Changes at Fox ‘n Fields
To help his mom in her struggles with cancer, Nick decided not to go back to State to complete his final coursework in the classroom that fall. He’d take his final classes on-line.
That offered him the benefits of being able to oversee the development project at the Collins’ Foster Home and being able to spend more quality time with his friends and those he’d loved: his mom, Piper, and Tanner. The cancer made him realize just how short life was and that he needed to embrace each moment of his life fully, appreciating those around him. He sat on a couch in the family room and reflected on his recent experiences.
The doorbell rang. Nick got up to answer it, following his barking dog Chipper to the door.
“Hi,” an older grey-haired man with a bushy mustache said. “Is your mother home?”
“Yeah, just a minute.” Nick went into his mom’s office to get her.
“Mom, someone’s here for you.”
Catherine got up and walked to the front door, while Nick returned to the couch.
A few minutes later, Nick watched his mom and the man walk into the kitchen. She pulled up a bar chair along the kitchen island and invited him to sit down. Nick wondered whether he should give them privacy. Maybe he’d just stay quiet.
“Nick, this is Leo Lazenby. He’s our executive vice president and chief financial officer.”
“Hi,” Leo said. “You must be Catherine’s pride and joy. She speaks highly of you.”
“Thanks!” Nick said. He decided to stay put on the couch. It didn’t appear that they needed him to leave.
After pouring two glasses of iced tea, his mom said, “I’ve come to the realization that as the CEO of our organization, my responsibility is to my employees. A recent study by United Way found that almost half of all Floridians can barely make ends meet. They can’t afford basic expenses for food, travel, and housing, let alone expenses associated with any vacations. A significant number of our own employees are facing these struggles. So as I troll around in my Ferrari or on my yacht, my employees are scrimping on the amount of mayonnaise that they can add to their bologna sandwiches. Is that fair? Therefore, I’m going to announce my voluntary pay cut to the board in our meeting tomorrow morning. I’ll be taking a 95% pay cut.”
“Oh Catherine. Please. Save me from your bleeding heart. You and I have earned our positions and our pay, through our hard work, education, and commitment to this organization.” Leo contorted his face in such a manner that it was barely recognizable. His nose crumpled with his mustache buckled under it, while his narrow dark eyes squinted.
“Leo, I’m not asking you to take a similar pay cut. I’m not asking any on the board to do that. Instead, I’m sharing with you my plans as the person who sets an example for those in her organization. Everyone else can make his or her own decisions.”
“Catherine. I think you’re making a mistake,” Leo stammered. “You’ll be paid less than all of the other board members. You haven’t been paid that little in years. How will you adjust to the new pay? You’ve been making at least a million bucks for the past five years. And then we gave you the significant pay increase that you’re now enjoying. From the looks of this house, you need every penny you make. I’m sure that the tax bill alone is a couple of hundred thousand a year. That would be about a third of your new salary.”
“Well, I’m planning on selling this house, so the tax bill won’t be an issue. Leo, consider this. Right now, excluding me, the average pay for the next five highest paid senior leaders in our organization for your salary, incentives, stock options, and bonuses is $9.2 million annually. Tan Nguyen, who works as an assistant plant manager in the next building is making $35,000 per year. Tan supports his wife and two kids on that income, which he supplements by delivering newspapers at 3 a.m. in the morning. He gets to work each morning by 7 p.m. and usually leaves just before 7 p.m. He gets home, catches a bit of shut eye, and then gets up to deliver papers for an extra $1,500 per month. Tan isn’t alone. Thousands of our employees are living similarly. Is that any way to live?”
“No, but we’re not Tan, Catherine, or those other employees. Tan probably doesn’t have a college education or an MBA degree.”
“Tan has a college education, just not the graduate degree.”
“Still, Catherine. We’ve all put in our time. He can work his way up as many of us did.”
“Leo, I did the calculations before coming here today. You are currently being paid two hundred and fifty times what Tan is being paid.”
“So. I work harder than Tan.”
“Two hundred and fifty times harder, Leo?”
“Okay, good point, Catherine. All I’m asking is that you don’t get the board to reduce our salaries involuntarily. We should have a say in this.”
“Agreed Leo. That wasn’t my plan. Here’s my plan. Starting on September 1st, Fox ‘n Fields will implement a new pay for performance plan, which includes several components: profit sharing for all, a productivity improvement plan for those in our manufacturing facilities, and individual incentive programs for those selling merchandise in the individual stores. Workers will now share in the profits, as long as there are profits and not losses, so each will have some ‘skin in the game.’ Our employees in manufacturing will engage in a new productivity improvement plan in which they will share the savings associated with determining and implementing ways to cut materials, labor, and overhead costs. Our sales and merchandising employees in the retail stores will engage in individual incentive plans, specific goal setting, competitions, and employee recognition programs. By my estimates and benchmarks of other organizations with similar programs, we are likely to generate a seven to nine percent increase in profits for the productivity improvement plans alone. Finally, I’m going to charge a couple of teams with investigating the possibility of a Fox ‘n Fields line of perfume, along with a potential Fox ‘n Fields credit card. Profit margins on perfumes can be as high as 95%, while in-store credit cards can be very lucrative. These plans together should result in a fifteen to twenty percent increase in profits, which account for increased employee morale, improved customer satisfaction, and increased sales. The increases in profits will offset increases in pay due to profit and productivity sharing and bonuses. I estimate that these plans will raise the average pay for our workers to at least $50,000 annually, if not more. Those who work hard will likely earn much more.”
Nick liked what he heard, so he looked up at Leo to check his expression, which now appeared stagnant, yet his mustache was still strangely bunched up under his nose.
“The board will probably be receptive to your plan. Just don’t push them on the salary issues. No one other than you will want to take a pay cut. What happened to you? Did you get hit on the head in that car accident?”
“I guess you could say that I had an epiphany.”
“Fair enough. I’ll support your plan in our meeting tomorrow.”
***
Nick was happy to hear that the strategic plan was accepted by the majority of those in senior leadership the following day. Catherine was the only one to take a pay cut, but the good will from the pay cut she took spread throughout lower levels of the organization.
Employees, stockholders, and the media hailed the program as “forward-thinking,” “incentivizing,” and “brilliant.” Headlines referred to Catherine O’Brien as the ‘people’s CEO’ and as ‘an example for all to follow.’ They wrote stories describing her as the CEO with a heart and a golden touch. She was compared to other CEOs who’d made similar moves in their organizations, including the CEO of an electric company, the founders of an ice cream manufacturing firm, the CEO of an on-line shoe retailer, and the founder of an investment conglomerate. A ripple effect soon followed and numerous CEOs of Fortune 500 organizations around the United States took similar steps.
Catherine O’Brien took it one step further and joined the country’s richest CEOs in their pledge to give vast sums of their fortunes back to charitable organizations. Catherine’s organization of choice was the Collins’ Foster Home.