Unfortunately, less than a third of employees in the same companies say management provides clear goals and direction.Ĭonfidence in top management's competence is collapsing. Thus, a recent survey found that 82 percent of Fortune 500 executives believe their corporate strategy is understood by everyone who needs to know. The result is a world in which top management thinks it's sending crucial messages but employees never hear a word. To be sure, much of the trust gap can be traced to inconsistencies between what management says and what it does-between saying “People are our most important asset” and in the next breath ordering layoffs, or between sloganeering about quality while continuing to evaluate workers by how many pieces they push out the door. Heads of the 10 companies with the poorest returns decreased 51.4 percent to a median of $1,150,860. The same Mercer study found that total direct compensation for those in charge of the 10 best performing concerns jumped 21.6 percent to $2,382,000 in 2003. On the other hand, shareholder pressure has led to a firmer link between CEO compensation and investor returns. The gap persists because bonuses, typically tied to profits, are routinely awarded to top managers but not to other employees. In contrast, the paychecks of nonunion salaried workers grew 3.6 percent (after a 3.8 percent rise in 2002). corporations by Mercer Human Resource Consulting revealed that CEOs in office at least two years enjoyed a 7.2 percent rise in salary and bonus in 2003, to a median $2,118,000 (on top of a 10 percent rise in 2002). Indeed, the attitudes of middle managers and professionals toward the workplace are becoming more like those of hourly workers, historically the most disaffected group.Īn analysis of proxy statements from 350 large U.S. Study after study, involving hundreds of companies and thousands of workers, has found evidence of a trust gap-and it is growing.
Indeed, the widening gulf has ignited a political firestorm and raised the specter of social turmoil. Hourly workers and supervisors indeed agree that “we're all in this together,” but what we're in turns out to be a frame of mind that mistrusts senior management's intentions, doubts its competence, and resents its self-congratulatory pay. companies receive compensation that is more than 500 times higher than the pay of the average American), the wonder grows. And they wonder, “Is this togetherness?” As the disparity in pay widens (some heads of major U.S. They see top management's perks-oak dining rooms and heated garages-versus cafeterias for lower-level workers and parking spaces a half mile from the plant. CEOs say, “We're a team we're all in this together.” But employees look at the difference between their pay and the CEO's.
Over the years, few topics have generated as much controversy as executive compensation. R11 Reilly, D., Ball, D., & Ascarelli, S.
In implementing a pay-for-performance system, what key traps must I avoid to make the system work as planned? How can we tie incentives to individual, team, or organizationwide performance?ĥ. What is the best way to develop pay systems that are understandable, workable, and acceptable to employees at all levels?Ĥ. What economic and legal factors should be considered in establishing pay levels for different jobs?ģ. How can we tie compensation strategy to general business strategy?Ģ. Questions This Chapter Will Help Managers Answerġ.