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United Airlines: How Implementing a Bonus Lottery Led to a Public Relations Disaster

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Get started on a management degree at American Public University.

By Dr. Marie Gould Harper
Program Director, Management at American Public University

The new tax law has encouraged some companies to pass on certain benefits to their employees in the form of one-time bonuses. Organizations are pursuing this option for a variety of reasons, including:

  • The economy is doing well.
  • Unemployment is low.
  • A tight labor market is requiring some companies to pay more and provide a better benefits plan to fill vacancies.

However, I don’t think the executives at United Airlines received “the full memo” with regard to passing on benefits to employees. They propose to implement a lottery for their bonus system.

When I read an article about United Airlines’ intent to roll out a new bonus lottery program for its high-performing employees, my response was, “No!”

The Merits of an Annual Bonus versus Annual Raises

There was an era when employees could look forward to a decent annual increase. For many people, those days are gone for good because more companies have moved to a bonus-based system. The number of employers offering annual bonuses appears to be greater than those putting their savings toward an employee’s boost in pay.

Human resources consulting firm Willis Towers Watson analyzed employers’ public announcements and found that as of January 12, 88 companies have committed to making one-time bonuses ranging from $150 to $3,000. Only 35 companies have made adjustments to their employee’s minimum wage and 10 others have announced some other form of compensation or salary change.

Some of the reasons why companies favor the bonus system include:

  • Bonuses are easier for employers to hand out than bumps in base pay because they don’t increase a company’s fixed costs.
  • A bonus is a win-win situation. Employees’ morale may be boosted; they receive extra money without the company having to make a long-term commitment (i.e., annual salary increase).
  • The bonus system has been around for a while. Many employees, especially high-performing individuals, have become accustomed to the system.

Top-Down Management Thinking Limits Companies’ Ability to Think ‘Outside the Box’

When an organization favors a “top-down” management system, there is a belief that those individuals at the top should have more control over the decision-making process. It makes sense since they are earning the higher salaries, right? Maybe.

The extremists in the top-down camp believe that an autocratic, hierarchical style of command-and-control decision-making is necessary for an organization to be successful and fulfill its purpose. However, this approach is a formula for groupthink.

We still have some companies without any diversity at the top. I’m not referencing demographics. Instead, I am referring to the thought process.

Most people in a CEO’s inner circle tend to think the same as the CEO. There may not be an opportunity for someone to think outside the box and question proposals.

This practice exists not only at the senior executive level. I have found this train of thought throughout the leadership ranks. Various managers get together to make decisions for their direct reports without soliciting feedback to ensure that the proposals are on track.

Deep down, the proponents of a top-down structure believe that if there isn’t an appropriate level of centralized control, the inmates will soon run the jail. Chaos will reign inside the company.

As a result, we have experienced situations where rollouts have become fallouts. Unnecessary backlash occurs in organizations when rank-and-file employees perceive management actions as unacceptable.

What Is Wrong with United Airlines’ Proposed Approach to Bonuses?

Bonuses are supposed to motivate employees, especially the high-performing ones. Having a bonus lottery system ensures that only a few employees who have made significant contributions could be selected for a bonus.

This bonus lottery system will demotivate employees and make them less inclined to perform at a level that makes them eligible for a bonus. It’s very disheartening to obtain an established level, only to find out that your company may not reward your hard work.

The United Airlines situation reveals a definite lack of communication between senior management and employees. The leaders didn’t vet the idea by proposing it to their employees before attempting to roll it out. They believed their own hype without circling back to get buy-in from those most affected.

When the memo came out, employees were furious. They signed an online petition condemning the decision and voiced their concerns in an internal company forum.

The Good News about United Airlines

United Airlines management has decided to “press the pause button” on the new bonus program. United employees have launched online petitions, flooded United’s internal website with negative comments and reached out to the press to discuss their displeasure with the new bonus program.

The moral of this story is that leaders should pay more attention to their employees; it would be in their best interest to vet and pilot proposals before implementation, especially when employees are affected. Leaders should be proactive and avoid negative press at all costs.

Get started on a management degree at American Public University.

About the Author

Dr. Marie Gould Harper is the Program Director of Management at American Public University. She holds an undergraduate degree in psychology from Wellesley College, a master’s degree in instructional systems from Pennsylvania State University and a doctorate in business from Capella University. She is a progressive coach, facilitator, writer, strategist and human resources/organizational development professional with more than 30 years of leadership, project management, and administrative experience. Dr. Gould Harper has worked in both corporate and academic environments.

Dr. Gould Harper is an innovative thinker and strong leader, manifesting people skills, a methodical approach to problems, organizational vision and ability to inspire followers. She is committed to continuous improvement in organizational effectiveness and human capital development, customer service and the development of future leaders.

Susan Hoffman is a Managing Editor at APU Edge, whose articles have appeared in multiple publications. Susan is known for her expertise in blogging, social media, SEO, and content analytics, and she is also a book reviewer for Military History magazine. She has a B.A. cum laude in English from James Madison University and an undergraduate certificate in electronic commerce from American Public University.

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