Finally, merit pay for auto workers?
The annual Detroit Auto Show opens to the public this weekend, and all week reporters attending the show's previews have been treating auto fans to news about the latest innovations and designs in the lineup of new cars.
But automakers aren't just planning to roll out new vehicles and features in 2011. They're also hoping to change decades of practice in the way they pay union employees. During a speech this week, General Motors CEO Daniel Akerson said he favors an "incentive-enhanced, variable pay system" for the company's union employees, The Wall Street Journal reported. Chrysler chief, Sergio Marchionne, followed up by saying, similarly, that "we need to somehow link the performance of the business to the workers."
Well, duh. It's hard to believe that in 2011 there are still major companies that don't have some kind of merit-based pay system--whether merely for annual raises, or for actual bonuses or profit sharing contributions--in place for all their employees. But it's true. While tying workers' compensation to the performance of the business has been one of the most widespread trends in management for years now, there are still places where seniority rules the day.
Of course, there's a reason for this. There are limits to how much you can really say someone assembling parts has an impact on the entire company's bottom line. Sure, such workers play an important role in quality, efficiency and speed to market, but there are so many ways their individual performance can be impeded by complex issues far beyond their control. It would be unfair to penalize them too much for mistakes made in marketing, economic forecasting or (in Detroit's case over the past few decades) just about everything else--from strategy to design and innovation to general management.
That doesn't mean something shouldn't change. Akerson and Marchionne, in conjunction with union leaders, will need to move carefully to make sure such a drastic shift--generations of auto workers have worked under the old rules--is made right. The Wall Street Journal reported that GM leaders have already been rationalizing the move by saying the bulk of their own pay is tied to performance. Such a defense will fall on deaf ears of workers who know how much executives make, and how much more their individual decisions can have an impact on the performance of the company. Rather than saying, "We're affected by it too," auto leaders should emphasize the critical role these workers' individual performance plays on the overall results of the company. And they should start small, tying a relatively minimal portion of union workers' pay to performance (or tying all of their pay to it, but in a minimal way).
The combined impact of these moves, if done right, could go a long way toward getting all company employees working for the same goal. A pay structure that only rewards seniority or job description does not do much to encourage people to work better, smarter and more efficiently on a day-to-day basis. Rather, it rewards people solely for sticking around. And as GM and Chrysler try to get out from under the government's investments, they will need their people--all of their people--to do a lot more than that.
Watch our interview with GM's Dan Akerson: Turning off American 'auto' pilot
January 14, 2011; 10:07 AM ET |
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