Dell: Dude, You’re Not Getting a Bonus
Posted on Sunday, February 4, 2007 by Frank Roche
Michael Dell sent an e-mail to all Dell employees announcing a number of business management and personnel changes. Quick summary: Dude, you’re not getting a bonus. Austin-based blog Translucence got a copy of the all-employee memo, which says there will be no bonuses for anyone because of underperformance. Michael Dell writes:
Last year, we worked really hard and there were many sacrifices. Thanks!
We had great efforts, but not great results. This is disappointing and it is unacceptable.
The result is that there will be no bonus this year. I know this is a big deal for you and your teams. We’re going to fix that so that our efforts translate into great results and success for our teams.
Mr. Dell did say there would be some money available for spot bonuses and they “are also budgeting for above-market raises this year.” It is an interesting time in Dell’s history. The essence of the big changes in Round Rock revolve around reducing bureaucracy. I really admire Michael Dell’s courage and conviction on this. It’s a huge decision to not pay bonuses and delivers a big message. I’ll be watching The Vault for reaction.
Technorati Tags: Dell bonuses, Dell, performance, pay
Megan
Feb 4th, 2007
It’s great to see leaders who walk the talk. Too often an executive team will take the easy way out – paying small bonuses – because they would find the fall out from paying no bonuses too hard to manage.
Performance Mgt and remneration systems send powerful cultural messages – hats off to Michael Dell
Frank Roche
Feb 5th, 2007
Megan, so true. It does take real strength to say, “We didn’t do what we said we would do.” I know that bonuses can practically become guaranteed in employees minds…this is a wakeup call that it’s about pay for performance. I think the straight talk that Michael Dell used was great. Nice to see from the top of the house.
Jay
Feb 5th, 2007
I have to respectfully disagree with the persons above. How much courage does it really take? I would prefer the courage to hire an independant CFO who wasn’t a “close personal friend” (Don McCarty) who had been fired for executive pay scandal at American Airlines (Note that while Dell is under SEC investigation, he was the chair of the audit committee and should have had the foresight to ask the same questions the SEC did in advance). Or perhaps it would have taken courage to hire someone other than Kevin Rollins, who was the easy pick for the job, but not the most qualified. Or maybe to have let him go earlier instead of waiting for Dell to erode slowly.
In terms of vesting stock options in 3 yrs instead of 5, these options are reserved for upper management for the most part, so he is enabling the same strategy makers that have failed in the past.
When it comes down to it, the company didn’t perform, but the real question is why? Did the people not execute or was (is) the leadership flawed.
Real courage would have been to cut off all bonuses for Directors and Higher while adjusting the modifier to weigh more heavily on individual performance for the individual so only the top tier of employees were significantly rewarded.
I think there is one thing we do agree on, however, and that is I hope there is no mammoth golden parachute in Kevin’s “resignation”, which would be a further slap in the face to giving a bonus to the leaders who failed in setting the strategy in the last couple years.
Frank Roche
Feb 5th, 2007
Jay, I guess I mean “courage” to say “we’re all in this together.” It’s true that bonus weighting needs to be more toward individual performance at non-exec levels, but there must be a threshold of company performance at which no one can be rewarded. Unfortunately, annual awards start being viewed like that…as a standard piece of total cash.
Are you saying that there are still bonuses/LTI for directors and higher?
Cannon Fodder
Feb 5th, 2007
If no bonuses mean no layoffs, I’m OK with it.
But who out there believes there won’t be layoffs? Don’t be so naive.
All the communication we see talks about bureaucracy and redundancy… It doesn’t take a genius to read between those lines. Did anyone notice how quiet it was today with all the VPs and Directors huddled together plotting against us? The ax will fall.
Joke: How many Dell employees does it take to screw in a lightbulb? Answer – 302. 100 in three separate autonomous siloed organizations to independently determine how to to screw in the lightbulb, one guy to ignore the research and find an answer on Google, and one guy who speaks English enough to tell the customer.
In a week or two 3,000 employees will be thinking that Saddam got off easy.
Frank Roche
Feb 6th, 2007
CF, best of luck to you…and you’re right, “reducing bureaucracy” generally means layoffs. Zoiks! I always hope when there’s a reorganization that it shakes out the deadwood and the low performers. Sadly, that’s not always the case…and soem groupd end up “paying” more than others. The really scary part is that layoffs can become part of a company’s management approach…once they do it once it can get to be a habit. A long time ago I worked for a very high performing healthcare company that was shocked when HMOs and managed care came about…they did a massive layoff…and have done one at least every year now for 20 years.
dellee
Feb 7th, 2007
Mike still got his 1.8 million bonus for 2006. (plus probably another half billion or so in stock grants)
Jobs returned to CEO of apple and took salary of $1.
hmmmmm. Seems like Mike is doing the opposite strategy.. hope that works for ya Mike… really.
My guess is that best performers will leave, market is great right now.
Frank Roche
Feb 7th, 2007
Wow, I was astonished to read that ANY bonuses were paid. I mean, “we’re in it together” doesn’t ring true when “some animals are more equal than others.”
I’ve always felt when things get bad, really bad, that those who can leave, do leave.
Web Marketing Mentor
Jun 18th, 2007
Bonuses are for performance. Not paying is brave but in my view the correct way to go.