Last week the CEO of MillerKnoll Inc. made some news for telling employees to leave “pity city” because they were concerned about whether they would receive any bonuses due to the fact it appeared the company would be short about $26 million toward their financial goal for the year. Ms. Andi Owen posted a video to her employees stating, “Spend your time and your effort thinking about the $26 million we need, and not thinking about what you are going to do if you don’t get a bonus.”  This response to her people’s questions about their bonus was well criticized on social media – mostly because it was noted her salary and previous bonus was quite a bit more than her employees made.

It was not a great example of effective employee relations as well as public relations, but it does point to a bigger problem with many company bonus or incentive programs. That problem being many workers do not truly understand what company’s bonus or incentive programs are intended to do. That is to motivate and provide a reward for achieving a goal/result. To receive the reward of a bonus, stated results must be achieved. Bonuses are pay at risk. The extra pay results from achieving a goal that is a stretch from a standard or attainable goal. If the results are not achieved, the extra pay is not paid out.

There are many types of pay at risk or variable pay programs. Bonus programs can be discretionary. Discretionary bonus programs allow the employer to provide bonuses at their discretion, and they decide if employees worked well this year regardless of achieving a goal or not. This seems to be what the MillerKnoll employees understood, and they were asking the boss if there would be any bonus if the financial results expected were not achieved. The boss, Ms Owen, reminded her employees (perhaps undiplomatically) that no, if the revenue results were short of the $26 million needed to reach the payout goal, do not expect a bonus. This would indicate that the bonus plan was non-discretionary. Non-discretionary bonus programs simply mean if a goal is not achieved there is no payout of bonus. If the goal is achieved – bonus.

Employers generally do not do a good job of communicating how their bonus or incentive programs work, and MillerKnoll’s situation seems to exemplify this. Incentive and bonus programs are two different types of pay programs. The MillerKnoll program appeared to be a bonus program that paid out based upon the completion of a specific goal.

To get the best results from either a bonus or an incentive program, make sure the program is communicated well to the impacted employees. This may involve multiple communications methods. Payouts should not be a surprise if employees are being kept up to date on progress toward the goal. At MillerKnoll, the employees foresee losing their bonuses due to knowledge about this year’s impending financial shortfall and asked about the bonus. The CEO reminds the employees (poorly) that their bonuses are contingent upon the company making “their numbers”. To get the best results from these pay at risk programs, communicate how they work up front.

Be sure to line up a bonus or incentive program with the company’s goals. Goals can be business goals as MillerKnolls appeared to be. They can also be cost-savings goals, organizational goals, and even human resource goals. The variable pay program should be set to goals and communicated to employees on how they can make those goals. If the target goal and the employees that can achieve the goal are not aligned, the variable pay program will not be as effective.

There are a lot of “moving parts” when developing an effective bonus or incentive program. One of the most important is ensuring that the participating employees understand the program. Otherwise, misunderstandings about pay can lead to poor results and hard feelings as well and misunderstandings – as MillerKnoll seems to have experienced.

ASE Connect

Compensation Consulting – If you need assistance developing an effective variable pay program, ASE can help. Whatever unique considerations your organization may have, our expert resources are here to guide you in the right direction. For more information, contact Kevin Marrs.

Sources, McLean & Company, CCH HR Answers Now. New York Post. MillerKnoll “threatened to fire workers for speaking about CEO’s “pity city” rant 4/20/2023