performance goals.

    Given th the figures by Lucky, it would be a total savings of 26,400,000 milllion dollars every quarter. They probably will save 26,000,000 and just use the 400,000 to improperly compensate their employees for the not guaranteed lottery system.

  28. Guys, Scott Kirby needs help. He obviously needs the help of a mental health professional. It would be better if the new plan was for every United employee to pitch in $1 a month for Kirby to get the help he clearly needs.

    Or United could just fire him.

  29. @Debit and @Ray yo’re both wrong. Capitalism works as long as we maintain the social contract. It does not turn everyone into assholes. Both pure socialism and pure capitalism have failed, repeatedly. You need capitalism to create incentives, but some socialist style values to ensure that people aren’t left behind. That’s actually how this country used to work until politics got completely corrupted by money and corporations tried to hold their executives accountable by tying CEO pay to stock performance. In the last case, massive unintended consequences. Go read some modern economics texts boys.

  30. Lets remember any type of bonus program is icing on a cake.

    There is zero requirement to have one, and one should never count on it being part of your base pay.

    United is certainly within its rights to switch things up and opt to use different metrics to calculate any such bonus and use different payout methods.

    I kinda like this.

  31. Can you imagine being one of the employees who won $5000, or a car, and having your coworkers know it was you? And that they got no bonus “because of” you? Then you have to work with them 40 hours a week…. ‘Oh her? She won the bonus. Let her do all that work alone, she got paid for it….’

  32. I ran the numbers: According to UA annual earnings report, UA paid out 87 million in 2017 in incentive payments. This new plan would pay out 4.7M per quarter or 18.8M annually.
    This looks to me to be 68M annual benefit to the company.
    Only 1,381 employees would benefit or 2% of the workforce, IF all the goals were met for the quarter.

    P.S. UA received a 192M “special income tax benefit in December from the Trump Tax Act.

  33. Team building? All for one and one for all? A lottery is a mechanism to inspire hope of a better future for one person. It has nothing to do with encouraging individuals to make sacrifices for the team. Still, a lottery in the place of bonuses is not a surprise when one considers that this idea comes for the C-Level where backstabbing is the norm and “for the good of the company” is a punchline.

  34. If you’re defending this move, you are either on United’s payroll or you are a clod.

    Nobody’s arguing against pay for performance. If they were taking all of the money they were originally putting into the bonus program and tying it more directly to performance? No problem there. Instead they’re taking away 75% of the original budget and throwing the remaining amount into this (insulting) lottery program. You can almost picture the discussions in the executive wing.

    “Hey, what can we do to hide this gutpunch from the poors? What do poor people like?”

    “Hmmm… Daytime TV? Game shows? I KNOW! Lets make it a lottery! The poors are always throwing their money away on stuff like that!”

    Just die already, United.

  35. Just shows how out of touch Scott Kirby is.

    Bring back Jeff Smisek – even he is an improvement over Kirby.

  36. Did they really think the public wouldn’t notice that this is a miserable attempt by executives to cut costs by reducing total employee compensation. As far as I’m concerned this is just another reason not to fly United, the worst airline in the sky.

  37. @Greg

    I don’t mind shills–they’re everywhere now–but please make your future efforts less transparent. Something this obvious is just insulting to our intelligence.

  38. Lucky, I don’t think this is an issue with Executives at an airline being out of touch with reality. It’s just pure bad corporate leadership (has nothing to do with working at an airline). All they are going to do is make their front line staff angry and that will negatively impact customer service. If they had a partial brain, they would leave the current bonuses in place and add the additional ‘lottery incentives’ as upside (and share the wealth of their increasing profits).

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