June 19, 2018

AIG Adopts Big 4 “Forced Ranking” Method

Good news servants of the capital markets! Remember how we talked last summer about forced ranking and how it’s rampant within the Big 4 performance ranking system? No? Put it right out of your minds? Had occurred to you because you’re delirious from the lack of sleep, poor diet, et al.?

Well as soon as busy season
is over, we’re sure it’ll come back to you; in the meantime, you’ll be happy to know that everyone’s favorite ward of the state, AIG is now joining you in implementing what might be the worst possible method of rewarding its employees.

American International Group Inc. is rolling out a plan to revamp how it doles out annual incentive pay to its employees, as the government-controlled insurance giant moves away from retention bonuses that have proved controversial over the past year.

The new initiative, called a “forced distribution” system, is being pushed by Chief Executive Robert Benmosche. Under the plan, thousands of AIG employees will be ranked on a scale of 1 to 4 based on their performance relative to their peers, and their annual variable compensation, which may include bonuses, will be determined by their rank. Individuals ranked in the top 10% will get far more relative to their peers.

Yes! The 1 to 4 ranking scale. That’s not quite as shrewd as PwC’s 1 to 3 scale and it’s at least simpler than KPMG’s 9 box but AIG employees have every right to be concerned about this arbitrary ranking system.

Warden Robert Benmosche doesn’t care though, there were too many rock stars, “Mr. Benmosche said performance-appraisal systems previously in place at AIG weren’t discriminating enough. In one case, he said, there was a ranking system with four categories, but about half of the people got the highest rating, and half got the second rank. ‘You can’t have 50% in the top,’ he said.” Bobby B also said that AIG is “unlikely to impose a requirement that underperformers leave.” Write that one down.

Our contributor Francine McKenna who has written both here and on her blog about forced ranking told us, “Investors will get contrived ‘performance’ enforced by cutthroat atmosphere that further encourages excessive risk taking.”

In addition, Ravin Jesuthasan a “talent-management” consultant (not involved with AIG’s change) who was quoted in the Journal (our emphasis), ” [Mr. Jesuthasan said] the approach can work in turnaround situations by helping to foster more accountability, but could be risky if not communicated well or “if links to consequences like compensation and employment are not properly thought through.”

Any of that sound familiar?

AIG Plans Revamp on Pay [WSJ]

Good news servants of the capital markets! Remember how we talked last summer about forced ranking and how it’s rampant within the Big 4 performance ranking system? No? Put it right out of your minds? Had occurred to you because you’re delirious from the lack of sleep, poor diet, et al.?

Well as soon as busy season
is over, we’re sure it’ll come back to you; in the meantime, you’ll be happy to know that everyone’s favorite ward of the state, AIG is now joining you in implementing what might be the worst possible method of rewarding its employees.

American International Group Inc. is rolling out a plan to revamp how it doles out annual incentive pay to its employees, as the government-controlled insurance giant moves away from retention bonuses that have proved controversial over the past year.

The new initiative, called a “forced distribution” system, is being pushed by Chief Executive Robert Benmosche. Under the plan, thousands of AIG employees will be ranked on a scale of 1 to 4 based on their performance relative to their peers, and their annual variable compensation, which may include bonuses, will be determined by their rank. Individuals ranked in the top 10% will get far more relative to their peers.

Yes! The 1 to 4 ranking scale. That’s not quite as shrewd as PwC’s 1 to 3 scale and it’s at least simpler than KPMG’s 9 box but AIG employees have every right to be concerned about this arbitrary ranking system.

Warden Robert Benmosche doesn’t care though, there were too many rock stars, “Mr. Benmosche said performance-appraisal systems previously in place at AIG weren’t discriminating enough. In one case, he said, there was a ranking system with four categories, but about half of the people got the highest rating, and half got the second rank. ‘You can’t have 50% in the top,’ he said.” Bobby B also said that AIG is “unlikely to impose a requirement that underperformers leave.” Write that one down.

Our contributor Francine McKenna who has written both here and on her blog about forced ranking told us, “Investors will get contrived ‘performance’ enforced by cutthroat atmosphere that further encourages excessive risk taking.”

In addition, Ravin Jesuthasan a “talent-management” consultant (not involved with AIG’s change) who was quoted in the Journal (our emphasis), ” [Mr. Jesuthasan said] the approach can work in turnaround situations by helping to foster more accountability, but could be risky if not communicated well or “if links to consequences like compensation and employment are not properly thought through.”

Any of that sound familiar?

AIG Plans Revamp on Pay [WSJ]

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In Case You Need Another Reason to Hate the French

french flag.jpgWalking around the PwC office in Midtown Manhattan, our blogospondent in the field happened across a couple of young ladies having the picture taken in front of the P Dubya sign out front, proudly posing as if it was their names on the building at 300 Madison.
Said blogospondent approached the young ladies and asked if they worked at the P Dub and they responded in heavily French accents, “yes”. As result of further prying, it was revealed that the ladies do work a lot during “busy times”, sometimes between 50 and 60 hours a week!
This compared to an American tax associate who we spoke to just a couple days before who, in the last fifteen days, had worked 185 hours.
Let’s recap: America – 185 hours in 15 days in the middle of June vs. France – 50-60 hours in one week during the “busy time”.
American vitriol towards the French may now ensue.

PwC Needs a Lesson or Two in Spin

240px-PricewaterhouseCoopers.svg.pngIn, lets talk about anything but Satyam, PwC news, the largest Big 4 firm was rated highest among professional service providers on brand recognition in the Brand Finance Top 50 ranking of Best Brands of British Origin.
“Chairman of PwC [in the UK] Ian Powell said the recognition was ‘testament to the strength and reach of our clients, the talents of our people, and the contribution that we make to the wider community.'”
We won’t take anything away from PwC but sometimes bad news is the best news for brand recognition. So this whole Satyam thing is probably not getting the credit it deserves. Come on P. Dubs! Lemons into lemonade!

PwC most recognised professional services brand
[Accountancy Age]