COLUMN: Talk about a gamble, what was United Airlines thinking?

March 6, 2018 | Holly Pennebaker | Human Capital Institute (HCI)
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The concept of replacing United Airlines’ quarterly performance bonuses with a lottery program didn’t last three days, much less come to fruition, due to some severe backlash from the company’s thousands of employees.

United Airlines President Scott Kirby announced the switch Friday, and by Monday, employees had let it be known that they just weren’t having it. Later Monday evening, Kirby changed his mind.

“Our intention was to introduce a better, more exciting program, but we misjudged how these changes would be received by many of you,” Kirby said in a note to employees, according to CNBC airline reporter Leslie Josephs.

The “exciting program” would have meant that instead of being recognized for exceptional performance and perfect attendance with quarterly operational bonuses, United Airlines employees would literally have relied upon the luck of the draw to win rewards like luxury cars, vacations or big chunks of change. The winnings sound great and all, but what about the company’s employees who go above and beyond, but don’t get so lucky? Basically, they’d be left empty handed despite their reward-deserving dedication to the company.

 “This is an insult to every single employee at UAL. Spin it however you want, but you’re still taking money out of our pockets and putting it into yours, Scott Kirby. Shame on you. Shame on you,” a captain posted on the company’s internal website.

The captain’s reaction was among 496 out of about 500 that threw serious shade at the lottery.

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I sat down with Dan Walter, CECP, CEP, President and CEO of Performensation, to ask the question: What was United Airlines thinking?

Walter has given solutions for equity and performance-based compensation for nearly two decades, and he’s a go-to expert in the compensation industry, especially on the topic of equity compensation.

He’s not one to view incentive programs as lotteries.

“Most companies use incentives to either enhance guaranteed pay or to offset base pay increases that are not keeping up with executive pay, inflation or reflective of the tight job market,” Walter said. “Nothing about a carnival prize-style incentive communicates an understanding of the value of employees and good performers.”

When employees work their hardest and deliver their best work, it’s because they trust some form of recognition will come, and because they feel like they’re a part of larger organizational goals. So likely, tossing a dart at a balloon to win a stuffed animal isn’t going to cut it. Leaders take a big risk when asking employees to play around with compensation, even if the bonus is based on performance and isn’t necessarily guaranteed.

“United employees most likely see some or all of their legacy bonus as an expectation or entitlement,” Walter said.  “[Leaders] clearly see the new program as a takeaway for nearly everyone.”

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So what goal could United Airlines possibly be trying to achieve with the move from performance-based bonuses to a lottery?

Perhaps its legacy bonus program was too small to have an impact, or too small to create differentiation between high and low performers, according to Walter. Additionally, he said it’s unlikely that the lottery was designed to reach all levels of employees.

“It seems unlikely that executives and management would accept a program where they may win big or may get nothing … while their colleagues get all the winnings,” Walter said.

Kirby must have seen the lottery as a way to reward efforts in a big way, but bluntly said, the lottery program is too much of a risk – a risk across many boards. When an idea doesn’t go over well, the reaction and repercussion have a long reach inside – and outside – of company walls.   

Let’s say that because of strong opposition to losing their quarterly bonus, and new frustrations that could have aroused, engagement goes down. For example, a drop in engagement among pilots, flight crews and flight attendants could easily result in flight delays, lost baggage and unsatisfactory service on flights. Big hit to United Airlines performance.

“I cannot see how this program will positively impact engagement,” Walter said. “A small percentage of people will enjoy the ‘game,’ and risk and reward associated with it … most will see this as a cut in pay and react accordingly.”

The risk spreads to an area where Walter said Kirby and company leaders needed to act immediately to repair: company morale. When morale goes down, leaders have a big problem on their hands. Employees likely lose motivation, drop attention to detail and commitment to tasks at hand, fail to carry out the company’s mission and no longer uphold company values, which means serious consequences for the employer brand. When a fallout like this one isn’t corrected quickly, the company’s employer brand tumbles.

Candidates; past, present and future can easily see the organization in a whole new light, and it may very well not be bright.

“It will certainly make [top potential candidates] think twice, maybe three times,” Walter said.

KEYNOTE: Leverage Core Values to Build Impactful Rewards, Recognition Program

So there you have it: the lottery program looks like it would have been bad news for United.

Companies make moves for many reasons, which oftentimes go misunderstood, but once employees get in the new groove, all is gravy and things go on. At United Airlines, maybe the lottery program came from a budget constraint and too few options for something better. Maybe there was another new program in the works that the company kept unreleased that would have filled gaps or provided an ideal solution. Regardless of the “what if’s,” Kirby’s retraction of the lottery program can only seem like his best shot in the dark (or light).