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Why United Airlines' Lottery-Based Bonus Idea Fell Flat

Experts advise first holding focus groups, considering public reaction

An empty airport waiting room with a plane in the background.

​What happens when a company replaces a merit-based bonus system with a lottery that doles out awards based on chance?

Nothing good, if the experience of United Airlines is any indication.

After the company said earlier this month that it was replacing its bonuses with a lottery system offering large rewards to a few workers at random, furious employees signed an online petition condemning the idea.

As a result, the airline announced that it would not introduce the new bonus program until after conducting a "listening session" with its workers.

Traditionally, companies award employee bonuses based on performance or on calculations that reflect a percentage of each worker's salary. United announced that it was getting rid of its performance incentive program that awarded workers up to $375 for each quarter that the airline met operational goals. Instead, the company said employees would be entered into a lottery system that gave out large prizes, including $100,000 in cash and a Mercedes-Benz C-Class sedan. Only workers with perfect attendance records for the quarter would be eligible.

 [SHRM members-only toolkit: Developing and Sustaining Employee Engagement]

A Way to Save Money?

Swapping a merit-based bonus program for a lottery based on chance may strike some as a way for United to save money—a move that may be viewed as especially greedy at a time when the economy and stock markets are humming. Paying out bonuses to rank-and-file workers and executives costs United tens of millions of dollars a year. Some experts speculated that the lottery system that United envisioned would award far less.

"When United announced its lottery bonus program, it broke its promise to employees," said Deb Gabor, CEO of Sol Marketing, a brand strategy consultancy based in Austin, Texas. "But more importantly, it broke its promise to its customers by creating a system that rewards randomness and variability, rather than consistency and caring, creating a condition in which employees aren't incentivized to deliver experiences that reinforce the company's promise to customers." 

United Airlines spokeswoman Maddie King referred SHRM Online to a message that United President Scott Kirby sent to employees indicating that he was putting the new bonus program on hold "to review your feedback and consider the right way to move ahead." He explained in the message that the new bonus approach was designed to "introduce a better, more exciting program, but we misjudged how these changes would be received by many of you."

"We will begin a series of listening sessions across our system to get feedback on how we should structure the new incentive program," King told SHRM Online. "We want to create confidence across our employee base in the new program that will help build morale, as we continue running a great operation and providing excellent customer service."

Claire Bissot is managing director of Cleveland-based CBIZ HR Services, which offers financial and employee business services. She noted that before making a proposal as bold as United's, it's advisable to convene focus groups to gauge what employee reaction might be.

"This is why there are focus groups," she said. "No matter how hard leadership tries to know the people and think like the people, it's very important to understand, especially in large organizations, that you are an executive. You aren't the people. Get opinions and feedback, let employees submit ideas, and start with small changes."

Affecting Employee Engagement

Kirby has said that he wants United to solidify its reputation as the "most caring airline in a highly competitive industry."

Those comments came after a highly publicized incident last year in which Dr. David Dao was one of four passengers asked to leave an oversold flight so airline employees could board the plane. When he refused, according to passengers' videos, airline officials dragged Dao through the aisle of the aircraft.

That alone may have been enough to risk customer trust. The recent news about the change to workers' bonuses may risk employee trust and morale, Bissot said

"Which athlete would train harder?" she asked. "One who tries out for the Olympics and is judged on their own performance? Or one that qualifies to go into a raffle with others in their similar skill set and possibly gets a chance? Employees want to know if they work hard, they will be recognized."

United's move, she said, may also leave workers questioning and even distrusting their leaders. "This approach would make most question: Are we in good hands? Do they know what they are doing? Are they really this removed from reality? Do they understand us? Do they care about us?"

Bissot acknowledged that United may have simply been trying to "think outside the box" to compete for talent.

"Creativity in employee engagement and development strategies is a significant challenge for employers today in order to attract and retain employees," she said. "Employers are now faced with differentiating themselves in their approach. We've seen the rise of free food in the office, flexible work schedules, sabbaticals and more. Unfortunately for United, not all ideas are good ones, and the adverse effects should be considered."

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