Changes in Management Compensation?

[FracusBrown]

I have read a lot of comments on this thread and also on UPSers.com bemoaning the loss of the half month bonus. Maybe it's because I have "only" been with the company for 9 years, but I don't understand the opposition to it. It seems like there are two main arguments against the half month bonus change:

1. It is "tradition" to get a little extra something during peak.
2. It is nice to get a lump sum before the holidays for gifts and stuff.

Regarding argument #1, the change improves upon tradition in that now we have access to the half month bonus sooner. Financially speaking, we are almost always better off getting money sooner rather than later. You can take the money and stick it in an online savings account, and earn an extra couple bucks on it rather than waiting until November and getting the money without any interest. I am tempted to offer those who want to maintain this "tradition" a deal. You give me your extra 4.2%, I'll deposit it in a savings account, and then in November, I'll give you your half month bonus and I'll pocket the interest. It is a win-win. You get to keep your tradition, and I get to pocket a little extra income at your expense.

Secondly, they are bumping up our base salaries by 4.2%, which is actually MORE than the half money bonus. By my math, half month bonus is actually 4.1666666%, so we are getting an extra fraction of a percent. Yes, it isn't much, but I'll take more money over less money any day!

Regarding liking to have an extra bonus for the holiday, you can just take 4.2% of your salary every month, stick it in the bank, earn a little extra interest, and not touch it until the holidays. If you don't have the financial discipline to do this, then that's a "you" problem, not a UPS problem.

On the surface there is no reduction in pay by dividing the half month into 12 equal payments. As you say, it is actually a slight increase and of benefit to receive it early. If there are no additional changes planned, the change in the half month bonus is not bad.

However it's a BIG "IF" when you consider that every change in compensation over the last 10 years has resulted in a reduction shortly after the changes were announced with a positive spin.

Personally, I believe the pay (all pay, including MIP) will soon be tied directly to performance. Changing the MIP factor to a percentage, eliminating the half month, aligning the MIP pay out with the pay raise schedule and recent changes to the QPR/career development process sets up the performance based pay process to begin in the near future - probably in 2012.

It really should not come as a surprise. Performance based pay and salary bands have been openly discussed for several years. This may benefit some, but the net effect will be less expense to the company and less pay to the majority of the people.

Believe the "spin" if you choose. History of the compensation changes clearly demonstrates that's there's probably more to it than just simplifying a few processes. Time will tell.

 

[pretzel_man]

On the surface there is no reduction in pay by dividing the half month into 12 equal payments. As you say, it is actually a slight increase and of benefit to receive it early. If there are no additional changes planned, the change in the half month bonus is not bad.

However it's a BIG "IF" when you consider that every change in compensation over the last 10 years has resulted in a reduction shortly after the changes were announced with a positive spin.

Personally, I believe the pay (all pay, including MIP) will soon be tied directly to performance. Changing the MIP factor to a percentage, eliminating the half month, aligning the MIP pay out with the pay raise schedule and recent changes to the QPR/career development process sets up the performance based pay process to begin in the near future - probably in 2012.

It really should not come as a surprise. Performance based pay and salary bands have been openly discussed for several years. This may benefit some, but the net effect will be less expense to the company and less pay to the majority of the people.

Believe the "spin" if you choose. History of the compensation changes clearly demonstrates that's there's probably more to it than just simplifying a few processes. Time will tell.

Did you review the presentation and all the FAQ's?

Seems to me that if the intent (of this change) is to reduce management compensation, there were easier ways to do so....

As you say, time will tell. As far as this change, while I'm not a fan of it, I see no loss.

 

[CleverNick]

FracusBrown:

You say, "Personally, I believe the pay... will soon be tied directly to performance". Isn't that the way it should be? Shouldn't top performers be rewarded with top pay? That is Basic Management 101. The fact that it HASN'T been done is quite puzzling to me. I hope your belief is correct, and the sooner they do it, the better in my opinion.

Right now, the only ways that management can reward people are through promotions and merit increases. However, as we have seen over the past few years, promotions are few and far between. If anything, positions are being eliminated so there are fewer promotions slots opened. Meanwhile merit increases were first frozen and then when they were reinstated they were pittance for everybody. Management has few ways to differentiate our top managers from the rest of the pack. If they were allowed to vary MIP based upon QPR score for instance, it would give them a real tool for rewarding the people who deserve to be rewarded.

 

[Popeye]

FracusBrown:

You say, "Personally, I believe the pay... will soon be tied directly to performance". Isn't that the way it should be?QUOTE]

Yes it should, but this would require a fair and objective measure of performance that doesn't exist. How would you like to have a low performing boss evaluating your performance and having your compensation REALLY tied to it? If your boss is a stroke and he thinks you're great what does that really make you?

 

[bones]

The purpose of all this is not to reward top performers with greater compensation, the purpose is to not give increases and MIP to people that don't hit their goals which could be a large number of people (have you seen goals for next year) this could lead to a large savings for the company. I don't think most people would have a problem with this if the goals were fair for each position. What I see happening is the people in the tougher operations will not get increases and MIP despite the fact they are better than 80% of the others at their level. Again, I see this as a tool to take money from management not give money to top performers. My 2 cents.

 

[FracusBrown]

Did you review the presentation and all the FAQ's?

Seems to me that if the intent (of this change) is to reduce management compensation, there were easier ways to do so....

As you say, time will tell. As far as this change, while I'm not a fan of it, I see no loss.

Yes, I read them. I have read all the past announcements also. So far, every one has resulted in a reduction of compensation, regardless of how it was presented.

FracusBrown:

You say, "Personally, I believe the pay... will soon be tied directly to performance". Isn't that the way it should be? Shouldn't top performers be rewarded with top pay? That is Basic Management 101. The fact that it HASN'T been done is quite puzzling to me. I hope your belief is correct, and the sooner they do it, the better in my opinion.

Right now, the only ways that management can reward people are through promotions and merit increases. However, as we have seen over the past few years, promotions are few and far between. If anything, positions are being eliminated so there are fewer promotions slots opened. Meanwhile merit increases were first frozen and then when they were reinstated they were pittance for everybody. Management has few ways to differentiate our top managers from the rest of the pack. If they were allowed to vary MIP based upon QPR score for instance, it would give them a real tool for rewarding the people who deserve to be rewarded.

I agree that pay should be tied to performance, but this should not be used as a disguise to reduce compensation overall.

FracusBrown:

You say, "Personally, I believe the pay... will soon be tied directly to performance". Isn't that the way it should be?QUOTE]

Yes it should, but this would require a fair and objective measure of performance that doesn't exist. How would you like to have a low performing boss evaluating your performance and having your compensation REALLY tied to it? If your boss is a stroke and he thinks you're great what does that really make you?

Some of the least skilled have good performance ratings and vise versa. The circumstances are often more of an influence on the rating than their ability or efforts.

The purpose of all this is not to reward top performers with greater compensation, the purpose is to not give increases and MIP to people that don't hit their goals which could be a large number of people (have you seen goals for next year) this could lead to a large savings for the company. I don't think most people would have a problem with this if the goals were fair for each position. What I see happening is the people in the tougher operations will not get increases and MIP despite the fact they are better than 80% of the others at their level. Again, I see this as a tool to take money from management not give money to top performers. My 2 cents.

Exactly! A few may get slightly more. The overall effect will be to reduce compensation overall.

 

[Prickle]

I know of several mgt people that already get away with fixing their numbers. Once compensation is based on goal achievement there is going to a huge increase in cheating numbers. I have also seen mgt manipulate goals on an individual basis, as to make the goal so far out of reach that the TARGETED person fails.

 

[pretzel_man]

Yes, I read them. I have read all the past announcements also. So far, every one has resulted in a reduction of compensation, regardless of how it was presented.



I agree that pay should be tied to performance, but this should not be used as a disguise to reduce compensation overall.

Some of the least skilled have good performance ratings and vise versa. The circumstances are often more of an influence on the rating than their ability or efforts.



Exactly! A few may get slightly more. The overall effect will be to reduce compensation overall.

If we are still speaking about this specific change, I do not see where anything is lost (yet...).

If the goal were to reduce management compensation, it would have been so much easier to just not reinstate the 401K match.

Yes, I know its less than it was before it was stopped. On the other hand, its certainly a lot higher than the ZERO % it was for my first 25 years with the company.

 

[CleverNick]

There's a lot of "ifs" and "maybes" and speculations here. First of all, so far there hasn't been anything announced regarding tying MIP to QPR, so basically you all are assigning motives to something which is merely a speculation and only exists in message board conjectures.

Secondly, I somewhat agree that "performance" is a nebulous thing which often cannot be captured perfectly. Yes, there may be situations where a manager might be clueless or might show favoritism or might show "anti-favoritism". However, from what I have seen, those situations are usually weeded out pretty quickly. Not sure how it is in your area, but we have people meetings where scores are reviewed and cross-checked between managers to make sure that nobody is getting the shaft. A more common scenario is that a manager might be lenient and the average QPR score of his people might be higher than another manager, not because of favoritism but just because he grades on a different curve than somebody else. On the flip side, you might have a manager who is a hard grader who gives everybody lower scores. The people meetings help to normalize the scores among different managers so that somebody who works for a hard grader isn't penalized and somebody who works for a lenient grader isn't rewarded. I HOPE that this is standard practice in all areas. If it isn't, then it should be!

Is it a perfect system? Obviously not because there is still subjectivity. But it is pretty darn good and generally speaking, people get the score that they deserve.

What also happens from what I've seen is that people think of themselves more highly than they actually are. I remember hearing about a study asking people how they compare to their peers, and something like 80% said that they were above the median. Obviously, by definition only 50% can be above the median so the conclusion is that people have an inflated self-worth, ego, whatever you want to call it. When a person gets a score which is "only" average, they might protest because it does not coincide with their own self-perception even though average means that they are better than half of their compatriots. Somebody might incorrectly feel that their manager is out to get them, when in fact, the manager is just trying to be objective and provide an honest assessment of the person versus his peers.

 

[sosocal]

the reality is that there is no way to tie compensation to performance in any meaningful way...Performace is based on plans -- plans are completely subjective--for example, say next year the District needs to improve NDPPH by .50-- my center runs scratch and many other are upwards of .85 over---how is the .50 distributed??? to the center that has less to give but will more likely GET IT DONE, or the centers that have the opportunity... Furthermore, I have been the clean up guy in two of my assignments...I have always turned things around, but it doesn;t happen overnight. If my compensation is tied to performace don;t ask me to take on challenging operations-- I like my raise!

 

[FracusBrown]

Yes, I read them. I have read all the past announcements also. So far, every one has resulted in a reduction of compensation, regardless of how it was presented.



I agree that pay should be tied to performance, but this should not be used as a disguise to reduce compensation overall.




If we are still speaking about this specific change, I do not see where anything is lost (yet...).

If the goal were to reduce management compensation, it would have been so much easier to just not reinstate the 401K match.

Yes, I know its less than it was before it was stopped. On the other hand, its certainly a lot higher than the ZERO % it was for my first 25 years with the company.

You made enough in your first 25 to retire rich. I know several people that retired with several million in stock from MIP awards alone. They were less skilled, less educated and less competent than most of todays managers (not directed at you). Some could barely write a coherent sentence or speak with an 8th grade vocabulary.

Management people in today's era are compensated at a much lower level. The defined benefit retirement plan was reduced when the 401k match was implemented. MIP has been systematically reduced. Benefits have been reduced. Pay increases have been reduced. Retirement has been reduced.

I agree that there is nothing stated as a loss in the plan.

Maybe I'm living under a rock, but I am not aware of anyone currently in the .5 or 1.5 unit MIP plan that's illustrated in the Compensation Redesign Brief. I guess we should assume some people will be getting a bump up when the .5 and 1.5 is converted to a percentage ????????

As I said earlier, time will tell. I predict that the changes will result in lower average compensation. Mark your calendar and we'll revisit the topic in a year or two. Hopefully, we'll have a better outcome than we have seen with past enhancements that resulted in lower compensation.

 

[pretzel_man]

You made enough in your first 25 to retire rich. I know several people that retired with several million in stock from MIP awards alone. They were less skilled, less educated and less competent than most of todays managers (not directed at you). Some could barely write a coherent sentence or speak with an 8th grade vocabulary.

Management people in today's era are compensated at a much lower level. The defined benefit retirement plan was reduced when the 401k match was implemented. MIP has been systematically reduced. Benefits have been reduced. Pay increases have been reduced. Retirement has been reduced.

I agree that there is nothing stated as a loss in the plan.

Maybe I'm living under a rock, but I am not aware of anyone currently in the .5 or 1.5 unit MIP plan that's illustrated in the Compensation Redesign Brief. I guess we should assume some people will be getting a bump up when the .5 and 1.5 is converted to a percentage ????????

As I said earlier, time will tell. I predict that the changes will result in lower average compensation. Mark your calendar and we'll revisit the topic in a year or two. Hopefully, we'll have a better outcome than we have seen with past enhancements that resulted in lower compensation.

I may be wrong, but I do not beleive the .5 and 1.5 MIP bracket are in small package? Will that come to small package? I heard rumors, but nothing has happened.

I may be under a rock, but I am not aware of the reduction in the defined benefit plan when the match was implemented. It may have happened, but I certainly do not remember that.

Finally, I don't know how to evaluate whether compensation today is less than 20 or so years ago. There is no question that stock growth is night and day different, but I don't know how to measure salary and MIP. Back then, a 2.0 MIP was very unusual. Of course, with the stock growing, it wasn't important.

One of the great things about the past was the stock growth. On the other hand, if managment would have taken their MIP awards and invested in the S&P 500, they would have done very well too. They key was investing it and not spending it.

I wonder what people are doing with their 1/2 MIP that can be directed? Are they saving for the future or taking cash and using it? Even with investment options of today, spending the money give a return of zero.

 

[UPS Lifer]

i don't feel like we are losing a quarter of MIP. It's not like the MIP factor would be higher or lower if they include those three months. If this year we got 2.4 and next year we got the equivalent of 2.4 (or whatever the factor will be), did we really lose anything?

Two different times early in my management career I received a raise late. The raises were made retroactive BUT they affected the amount of stock I got. It was a total of 10 shares. Those 10 shares would have multiplied to 240 shares. You do the math! So, don't kid yourself, a small amount could have a major affect down the road.

 

[upssalesguy]

Two different times early in my management career I received a raise late. The raises were made retroactive BUT they affected the amount of stock I got. It was a total of 10 shares. Those 10 shares would have multiplied to 240 shares. You do the math! So, don't kid yourself, a small amount could have a major affect down the road.

i understand that, but for the MIP award, you wont get any stock until march of 2012, which I think will stillbe the same amount you would have gotten it if it was the first week of december in 2011. sure, you wont have it for three months, so you will lose that value, but you wont lose the amount of stock, per se.

the people getting the shaft are the ones that wanted to retire fourth quarter of 2011. they wont have that award as part of their annual salary

 

[25in10togo]

Many long term folks retiring do not use there last 5 as their 5 best of final 10 yrs to get pension amount. Many have come down from manager to supervisor positions for the last few years. As far as getting the shaft. I believe the strong performers have been supporting the weaker performers for years for the same or in sales positions less total pay. As Lifer says most seemingly small changes have large monetary effects we do realize until a much later date.

 

[tieguy]

i understand that, but for the MIP award, you wont get any stock until march of 2012, which I think will stillbe the same amount you would have gotten it if it was the first week of december in 2011. sure, you wont have it for three months, so you will lose that value, but you wont lose the amount of stock, per se.

the people getting the shaft are the ones that wanted to retire fourth quarter of 2011. they wont have that award as part of their annual salary

thats my last question with this change. The rest is a change but does not appear to affect current management negatively. My question then would be what we are doing to account for the lost quarter of MIP. Just got my handout in the mail yesterday. I dont see where its discussed.

I do love the the corporate mumbo jumbo on this flyer.
"strenghtening the link between pay and peformance"
I didnt know it was weak? Somehow the company survived 103 years with this weak link. Now its suddenly a problem.

The wording then evolves to "the redisign will further strenghten the connection between UPS performance and Pay" we went from strengthen to further strenghten here in about two paragraphs.
did I miss something?

The word Reward being Italicized on the flyer. this to let us know that we are being rewarded and not compensated. The masters will reward the minions if the minions please the masters....

All good natured ribbing at the verbage provided to us from corporate land where I think verbage is sometimes their only product.

The concept of linking performance and pay in the present format is an interesting one. I'm not sure the average supervisor understands how they affect the mip elements we chase or that they believe they have the ability to directly impact those elements. Corporate may actually have more of an impact on those elements then the average front line management person. Perhaps we can continue that thought when the new goals come out.

One last thought here as I read through my flyer it states the vesting of RSU's will not change from previous incentive awards. what does that mean? Will we now have two seperate vestings as the old shares vest in december and the new shares vest in march?

 

[Catatonic]

Many long term folks retiring do not use there last 5 as their 5 best of final 10 yrs to get pension amount. Many have come down from manager to supervisor positions for the last few years. As far as getting the shaft. I believe the strong performers have been supporting the weaker performers for years for the same or in sales positions less total pay. As Lifer says most seemingly small changes have large monetary effects we do realize until a much later date.

Many management were also doing this due to the double MIP in 2009.

 

[Catatonic]

I read through the brochure and never found the word "ENHANCEMENT".
I think this word may have been banned from all correspondence coming out of HR and Employee Communications.

 

[j13501]

Five years ago, a big change was made to M.I.P., so that each person was awarded 50% in the current year, and the other 50% paid in RPUs spread out at 10% per year over a 5 year period. I remember commenting at the time that, "it will save money for the next 5 years, but once the new program is completely implemented, the company won't have any additional savings. I wonder what they'll do next?"
I guess we got the answer with this change.

 

[Dragon]

Okay maybe I missed it but:

In 2011 I get the half month (4.2%) spread out over 12 months and a payraise April 1, 2011 (assuming a payraise).

In 2012 I get zero half month (0 %) spread out over 12 months and a payraise April 1, 2012 (assuming a payraise).

How am I not losing money?