Tuesday, March 13, 2012

Could CEOs of White Collar Companies Learn Something?

Through the wonders of modern technology, I can watch pretty much any TV show any time that I want to if I am at home or in front of a computer. I spend enough time on my computer, though, so I'd rather watch on the not so small anymore screen.

Why should you care about this? Well, there's this CBS show called "Undercover Boss". It's a little bit corny and sappy, but there is a learning experience there as well.

Here's how the show works. A corporate executive, usually the CEO, goes undercover and does jobs alongside some of the company's workers. Usually, the CEO learns a few things such as:

  • Those jobs that are the meat and potatoes of the company may not be so easy
  • Sums of money that are pocket change to the CEO are meaningful to the company's workers
  • People that the CEO doesn't talk with every day have good ideas
And, for the sappy side of the viewer, most of the workers who are shown on TV have some back story such as a child with a disability or they work for a charity on weekends. At the end of the show, the CEO usually gives them some amount of money and other goodies. On the most recent episode, we saw the CEO if Oriental Trading Company give 'awards' of perhaps $125,000 and authorize expenditures of probably another $500,000 per year. We saw the CEO's house. It wouldn't surprise if, in a good year, he gets a bonus of more than $500,000 per year (by the way, he may deserve it, I'm not opining on that, but simply making a point).

I've worked for a few large firms in my life. [I've learned that smaller firms run differently. The CEO's can actually talk to their employees.] When I worked for Exxon way back when, I was a young blue-collar worker and frankly, I was pretty clueless about what was going on there. Since 1985, I've been in the consulting business. Mostly, I've worked for large firms (you can look them up if you like as I have not hidden my profile online). 

Let's consider one of those large firms (if you try to work out which one this is, that's at your peril and for your enjoyment). The CEO there has had earnings according to public disclosures in the broad range of roughly $3 million to roughly $20 million per year according to public disclosures. [Every company that I have worked for since 1985 has a make CEO, so using the masculine here is factual.]

I compared the progression of that CEO's pay to shareholder return. Guess which was bigger. It's not shareholder return. On the other hand, over that same period of time, anecdotal data (talking to co-workers) suggests that many of them, even high performers, had no increases in compensation. Certainly those increases were not as high as those experienced by the CEO. 

Let's dig deeper. The CEO was lauded by the Compensation Committee for cutting costs. He slowed down increases in compensation costs. He cut benefits. He cut the little things at work.

From an employee's standpoint, what did that get him? It made him unpopular. It got him high turnover. Turnover costs money. In the consulting business, turnover costs clients. In fact, in any customer service business, unhappy employees and high turnover cost clients. But that blame can be pushed elsewhere.

I dare one of these CEOs. Contact CBS. Go on Undercover Boss. See what your employees think. Maybe they have good ideas. Maybe you'll find out why so many of them leave. Maybe you'll find out why you are losing clients. Maybe then you'll earn your compensation.

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