Monday, March 3, 2008

Dreaming of a Buyout

The latest announcement by Ford to offer one of the most lucrative buyouts ever to 54,000 employees has me longing for such a deal. With the current state of Detroit’s big three auto industry, I am a little surprised that they are doing so much to help the employees – evidently they learned a few things about public relations and the backlash of pulling the rug out from loyal employees.

Ford is saying all the right things and doing a lot to help in this transition:
“We need to restructure, and it’s important to our business to do so,” said Joseph R. Hinrichs, Ford’s head of global manufacturing. “But we want to do it in the best way for our employees.”

As an employee, I especially approve of this statement:
“We always prefer for people to voluntarily leave and that’s why we put the energy and effort into this package of buyouts,” said Martin J. Mulloy, Ford’s vice president for labor affairs.

Back to my own reality, I am faced with a corporation that has taken a completely different route with very different results. In the past, buyouts were offered to encourage those close to retirement to move on. It worked well, as it was a voluntary program. It was not disruptive or threatening to the employees. But, the company complained that the “wrong” people were leaving. In other words, they couldn’t choose the people to be dismissed.

So, a new tactic was deployed under the veil of “compensation for performance.” We were informed that instead of merit increases being spread across the employee base like peanut butter, the better performers would be rewarded with more money and the lowest rated employees would receive zero raise. Since most of us believe we are above average employees, we all bought it.

Over several years, as times have gotten leaner, this has evolved into not just a zero, but a one way ticket out the door for the lowest rated employees. If this was a perfect world and fair was fair, this scheme would probably work, but unfortunately there is favoritism, old boy syndrome, subjective evaluations and personality conflicts that determine the bottom 10% of the base. It has created animosity, distrust, and suspicious employees. Not to mention all of the lost work time as a result of the numerous watercooler discussions concerning this policy.

This approach of weeding out employees would be more effective in situations where each employee’s work productivity could be measured. For instance: a salesman who completes a finite number of sales for a quantifiable amount in sales. Forcing engineering into such a metric is a mistake, as sometimes the most valuable person in the room is the one who knows the right question to ask, or the one who thinks differently, out of the box, thereby providing another perspective on a problem.

So at this time, to my chagrin, buyouts are not on the table and probably will not be for quite awhile. The cycle will turn at some point, when management finally realizes the damage that has been done to morale, but for now I can only dream of having a nice send-off in the form of a cash buyout.

For more personal finance stories please visit the Carnival of Personal Finance. This week's theme centers around facts about the homeless people in the US. My article "When are the peak earning years?" was included.


  1. Wow- reading this post was like reading my own thoughts on the subject, especially when it comes to corporate politics and evaluating engineers.

    I like the way you think. =)

  2. Thanks for the comments. I appreciate the feedback.