Publix's new pay system: High performance, smaller paycheck

Can you believe this?

http://www.sptimes.com/2007/03/25/Business/Publix_s_new_pay_syst.shtml

Even good employees can face pay cuts in a new pay plan at Publix that includes penalties as well as rewards.

After bagging groceries at Publix for nine years, Ray O'Connor was stunned when his bosses called his work "successful" then cut his pay a quarter to $8 an hour.

"I think they just want to get rid of me," said the 75-year-old Spring Hill man who works part-time to supplement his police officer pension. "They said I wasn't improving. Improve what? I've never dealt with anything like this in my life."

Now he has trouble sleeping. He's embarrassed when peers talk about pay. Nobody mentioned it, but he wonders if it's his age. He's talking of seeing a lawyer, but not quitting "until I get this blemish off my record."

O'Connor is among the first intended consequences of a new pay plan adopted by the nation's sixth largest supermarket chain. Lakeland-based Publix Super Markets Inc. spent years creating a "Tie Pay To Performance" plan that offers penalties as well as rewards.

Mass merchants have used performance incentives for years, but they're usually tied to a store's performance and meant to foster teamwork. Publix zeroes in on each worker and adds the unconventional twist of institutionalizing disincentives - even for top performers.

"We want a customer experience the customer deserves and expects at Publix, so we are rewarding people for hard work while increasing what we pay overall," said Shannon Patten, spokeswoman for the grocer that employs 142,000 people full- and part-time in five states. "But some associates face a decrease if their performance slips."

Here's how it works. Top performers - many of whom pocketed raises two to three times and up to $1 an hour more than what they were used to getting - love it. Others are getting their standard raises. Many must resolve to work harder. In February, 19 percent of employees up for review got no raise and 4 percent took pay cuts.

Publix says the plan is working. In August, 68 percent of hourly workers got a raise. The rest were put on six-month notice they had to shape up. Six months later in February, 77 percent got reviews good enough for raises, showing more workers got the message.

It's a culture shock at a chain already named one of the nation's 100 best employers, that consistently rates tops in Consumer Reports customer service ratings, and was just named the best of 19 major retail chains rated by the University of Michigan Customer Satisfaction Index.
For years, virtually all Publix store workers could count on a modest annual raise. Not now. Semi-annual evaluations, based on supervisors' numerical ratings in 21 areas, grade workers as role model, superior, successful or two types of needs-work-to-keep-the-job. The rating is matched to a performance pay range for each job. Publix gives workers a six-month warning to improve their performance to keep their current pay rate. That goes for top-rated "role models," too.

O'Connor, for instance, was rated "successful" the past two years with all his scores above average. Yet his seniority already put him at the top of the bagger pay range. So his pay was cut.

"Before this I was rated successful at 107 points and got a raise," he recalled. "Then I got a 123 and a 114 my past two evaluations and lost money." In August his supervisor wrote he needed to offer cart carry-out to more shoppers. In February he suggested O'Connor stay busier in slow times and coach younger baggers.

Publix declines to talk specifically about O'Connor's case. But the company - which employs 4,500 people over 70, 750 over 80 and two over 90 - says it's not about age. Internal reviews of those hit with pay cuts found all age groups.

Without a union contract, no federal or Florida law stops an employer from cutting pay. "But I've never heard of a plan that docks pay," said David Szymanski, chairman of the retail studies program at Texas A&M. "If you want to get rid of somebody for performance, just counsel them out."

Studies find retail employees want plans that reward performance and prod slackers to shape up. But inflation makes being passed over for a raise a pay cut. And some experts question taking money away from low level part-timers because it's divisive and undermines teamwork.
"I've never seen a pay-for-performance plan that works because it brings the top-performing lions out to feed on everybody else," said Terri Kabachnick, a Largo retail HR consultant and author of I Quit but I Forgot to Tell You. "It's worse in supermarkets where people don't control outcomes. Their day is go here, go there, clean up this spill. If you don't get along with the manager, forget it."

Is it wise to use money as an disincentive? "Cold hard cash leaves employees feeling ... well, cold," Kabachnick said.

It's a trend that began when department stores saw pay-for-performance as a cheaper alternative to commissioned sales jobs.

"In supermarkets, however, store managers often are not as sophisticated in HR practices," said Bart Weitz, chairman of the retailing program at the University of Florida.

It's not about the money to O'Connor. He has health insurance and works fewer than 25 hours a week. So with the pay cut he's only out $3 to $5 a week. "It's the principle," he said. "It's time somebody tells these big companies to stop stepping on the little guy."

Mark Albright can be reached at albright@sptimes.com