If you have a boss who knows your profession much better than you do, and that boss tells you how to do your job better so you can avoid problems in the future, what do you? Do you ignore your boss? That wouldn't be too smart, would it?
Yet when auditors, who know accounting much better than the clients who hire them, give advice about how to avoid the demise of their companies, the managers ignore them. Later they lament that the auditors' comments were only "suggestions for improvement."
Day after day we read about it in the news as one company after another falls into financial woes—and they all give the same lame excuse. You could say it's a trend.
So what's going on here? Could it be that the short-term rewards for seeing a company through bankruptcy (retention bonuses) are so much greater than the long-term rewards for effectively managing a company? Is this the new executive early retirement program?
It all started back in 2002—ironically, back when we were in the thick of the Enron debacle dominating the news. When their auditor told them they had serious problems with their internal controls, Mills Corporation's management ignored the warning. Then they started to go broke. Surprise! Rather than doing the hard work of leading the company to become more competitive, they started selling the company's assets to bolster their bottom line and hide their problems—all while collecting exorbitant salaries for a job they weren't doing.
They might have faded quietly into bankruptcy, earning mega-million-dollar retention bonuses for staying in their jobs while they shut down or grossly downsized the corporation. They might have if they hadn't been sued by a former CEO who was invested in those assets and whose portfolio declined 70% in one year as a result of what he calls "reckless management."
Only $17 million left in an investment that was worth $58 million a year ago. Poor guy. Wouldn't it be nice if all former CEO's remained invested in the companies they once headed and sued when the value of their portfolios declined? Think of all the employees who might benefit by being left with a little more than nothing.
Here's a good example of what happens when people who don't really know what goes on in the workplace try to give advice (or make laws) about workplace issues: they think job evaluations are fair.
Job evaluations, when administered appropriately, are conducted frequently enough to help employees perform their jobs well. The intent is to develop employees so they will have successfully accomplished their tasks and advanced the organization's goals by the end of the year. But most managers in hierarchies don't like managing people—they find it boring and unrewarding. So they don't do it. And they get away with not doing it because their managers hate it, too, so they don't manage the managers.
At the very last minute, managers sequester themselves in their offices for the dreaded annual exercise of writing job evaluations. Because they haven't managed their employees all year long, they have no information to summarize about each employee's achievements—so they make it up. When evaluations are used to determine bonuses, bad bosses give good evaluations to their buddies and bad evaluations to the people they don't like—regardless of actual performance.
Base-salary structures have minimized the effect of this favoritism because annual adjustments have been associated with the position—to keep it competitive with similar positions at other employing organizations. Base salaries enable organizations to compete in hiring the best talent by offering comparable salaries to new hires. But now, bad bosses may be getting more power to abuse government employees—a way to discourage good employees who do not collude with their boss's dysfunction by not just withholding raises, but by lowering the base-salary for comparable positions to force compliance with a bad boss's personal agenda.
It's easy to think that it makes sense to pay people less if they are not performing well in their jobs; it even sounds logical. And in a system of integrity, it might work. But in a system with no checks and balances—in which no one is minding the store, in which managers aren't managing managers to make sure they're doing the job of developing employees—in a hierarchical system in the United States, this is just one more nail in the coffin of workplace justice.
