MIP

[hangin455]

Sorry, but as a long time UPSer and management person, I won't get into the "woe is me" attitude.

The real issue here is not the LTIP or MIP changes, it is the lack of stock growth. When I was younger, 1.5 or 2.0 for an MIP factor was great. We all knew that the actual MIP number was not as important as the stock growth. We knew the importance of compounding.

These realities are still true today...

So the management committee ties management compensation to things that corrolate to stock growth. The intent is to have the management team work on those items that promote growth in the stock.

Stock Options and LTIP do the same. Reward the higher level management for growth indices and actual stock growth. With the lack of growth, these programs are worth much less than the "targets" that are quoted.

Casey's dream was that his management team would be compensated for things that grew the business. He wanted us to think and act like owners and managers, not like employees.

"Woe is me" isn't the way an owner would act.

P-Man

P.S. I don't expect anyone to agree with this, but its how I feel.

The upper level guys were once talented lower level guys. Where I am we can't even get anyone to take a sup's job anymore. Lots of grief for same rewards as an hourly.
When the company was private and the only way to get stock was to put on a tie, you saw talented people step up from the ranks. The long term future of this company really needs re-examination.

 

[pretzel_man]

Well, I didn't expect my comment to be well received and I was right.

I never said that lack of growth was caused by the front line. I never said that the front line supervisors and managers have not sacrificed or are not working hard, I never said things are rosey.

However, I did say and I do believe that when management thinks there is nothing they can do to improve the situation and meet organizational imperatives they have become employees rather than owners and managers.

Read some of what management has written here. That's the flavor.

Look at the comments about PAS. PAS is doing poorly in a significant number of centers. Yes, that's true. Its also true that a lot of centers are doing very, very well.

Why is that? Its the same system everywhere. PAS is not the cause, but the symptom.

The management committee did what they thought the company needed in order to grow. That was to align compensation for all management with growth indices.

The upper management has even more compensation tied to growth. When the stock doesn't grow, they are severely impacted. That's how it should be.

Its time to decide what we can do to improve our situation...

Again, I don't expect a great reception...

P-Man

 

[squeekywheel]

With the changes in the MIP program and the addition of the LTIP many partners I have spoken with feel they are now only employees. 2006's MIP was cut 1/3 from the previous year (2.4 -> 1.6). Ok, I'm not happy but I could accept it better if the top management at the company 'shared' in this event.

Well they did to a certain extent but then the top 600 or so managers received the new LTIP. I don't know the exact number but I have heard rumor that the LTIP was around 110% of their yearly salary. So a top 2+ unit manager would have lost 2 x .8 = 1.6 months salary in MIP, but gained 1.10 x 12 = 13.2 months salary in LTIP for a net gain of 11.6 months salary. (I sure their monthly salary is a lot larger than mine!)

And to add insult to injury, the 'L' in LTIP is supposed to mean long term at 3 years where the MIP award vests over 5 years. So after 3 years, while I'm still waiting for 40% of my RSUs to vest, the top management could have sold of all their RSUs from the LTIP. Doesn't this sound like Enron?

pretzel_man, am I missing something here?

 

[BSUUPS]

Pretzel man - I was you two years ago - I still share your sentiments (in theory)... However, to be the solution, to move the number, to affect change I need to have the keys and the steering wheel to the car. I find a lot of management these days are not miffed with a "WOE IS ME" mindset. I believe they want to genuinely make things better, but are tired of fighting the walls and barriers that their own (higher) partners build.

 

[pretzel_man]

Pretzel man - I was you two years ago - I still share your sentiments (in theory)... However, to be the solution, to move the number, to affect change I need to have the keys and the steering wheel to the car. I find a lot of management these days are not miffed with a "WOE IS ME" mindset. I believe they want to genuinely make things better, but are tired of fighting the walls and barriers that their own (higher) partners build.

BS:
I can only hope you keep on trying. I certainly get discouraged from time to time, but I believe in this organization and I do trust upper management.

Again, you'll say I'm naive, but I've been with this company 30 years and through that time, have met just about all of the management committee. They are good, honest people.

I think the barriers to improvement you mention are real. Have you been through the enterprise vision presentations? They paint a picture of where we need to be (and why). Those are intended to let us know where to steer...

Squeeky:
I don't think your facts are correct on LTIP. You're correct that its for the top management (Grade 20 and above).

The amount of award is based on business indices that are tied to stock growth. I don't know the percentages of salary its targeted at, but I'm certain it begins lower than 110%.

Also, since the indices have not been favorable this year, the LTIP won't be paying much. (Or so I'm told).

Lets look at this for a moment....

All management gets MIP, and MIP was changed from 15% of profits to a target based on meeting important business elements.

The next level (Grade 18 and above) get stock options. These are largely based on stock growth. If the stock doesn't grow, its worth much, much less.

The highest level (LTIP) pays if important indices are met. Again, these are tied to indices that correlate with stock growth.

So, if indices are not met (and therefore stock doesn't grow), upper management has a large incentive at stake.

Isn't this what we'd like. Incent upper management to have the stock grow?

Anyway, best of luck to you.

P-Man

 

[beentheredonethat]

BS:
I can only hope you keep on trying. I certainly get discouraged from time to time, but I believe in this organization and I do trust upper management.

Again, you'll say I'm naive, but I've been with this company 30 years and through that time, have met just about all of the management committee. They are good, honest people.

I think the barriers to improvement you mention are real. Have you been through the enterprise vision presentations? They paint a picture of where we need to be (and why). Those are intended to let us know where to steer...

Squeeky:
I don't think your facts are correct on LTIP. You're correct that its for the top management (Grade 20 and above).

The amount of award is based on business indices that are tied to stock growth. I don't know the percentages of salary its targeted at, but I'm certain it begins lower than 110%.

Also, since the indices have not been favorable this year, the LTIP won't be paying much. (Or so I'm told).

Lets look at this for a moment....

All management gets MIP, and MIP was changed from 15% of profits to a target based on meeting important business elements.

The next level (Grade 18 and above) get stock options. These are largely based on stock growth. If the stock doesn't grow, its worth much, much less.

The highest level (LTIP) pays if important indices are met. Again, these are tied to indices that correlate with stock growth.

So, if indices are not met (and therefore stock doesn't grow), upper management has a large incentive at stake.

Isn't this what we'd like. Incent upper management to have the stock grow?

Anyway, best of luck to you.

P-Man

Pman,
The changes to the MIP was to tie us into growth of the company and stock. (At least that's what they told us). As you said, the LTIP is also tied to the top mgmt folks improving the company\stock. How is it that last year the front line folks had below goal results, yet in the same year, the LTIP had above above goal results?????????????
The old MIP that Casey set up decades ago, was pretty well tied to making the company grow and make profit. If we had a profit the mgmt team got 15% of it. (It used to be 10% when first rolled out to only Mgr level). Seems to me like Casey did a pretty good job, and had some good ideas. How much has Mike grown the business as compared to Casey?????????

 

[ups79]

The bigger the business becomes the less growth possible.

 

[pretzel_man]

Pman,
The changes to the MIP was to tie us into growth of the company and stock. (At least that's what they told us). As you said, the LTIP is also tied to the top mgmt folks improving the companystock. How is it that last year the front line folks had below goal results, yet in the same year, the LTIP had above above goal results?????????????
The old MIP that Casey set up decades ago, was pretty well tied to making the company grow and make profit. If we had a profit the mgmt team got 15% of it. (It used to be 10% when first rolled out to only Mgr level). Seems to me like Casey did a pretty good job, and had some good ideas. How much has Mike grown the business as compared to Casey?????????

BeenThere:

I understood (as you did) that last year's LTIP paid well. I can't explain it, and honestly not trying to cop out, all I can say is that all systems have issues.

On the other hand, I understand that this year's LTIP is tracking very, very low....

Compare Eskew to Casey?? I can't. Especially since Jim Casey is one of my personal heroes.

However, I encourage you to read some of Casey's writings from late 40's to 50's.

Issues then were similar to today. Retail delivery was losing ground and we needed to change. In the late 40's, Casey talked about "the road ahead" and that the "good old days" were gone.

He was pushing management to change with the times and took time to let them know his displeasure at not embracing the change.

We are in a period of change again as well as competition that we have not seen before. Once again, management is being asked to move us to the next level.

Oh well... I know its not easy... I think if the stock were growing we could all handle it a little better.

P-Man

 

[beentheredonethat]

BeenThere:

.........
He was pushing management to change with the times and took time to let them know his displeasure at not embracing the change.

We are in a period of change again as well as competition that we have not seen before. Once again, management is being asked to move us to the next level.

Oh well... I know its not easy... I think if the stock were growing we could all handle it a little better.

P-Man

P-Man,
I understand change, what I don't understand is the way we do it. Want to change the MIP plan? Fine. But come out with a yardstick that will say exactly what it will be and exactly how it will be calculated. For ex element one, make goal (clearly definite it btw) and you get x, miss it by y%, lose y% from the x. So forth and so one. If they are such important goals, At least have a couple years in a row with the same goals. Want to grow the business? Great. in past we had the philosophy of let's not build new buildings until we absolutely had to and then we would build a building. Made us lots of money when there was no competition, and customers couldn't do a lot about asking for later pickups etc. FDX has the "Field of dreams" philosophy of if we built it, then they'll come. They are pretty successful at that. They fly to airports we don't, allowing later pickups and earlier arrivals then UPS can. How do you grow the business, when FDX can beat us by an easy 30 - 45 minutes on pickup time for air? However, we don't do that, since it may cost money. We have one customer that receives 500 NDA ltrs/day just from us. This same customer gets about 1400 day in total, between UPS, FDX, DHL and USPS. They are asking to have earlier deliveries. To get it earlier would require an air driver to be added and drive straight from airport. We won't do this, since it will cost too much money. We tried telling IE that 1 PT air driver isn't that big of a deal considering we could lose 500 NDA's Day. At same time if we do it we stand to get even more NDA's a day. Seems a pretty easy way of keeping the business and growing it. Also, when it comes to people, I think part of the reason we had such a great crew of both mgmt and hourly was due to the good pay rate we receive. However, our future drivers and our future mgmt have and will continue to come primarily from the PT work force. As time has gone by, the pay has been stagnant and the starting pay is getting very close to what the minimum wage is in some states. How can we attract good PT'ers if we don't have a good pay rate???? I know we give benefits, and that helps to attract some workers. Usually the workforce we want to attract 18-22 year old college students don't care about medical. They want cash (I know there's tuitition also). If we don't attract the best, brightest and hardest working. What will our future drivers and future mgmt be like? In short, a fair day's work for a fair day's pay for these pt folks. I'll get off my soap box now.

 

[squeekywheel]

The company has done a poor job with the MIP elements. With the next MIP cycle starting Monday, I would expect the company to clearly communicate the elements for the coming cycle BEFORE the cycle starts. If this coming cycle goes like the last one, we won't see the elements until late January - 4 months into the cycle. Even when we get the elements, they are shrouded in secrecy - improve numbers to meet confidential plan.

The beauty of the old MIP is that it was simple: 15% of pretax profit. Known long before the cycle started, easy to explain and apply to all work groups, easy to measure.

 

[constructively dissatisfi]

The purpose of the New and Improved mystery MIP elements isn't to grow the business. It's so they can screw with the MIP payout whenever they want. It seems clear that the plan is to take money away from grade 19s and below to give it to the 20s and above. A couple of years ago when they implemented the whole RSU scheme everyone's MIP was cut in half. The MIP factor will continue to get lower. Each year they have to pay out 20% of each previous year's RSUs. The MIP factor every year will be calculated with this in mind. They don't want to give back that unit they took away, so the MIP will be reduced accordingly. I'd expect this year's factor to be much lower than last years. The 20s will still get their RSUs.

 

[Parcel Dust]

The purpose of the New and Improved mystery MIP elements isn't to grow the business. It's so they can screw with the MIP payout whenever they want. It seems clear that the plan is to take money away from grade 19s and below to give it to the 20s and above. A couple of years ago when they implemented the whole RSU scheme everyone's MIP was cut in half. The MIP factor will continue to get lower. Each year they have to pay out 20% of each previous year's RSUs. The MIP factor every year will be calculated with this in mind. They don't want to give back that unit they took away, so the MIP will be reduced accordingly. I'd expect this year's factor to be much lower than last years. The 20s will still get their RSUs.

................Keep in mind that grades 20 & above receive their MIP all at once....same as it ever was........Get it thru your heads that we are a public company & like all public companies controlled by Wall Street.....The main problem is that Mike & his possee have failed to grow the stock value.....The stock has not even kept pace with inflation.....Perhaps Mike should ask Fred S for advice.....

 

[local804]

Supes could complain to their union......

lol

 

[JustTired]

Get it thru your heads that we are a public company & like all public companies controlled by Wall Street.....The main problem is that Mike & his possee have failed to grow the stock value.....The stock has not even kept pace with inflation.

If you continue to make cuts to "grow the stock value", You'll most likely "cut" yourself right out of business in the long term. It's like chasing your tail.

When the company was private, the stock almost always grew every quarter. It was a slow steady growth. Those that owned the stock were in it for the long haul. And while I still suspect that the majority of stock is still held by those same people (employees and partners of UPS), the "value" is being determined by those shares owned by the public.
Bad deal!!

Cost cutting is an ongoing process and is vital to the success of a company. But some of the cuts being made seem to be knee jerk reactions to the stock market in an attempt to "grow the stock value".

Most of these cuts are at the expense of service. Service is all we offer. A choice has to be made to "grow the business" or "grow the stock". If you choose the latter, at the expense of the first, the company will whither and die.

In my opinion, if the company is to survive the next 100 years, they need to somehow buy back that publicly held stock and return to a "privately held company" status. Making prudent cuts in cost and return to rewarding their employees and partners with a steadily (albeit slow) growing stock.

Of course many at the top could probably care less whether the company lasts another 100 years.

 

[Dfigtree]

In case anyone cares (I know P71 cares) to look at the historical MIP info, here it is ... at least some of it ...

Year MIP (1 unit)

1986 2.55
1987 2.05
1988 1.55
1989 1.60
1990 1.30
1991 1.05
1992 1.10
1993 1.10 (correct, same as previous year)
1994 1.20
1995 1.41
1996 1.61
1997 1.12
1998 2.13

 

[ups79]

I would say that 1998 is high because of the miss in 1997(and I don't mean mess).

 

[ups79]

Secondly, wasn't 1997 the opl fiasco?

 

[pretzel_man]

Some comments / responses to posts:

<Secondly, wasn't 1997 the opl fiasco? >
No, that was 2 years later. 1997 was the strike fiasco.

<Keep in mind that grades 20 & above receive their MIP all at once....same as it ever was........>
Not True. MIP for Grade 20 and above is the same as everyone else. Grade 20 gets the same MIP factor as a manager and the same rules.

<seems clear that the plan is to take money away from grade 19s and below to give it to the 20s and above. >
Why? Did the 20's and above get together and scheme this? Do you really think that there is some conspiracy? Maybe the reasons they gave are true.

<The beauty of the old MIP is that it was simple: 15% of pretax profit. Known long before the cycle started, easy to explain and apply to all work groups, easy to measure. >
Yep. I agree. This is a subjective plan.

Beenthere:
I agree with much of your post. We have to compete with better service and flexibility. Cost is certainly a factor however. Especially when FedEx drivers are almost 1/2 the cost of ours.

P-Man

 

[constructively dissatisfi]

Some comments / responses to posts:

<seems clear that the plan is to take money away from grade 19s and below to give it to the 20s and above. >
Why? Did the 20's and above get together and scheme this? Do you really think that there is some conspiracy? Maybe the reasons they gave are true.

P-Man

Maybe I missed something. What reason did they give for 19s and below taking a pay cut while 20s and above were getting a big increase? Is is possible for the 20s and above to hit all their goals when nobody working for them hits theirs? What kind of leadership is that? We don't have leadership any more. We have losership.

 

[Six Sides]

You are correct we have losership "Just make the number" soon we will have nothing!