GM Memo Says Many Workers Are Overpaid
As General Motors moves to dramatically slash its personnel costs, an internal memo says that many of the company’s 126,000 salaried employees in the United States are overpaid and don’t deserve merit pay raises.
The memo, titled “1987 Merit-Promotional Plan,” says that “many employees should receive little or no merit award, as their current compensation is at or greater than comparable employees in the top 30 companies in the U.S.”
The document’s disclosure comes less than one month after it was reported that the company is ending its controversial system of awarding huge cash bonuses to its top executives in favor of a new compensation system tied more closely to the corporation’s financial performance.
Patricia Malloy, a GM spokeswoman, said she could not confirm the pay policy guidelines detailed in the memo. The document was given to The Times by a source with detailed knowledge of GM’s personnel policies, especially those that relate to the company’s salaried work force.
Malloy said the document, which did not list an author, did not come from GM’s corporate-level personnel staff, but he acknowledged that it could have come from a different department. The source who gave the document to The Times said that it was a corporate-level document from GM, adding that it may have originally been a script for a management slide presentation and, as a result, might not have been retained in the personnel staff’s permanent document file.
The memo does not address pay to GM’s top executives, but rather the salaries paid to middle-managers and lower-level office staffers. It also seems to be symbolic of an ongoing effort to come to grips with what analysts call GM’s bloated bureaucracy.
In January, 1986, GM discontinued its cost-of-living pay raises, which were traditionally awarded across the board to all salaried employees. The company has switched over to a system under which raises are to be granted selectively and only on the basis of merit.
Production workers at GM are covered by union contracts and so have not been affected by the change.
The memo seems to reflect GM’s new focus on controlling costs after years of lavish spending by the company that has not paid off in higher sales or profits. Although GM has poured billions of dollars into new plants and equipment since 1979, its sales and U.S. market share have been sliding during the past two years.
GM’s salaried work force, which outside analysts say has become thick with deadwood through overstaffing, has become a special target of GM’s new cost-consciousness. GM has already said publicly that it plans to reduce its salaried work force by 25% by 1990.
The document states that the company plans an “aggressive reduction in head count” this year, which “will significantly reduce our payroll.”
At the same time, the memo says that GM doesn’t plan to use all the available money set aside in its merit pay pool this year, adding that “we must spend our promotional money wisely.” It adds that managers should “make clear discriminations in favor of your top performers” in handing out raises.
The document also states that employees should not be given merit pay raises if they have previously refused a company offer of voluntary early retirement or have rejected similar voluntary severance packages.
“Merit awards should not be granted to employees identified as candidates for the special incentive separation program who refused our offer to separate,” the document says.
GM has been trying to avert massive layoffs of salaried personnel by using such benefit packages as incentives to persuade employees to leave on their own.
