DETROIT – Ford Motor Company spent the weekend dealing with an internal crisis over white-collar compensation.
After posting a near $18 billion profit for 2021, it turns out the bonus calculations didn’t go over well with many because benefitted senior managers.
“Here at the Glasshouse, bonus season is more anticipated than tax refund season because the numbers are that large. But over the weekend, they had to work out a difference between what senior managers received versus what the middle level received,” said Neal Gilbert, Permanent Placement Robert Half Company.
The original incentive compensation for senior officers who manage the global business, Chairman Bill Ford and CEO Jim Farley, received 135% of the bonus.
North America GSR-LL6 team members only 54%. Ford’s President of the Americas, Kumar Galhotra, told employees in a letter, “Plain and simple, we did not achieve our original automotive performance targets.”
The North American business did not do well enough for the big money, but the global business did. After that weekend meeting, Galhotra says, “However, we realize the formula for which we arrived at the AICP Awards doesn’t fully consider the unusual events that affected our business, such as the global microchip shortage and a continued pandemic.”
Galhotra relented, and the North America GSR-LL6 execs saw their bonus double from 54% to 108% of the bonus target. That cash taken from officers cut their bonuses to 108%. Global LL5-LL2 leaders will remain unchanged.
We checked in with Robert Half Company Permanent Placement Partner Neal Gilbert. He says lower-level employees everywhere have turned the tables.
“The smart companies out there like Ford, who is actually increasing the bonuses, that it’s a very smart move because the cost of replacing an employee is way more than whatever they’re giving out as bonuses are concerned,” said Gilbert.
In years past, Ford’s North America profit skewed bonuses the other way, and that’s why the formula changed in 2020. The reason for the acrimony is we’re talking tens of thousands of dollars at stake for many white-collar ford employees.
As it stands, the blue-collar employees will be receiving about $7500.
Below is a note that was sent to employees:
Team,
The leadership team and I met this weekend to discuss what we can do to adjust the gap between the North America AICP plan for LL6 and GSR employees and the Global AICP plan for LL5+ employees.
Plain and simple, we did not achieve our original automotive performance targets. However, we realize the formula for which we arrived at the AICP awards doesn’t fully consider the unusual events that affected our business, such as the global microchip shortage and a continued pandemic.
So we intend to make the following adjustments to the AICP awards:
- We are reducing AICP for the company officers to 108% of target from 135%. That includes me, Jim Farley, Bill Ford and other senior leaders
- We are doubling AICP for NA GSR-LL6 team members to 108% from 54%
- Global LL5-LL2 leaders will remain unchanged at 135%
We realize these changes will not satisfy everyone. But we agreed in this current business climate this change is the right thing – the fair thing – to do.
For context, let me provide some history on how the current AICP structure was established.
Several years back, all employees in North America were tied to global results. In 2018, global AICP was 72% and in 2019 it was 54% for all of us. These were years in which North America performed the highest of all regions. Our GSR and LL6 employees requested changes be made so that the bonus structure better tied the work they do in the country they are employed. Based on that feedback, we restructured AICP and finalized those changes near the end of 2019 with the plan to implement in 2020.
However, the pandemic hit and as many of you will recall, we made an adjustment for all employees to recognize your hard work and bumped AICP in 2020 to 50 percent for all employees. Absent the adjustment, AICP would have ranged from 14 to 23 percent that year.
We set business targets for 2021 with the assumption that the pandemic would ease, and the supply of microchips would improve. Neither occurred. Our automotive business missed its business plan targets, while Ford’s overall global performance was above target resulting in the AICP percentages communicated last week.
I bring up this history to demonstrate how at each step our collective teams have always done our best to listen to employees. With these adjustments, we continue that practice.
The business environment remains fluid and we will continue to refine our AICP process. We will keep you informed of our progress. We also understand you may have additional questions and we will use an upcoming Building Ford+ session to address them.
Thank you for everything you’re doing to deliver Ford+.