Comments on: What would you do?

By: Miki Saxon

Miki Saxon — Sun, 19 Jul 2009 18:18:35 +0000

Hi Phil, I like your description of what the CEO should cover in her statement. I also think it's important for people to know that the entire executive staff took substantial cuts. I also like the idea of explaining the alternatives along with the business reasons for the decisions. Not everyone understands how business works and this is a great opportunity for people to learn what makes their company tick.

By: Miki Saxon

Miki Saxon — Sun, 19 Jul 2009 18:07:30 +0000

Hi Marjie, that’s an interesting approach, but I’m not sure how well it would work. I find that most people are more likely to talk about their religion or sex life than their finances, so I’m not sure how open they would be. Many might be embarrassed to have their boss know how they handle their money or the difficult situations with which they’re dealing. I know I never talked about what was going on in my family and would have preferred to work a second job to discussing it with my boss. And, unfortunately, people lie and there would be no way to verify it.

That said, perhaps there is a way to present the idea to everybody and see how many volunteer. It’s surprising what people will do for their colleagues.

Thanks for spending time thinking about this, I know Jim appreciates it as much as I do.

By: Miki Saxon

Miki Saxon — Sun, 19 Jul 2009 17:53:33 +0000

HI Rick, based on what Jim has said, his CEO is very open and the culture is heavy on trust. That is why he is so concerned about her approach. Based on his own previous experience, once trust is breached it’s incredibly difficult to rebuild.

Your comment that the CEO’s pay cut needs to be the largest is critical to a successful outcome, but I think it needs to be larger by both amount and percentage, because if her salary goes down $10K, but it is only a 1% cut in comparison to, say, 5% for others, the pain isn’t really being shared.

I don’t like the idea of leaking the info, leaks are suspect and their accuracy can neither be predicted nor controlled, so your thoughts about the all-employee communication, open and honest, with no hoopla surrounding her own cut would be a much better choice.

Thanks for adding more to ideas for Jim.

By: Miki Saxon

Miki Saxon — Sun, 19 Jul 2009 17:30:53 +0000

Hi Rob, interesting idea bout setting a base for each area and it might work IF the CEO is willing to jump into the open communications you and others mentioned with both feet.

But if she just sticks in her toe, or has the discussion privately with a chosen few I think it will blow up in her face.

Thanks for stopping by with an interesting suggestion.

By: Phil Gerbyshak

Phil Gerbyshak — Sun, 19 Jul 2009 16:11:17 +0000

I like Rick’s last point: make sure the CEO’s cut is the largest. That would be the best advice to give to the CEO: if you’re going to impact others, make sure you impact yourself the most.

I would also advise Jim to let the CEO to make a small public, though personal, statement to the entire staff, to let them know that she tried to cut in what she felt was the fairest way possible, to minimize the impact. Jim may also ask the CEO to mention that this cut was done in place of massive layoffs or in place of selling the company, something nobody wants. Just something small, yet in front of everyone, can be very effective.

By: Marjie Snyder

Marjie Snyder — Sun, 19 Jul 2009 14:13:05 +0000

My opinion changed several times from first reading this Saturday night when first tweeted.
My first thought, was why does Jim think this is unfair, isn’t an employer allowed to set the pay of any employee as he/she chooses?
Then on second thought, why doesn’t the employer just do a “fair” pay cut and make it an equal % across all employees?
Then I thought a very compassionate way of instituting pay cuts (and the way I would do it) is to meet individually with all employees and find out the financial situation of each. If one has a high paid spouse and can afford a bigger cut, while one employee is a single parent with day care costs, I may not cut her pay at all.
So my question, what’s wrong with an employer making pay cuts, case by case and why didn’t the employer just say, we’re making pay cuts case by case. I would.

By: Rick

Rick — Sun, 19 Jul 2009 14:04:59 +0000

Miki, as far as specific action steps for Jim, it depends a lot on the very culture of the company he seeks to protect.

If his boss is likely to be amenable, it would seem wise for Jim to propose to her that senior execs get together with her to review alternatives.

If, though, it is common for her to act without seeking input from her direct reports, proposing she do so will not be taken well. In that case, Jim is left to propose what he feels is the best alternative. There have been several ideas proposed in this thread, and he needs to decide which is likely to work as he tries to sell it to his boss.

My one word of advice would be to point out to the CEO that her pay needs to be cut more (in amount, not necessarily percent) than anyone else’s, and the amount of the cut needs to be leaked. Or, she could simply announce her own cut without any hoopla. “My own pay is reduced by $XX,000″
would fit well as the last line of whatever internal all-employee communication which is planned.

By: Rob Hooft

Rob Hooft — Sun, 19 Jul 2009 07:20:23 +0000

The “unspoken” alternative is obvious: cut everyone by the same percentage…. or is it? Is that the most logical? Assuming that the top performers earn more than the rest, that means that you are cutting top performers the most.

How about cutting everyone by the same “amount”? Yikes, that will hit the new star on first base!

I am obliged after these negative comments to give one alternative, even though that alternative suffers from similar troubles: within each function group, establish a base salary (e.g. comparable with the lowest starting salary in the group), and cut a percentage of what the people earn in that group above the base. An employee with a salary of 55k in a group with a 40k base and a 20% cut would lose 20% of 55-40=15k, that is he will be cut to 52k.

My conclusion is that a pay cut is always hurting people in unequal fashion. Not much you can do about that. The solution to the detrimental “leaking” of the percentages is openness. The cutting of the morale must be prevented by positive communication around the process, a real hard job for the CEO.

By: Miki Saxon

Miki Saxon — Sun, 19 Jul 2009 03:46:15 +0000

Hi Rick, I agree with everything you say, but none of us are offering ideas that Jim can take to his boss.

We are a bunch of smart people, so let’s come up with alternatives!

By: Rick

Rick — Sun, 19 Jul 2009 03:26:28 +0000

I agree, Miki, that the details will get out, even if no one knows for sure who was cut what percentage. The inequity of the plan is a serious problem. We are a hundred years past the days when those who ran companies could get away with playing such a judgmental/parental role as is implied here.

What of the single guy who has a live-in girlfriend who has two kids? Is he less entitled than the married guy with children?

Very quickly, one ends up with decisions which will seem unfair to someone who is affected.

I can’t speak to the legal aspects, but from an ethical stance, it is wrong to treat employees differently for any other reason that their status in the company.

Treat the better performers differently? Sure. Base it on seniority? Okay. Any accounting or accommodating for employees’ private lives, though, is wrong.

Now, if the CEO wants to donate his own money to help a large family through a tough time, more power to him!