Ford raises some white-collar bonuses after objecting to original plan

DETROITFord Motor Company spent the weekend dealing with an internal crisis over white-collar compensation.

After posting nearly $18 billion in profit for 2021, it turns out that the bonus calculation isn’t going well with many because it benefits senior managers.

“In this Greenhouse, the bonus season is more awaited than the tax return season because the amount is so large. But over the weekend, they have to figure out the difference between what senior managers receive versus what mid-level managers receive,” said Neal Gilbert, Robert Half Company Permanent Placement.

Genuine incentive compensation for senior officers managing global businesses, Chief Bill Ford and CEO Jim Farley, receive 135% of the bonus.

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The North American GSR-LL6 team members are only 54%. Ford President of America, Kumar Galhotratold employees in a letter, “Clearly and simply, we did not meet our original automotive performance targets.”

North American businesses are not successful enough to make a lot of money, but global businesses do. After that weekend meeting, Galhotra said, “However, we realized the formula we used at the AICP Awards did not fully take into account the unusual events affecting our business, such as the global microchip shortage and the ongoing pandemic.

Galhotra relented, and North American GSR-LL6 executives saw their bonuses double from 54% to 108% of bonus targets. The cash taken from the clerk cut their bonus to 108%. The global leader LL5-LL2 will remain unchanged.

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We checked in with Robert Half Company Permanent Placement Partner Neal Gilbert. He said lower-level employees everywhere had turned things around.

“Smart companies out there like Ford, who actually increase the bonus, that this is a very smart move because the cost of replacing employees is way greater than anything they give out as a bonus,” Gilbert said.

In years past, Ford’s North American profits swerved bonuses the other way, and that’s why the formula changed in 2020. The reason for this bitterness is that we are talking about tens of thousands of dollars at stake for many white-collar ford employees.

As it stands, blue collar employees will receive approximately $7500.

Below are the notes sent to employees:

Team,

The leadership team and I met this weekend to discuss what we can do to adjust the gap between AICP North America plans for LL6 and GSR employees and AICP Global plans for LL5+ employees.

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Plain and simple, we fell short of our original automotive performance target. However, we recognize that the formula we used to earn the AICP award does not fully take into account the unusual events that affect our business, such as the global microchip shortage and the ongoing pandemic.

So we intend to make the following adjustments to the AICP award:

  • We reduced the AICP for corporate officers to 108% of the target from 135%. That includes me, Jim Farley, Bill Ford and other senior leaders

  • We doubled the AICP for NA team members GSR-LL6 to 108% from 54%

  • Global LL5-LL2 leader to remain unchanged at 135%

We realize this change will not satisfy everyone. But we agree that in today’s business climate, this change is the right thing – the natural thing – to do.

For context, let me provide some history of how the current AICP structure was founded.

A few years ago, 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 are the years in which North America performs the highest of all regions. Our GSR and LL6 employees are calling for changes to make the bonus structure more binding on the work they do in the country where they work. Based on this feedback, we restructured the AICP and finalized the changes towards the end of 2019 with plans to be implemented in 2020.

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However, the pandemic hit and as you will remember, we made adjustments for all employees to recognize your hard work and increased AICP in 2020 to 50 percent for all employees. Without adjustment, the AICP would range from 14 to 23 percent that year.

We set business targets for 2021 assuming the pandemic will subside, and the supply of microchips will increase. Not occur. Our automotive business missed its business plan targets, while Ford’s overall global performance was above target resulting in the AICP percentage communicated last week.

I bring up this history to show how at every step our collective team has always done its best to listen to employees. With these adjustments, we continue the exercise.

The business environment remains fluid and we will continue to refine our AICP processes. We will keep you informed of our progress. We also understand that you may have additional questions and we will use the upcoming Building Ford+ session to answer them.

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Thank you for everything you did to bring Ford+.

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