VideoIn a series of subsequent recorded conversations, Albert continued to insist White's plan had been canceled, and that he was owed nothing more than he had already received. But he reviewed White's performance metrics anyway, concluding that White's performance was poor and even "if the plan existed," White would be owed at best just a third, or $42,417, of what he claimed. He then offered a $20,000 settlement, which White refused.
White says he learned indirectly in March that his position as PeopleSoft practice leader had been eliminated. Salter told him he would henceforth be a full-time billable consultant, but was expected to continue "doing non-billable activities that are beneficial for the PeopleSoft practice." White left Idea Integration that day — he says he was effectively fired, the company says he abandoned his job — and filed suit shortly thereafter.
Handle with Care
One reason managers tinker with incentive plans could be that employees typically don't sue. Many sign agreements when hired that say they will submit claims against the company to arbitration — a process that limits their legal resources. "The deposition practice is extremely limited in the arbitration," notes attorney Eccleston.
Confusion between incentive plans and discretionary awards also dissuades employees. "The average employee doesn't know if he has an incentive plan or a discretionary plan," asserts Peter LeBlanc, senior vice president in the Raleigh, North Carolina, office of Sibson Consulting. Adds Eccleston: "There is a mistaken impression among most employees that there is no such thing as a good bonus claim."
Even more common is when employees decide that the amount of the claim isn't worth the effort. One former senior manager at Idea who was hired around the same time as White claims MPS owes him $6,652 in bonus pay, but says the amount simply wasn't worth fighting for. "It would have required spending $2,000 to $3,000 more than what I was owed," says the manager, who spoke on condition of anonymity.
The fact that White did sue illustrates a key point: As incentive pay is used beyond traditional areas such as sales, companies must include detailed, specific triggers in their plans if they want compensation to vary in response to company performance changes. "These plans very much turn on the terms of the plan as drafted," says Spaulding. "That's important for employers to know because often either these plans are not put down very clearly in writing, or they are not very clearly communicated to employees."
Indeed, at least one study suggests that companies generally handle employee cash bonus plans with far less care than contracts with vendors or customers. For their part, by contrast, employees at Idea Integration kept tabs on their plans: one former consultant says "all" Idea consultants tracked their bonus compensation metrics on Excel spreadsheets they designed and managed themselves.
Asked if Idea's management ever altered the plans while they were in effect, former business development manager Ray Hammons answered in a deposition that it did so "[p]retty much at will. Whenever they decided that, I guess, people were making too much money. Then they tended to modify that individual's or that whole group's performance plan, bonus plan."
"Changing compensation plans retroactively or midstream is not our practice," responds Idea's Tutor. At best, however, White's case suggests that Idea's management was overly casual about verbally adjusting compensation plans — even retroactively — without issuing formal updates. Regardless of the finer legal points, altering plans in midstream undermines employee trust in management, say compensation experts. "When these disputes arise, the plan is clearly not working for the company in terms of motivating employees," comments Spaulding. Instead, "it is acting as a drain on morale."
Such casualness about incentive compensation is possible in part because employees are uncomfortable challenging their bosses about a sensitive topic like pay. A survey of compensation practices published by WorldatWork, a not-for-profit association that focuses on employee motivation, compensation, and benefits, indicated that 50 percent of employees felt pay programs were not to be discussed at work. "As a manager, it makes your job easier if employees don't discuss pay amongst themselves," says Paul Mulvey, professor of human-resource management at North Carolina State University in Raleigh and a co-author of the study, "because if you make any mistakes, you may suffer fewer negative consequences."
Of course, that also assumes that employees aren't wearing a wire.
Tim Reason is a staff writer at CFO.
Just Rewards?
Corey White is not alone in claiming that Idea Integration Corp. shortchanged him. White's first manager, Cash Menicke, says he forfeited a $25,000 bonus when he was laid off. Also, a former Idea sales executive who requested anonymity claims he was laid off with $198,188 in incentive pay and unreimbursed expenses of $14,404 outstanding.
Sheri Jennings, former senior business development manager, wasn't laid off, but says her compensation plan was changed unexpectedly halfway through a lucrative project. "It was basically, like, we think you've made enough now," she says. "I did the math and remember thinking it cost me roughly $100,000." That was also the case with a former senior manager — hired about the same time as White — who claims his incentive pay was arbitrarily halved midway through a quarter, depriving him of $6,652.
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