Business/Finance

AIG's exorbitant outing at the Regis was justified

by JS O’Brien

I sometimes post opinions that I know will get my head taken off.  This is one of them.

The media is wrong about AIG.  The $400,000-plus retreat that has everyone so outraged was not for failed executives, but for top-producing salespeople.  Events like this one are common across the US for top salespeople, and there’s a very good reason for it.

I’ve been around way too many salespeople in my life.  They aren’t the most likable bunch unless your idea of a good time is hanging out with greasy gladhanders wearing outsized jewelry who’d sell their children into slavery for a $1.95 order of paper clips.  But I don’t have to like them to understand that they are necessary to keep the money coming in, the economy humming, and the rest of us employed.

I have designed many, many sales incentive compensation plans over the years.  You see, one really great thing about salespeople is that it’s easy to motivate them.  Dangle enough money in front of them and they’ll crawl on their bellies naked through broken glass for you.  It’s like waving a kibble at a starving Rottweiler.  The funny thing, though, is that money, in itself, is not the primary motivator for them.  Prestige, power within the company, and the reputation as a winner are the things they’re really after.  Money is a means of demonstrating that to their peers, who understand this little game all too well (or else they generally get out of sales).

Like most firms, AIG understands that these sales reward junkets — where the company makes a big deal out of salespeople, lavishes praise on them, singles them out from their peers, allows them to hobnob with bigwigs who constantly tell them how important they are to the company — are far more motivating than cash.  AIG could pay cash bonuses to them in lieu of a big get together at a fancy hotel and no one would bat an eye.  But cash bonuses wouldn’t work as well, and AIG (and I) know it.

So, don’t blame AIG for continuing to do business the way business is done.  Meetings like these are a cost of doing business.   Hey, I’m all for firing AIG executives who got the taxpayers into this mess.  But I’m not for firing anyone who understands how salespeople think and is trying to get them to sell more.  Making them stop having these meetings will just force them to increase sales incentive compensation, which will fly under the media’s radar.

And that’s a stupid solution to a non-issue.

14 replies »

  1. Ditto here. In times like this it’s all too easy (and appropriate) to get really mad at the corporate honchos whose activities range from “inept” to “criminal.” This often gets us into “baby/bathwater” territory, and when that happens we can make bad situations worse.

    The types of events you’re talking about – “President’s Club” events – are powerful engines for productivity. Salespeople are odd animals, and they’ll work like crazy to earn the right to attend them. The value in this, as you so accurately note, is lots of revenue, which means companies are more healthy, and if you can’t figure out what that means for workers and their families then you’re not smart enough to be reading a blog anyway.

    Well said….

  2. Every single headline I can find calls this an “executive retreat,” even the stories released after AIG’s statement about the purpose and attendance of the event – a statement which could easily be checked out. Obama, McCain, and (for the love of God) the White House have all jumped on the bandwagon, calling AIG “despicable” and “irresponsible…” Irresponsible. Hmm.

    Meanwhile, I doubt the employees of the St. Regis and its surrounding restaurants and bars are complaining about a hundred well-lubricated tippers showing up instead of cancelling…

  3. Amy Pohler said it best when they claimed it was planned for a long time:
    it’s like carrying on with grandma’s birthday party even though she died last week!

  4. Morgan:

    I understand why you might agree with Amy Pohler, but remember that AIG is a huge company. The insurance division has nothing to do with the division that brought the company down. These salespeople have been promised this perq all year long, and knew (by this time) that they’d won it — be earning it.

    Here’s another way to look at it. Say that the average cost of these events is $500,000, and 100 of the top salespeople are invited. That’s $5,000 each. Most of these folks earn so much money that a $5,000 bonus “kicker” would hardly raise an eyebrow. So, if AIG is to meet its commitment, it will have to give out this money anyway, and it won’t be nearly as effective as the big to-do. In fact, they may have to give out more money in bonuses to make it at all meaningful.

  5. I agree the $400K is a drop in the bucket. The employees and retirees who might have been counting on this money to help cover their pensions will have to look elsewhere, anyway, when AIG finally goes under (next day or so?). Might as well keep partying until the deck’s fully under water.

  6. Timing is the real issue. One thing I’ve learned is once your in trouble, don’t do anything to skyline yourself. If AIG was going to go ahead with this they needed to understand that people were watching and perception is reality. They should have seen the need to explain their position on this right up front, instead of haveing to play catch up with the press.

  7. Bob,

    Now there, you’ll get agreement from me. Someone in AIG should have realized how things would look, and planned accordingly.

  8. Oh come on folks. I doesn’t MATTER if 400K is a drop in the bucket. It doesn’t MATTER that this outing is a great motivator for the salespeople. What DOES matter is that AIG is a failed company using taxpayer money to even STAY in business. Wake the heck up and smell the coffee. Things in America need to change and change fast. This bailout package is one great big hoax and a symptom of what is wrong with AMerica. A blank check to failed corporations who got into trouble in the first place based on greed. I say let them fail.

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