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As many now know, the Apple Stores dropped their quarterly bonus structure completely last month, opting instead to offer a modest pay-raise to all employees. No small number of Apple Store personnel – both here locally and around the country – have lamented this to me via email and iChat, but as it stood the bonus scheme was deeply flawed. That said, I’m not sure how on earth Apple felt that eliminating the bonus would make things better.

The Evolution of Bonus

From the beginning, Apple paid bonuses at the store level; there have never been many direct, individual incentives. If your store met its goal, every employee got a bonus. In the days of yore, many many moons ago, the goal was revenue. Corporate set a revenue goal for your store and, should your store exceed it, they started throwing cash at you. If you were a full-time employee, you got a full bonus; if part-time, you got a half bonus pro-rated based on your average weekly hours. Eventually, a “kicker” was thrown in allowing the store to double its bonus if it met some secondary bonus, though it was essentially a megaplier ball – you couldn’t get the “kicker” without meeting the initial, revenue-based bonus. Seems rather fair and equitable, really – a team based goal with the people who worked the most getting the most. The problem was, it wasn’t.

Back in the day, the average store had about twenty-five employees, not counting managers (who had their own bonus structures). Of the twenty-five, four were typically full-time Mac Geniuses, one was a full-time Mac Specialist, one was a full-time Inventory Specialist, and the balance were part-time Mac Specialists. That means there were six full-timers and nineteen part-timers. Now, further, of the six full-timers, only one had any bearing on the bonus goals. Mac Geniuses hardly sell anything, contributing very little directly to revenue, and the Inventory Specialist – while crucial to a properly functional store – contributed even less to the revenue figure. So, of the six employees with the most to gain by achieving the goals, only one was a direct, effective contributor to the mission. And the other nineteen, who effectively did 90% of the work towards that goal…?

Eventually, a new bonus structure emerged that sought to measure as many aspects of the store’s operations as possible. A new “score card” approach was drafted, assigning points to several different store-wide statistics such as revenue, sales of CPUs, iPods, AppleCare plans, ProCare, and .Mac, as well stats on inventory efficiency, loss prevention, discounts given, returns, and more. Revenue and CPUs sold still accounted for the lion’s share of the points on the board, but the others contributed enough that suddenly the Inventory Specialist’s job became relevant to the bonus process. Two things did not change, however. First, full-timers still got the most bonus, despite being a small percentage of the population. Second, and perhaps worst, there was still very little the Mac Geniuses could do to affect the outcome. Now, to be fair, we did finally have some effect, but the difference was a small nuance. What, pray tell, is the difference between “none” and “very little”? Before, when the goal was merely revenue, our contribution was virtually nil. Now, we had a small bearing on the measurements for loss prevention, ProCare sales, inventory, and returns, but by virtue of both the smallness of our influence in these stats and the smallness of the points given to these categories, our contribution was still scarcely meaningful.

Perhaps most infuriatingly, Apple has concrete statistical data on the performances of its Genius teams, ranging from repair times to parts used to Genius Bar appointment turn-around, and more. Of these stats, a startling few made their way in to the new scheme, and by startling few I mean none, and by none I mean the big “oh”, that round, goose-egg shaped number. All this glorious data, all of which were the alpha and the omega for how Geniuses and their teams are judged at their year-end review, and not the tiniest iota was used to calculate the score card.

The effect on employee morale is fairly concrete here. The Geniuses lose hope and become disgruntled if the store does not bonus, because that’s money they could have taken home that they were essentially powerless to secure. The rest of the store becomes disgruntled if they do bonus, as four-plus of the employees with the least to do with it take home the lion’s share of the money.

Another defect in this system was the reliance on forecasting; someone On High would set a goal value in each category for each store, based partially on past performance and partially on a forecasted growth model. Honestly, I don’t know whether this much was the flaw, or whether the trouble was in the specific forecasting system used to create the values. What I can say is that my stores often received bonuses in quarters that, to a local observer, seemed rather lack luster, and failed to achieve bonus in quarters where we busted our ever-loving arses trying to reach goals that were simply untenable.

Saving Private Bonus

Removing the bonus was, possibly, among the worst solutions to this problem. It took a lose-lose morale problem and turned it into a “holy shit, that’s fucked up” morale problem. Granted, they took that same money and gave across-the-board pay raises throughout the division, and on the books it appears to be a net-wash. But now there is no incentive to work harder; they’re guaranteed to make a specific amount, and no amount of back-breaking, record-setting labor will modify that… and the management, still subject to a bonus structure themselves, are going to still be expecting said back-breaking, record-setting labor. Instead, the bonus structure should have been drastically altered to account for all its flaws.

First off, the Geniuses should not be included in the larger, sales-driven bonus structure. For most intents and purposes, the Genius Bar is a separate entity within the store that functions as its own team. It has its own room back-of-house, and has its own inventory both physically and systematically. It has its own mechanism for statistical analysis, one which is virtually untouchable by other staffers. These stats are already reliable enough that the Geniuses are held accountable to them in their annual reviews at both the individual and team levels, it would not be a stretch to create a bonus system for the Geniuses that encompasses Customer Satisfaction Scores, repair times, and the lot.

Second, pro-rate the bonus for part-time employees, or cut it in half. Don’t do both.

Next, ditch the forecasting model, and pit the stores against each other in a way that allows for variances in traffic. For revenue points, include traffic flow in the equation so that smaller stores are on equal footing. Instead of raw revenue, track revenue per visitor or revenue per transaction and award points to stores in the top third, or assign points to all based on their position – that is, the best store gets 150 points (if there are 150 stores) and the last store only gets one point.

Lastly, Apple Corporate has a rich tradition of handing out product as incentives, a tradition that never really translated over to Apple Retail.¹ At Corporate, if you consistently perform at the top of your division, you’re virtually guaranteed to have been awarded a small trove of Apple products. When I worked for AppleCare, before Apple Retail even existed, I went home one quarter with an all-expenses paid trip to MacWorld New York and, had I not traded it for a PowerBook, would have been in the audience for the unveiling of the PowerMac G4 Cube.² I know other fellows who have won multiples of computers and small hoards of AirPort base stations, wireless keyboards and mice, and other Apple goodies. This tradition should be imported fully not only to reward performing employees, but also to help get Apple products into their hands to help them relate even better to their customers.

It’s the Morale, Stupid

Apple Retail has lost its grip on employee morale and has fallen into the trap many retailers do by treating their employees like expendable, warm bodies,³ and this move is just another example of this. The AppleStore, more than any other retailer, relies heavily on employee morale, as there is a much greater sense of team, belonging, and meaning. Gap employees, for better or worse, are not passionate about their company like Apple employees are, and Apple frequently trades on this fairly heavily to get away with shorting said employees on cash. The problem, here, is that passionate employees – being emotional already – are more likely to become bitter. They care deeply and feel that their employment is a relationship with the company, and when the company shuts them out, it makes the wrong all that much more painful.

This is all talk, of course, until the fallout begins and people start leaving. Unfortunately, it’s not all talk anymore, as I find myself fairly regularly deluged by emails and IMs from Mac Geniuses and Mac Specialists around the country (and one from overseas) who report that they’ve either already quit, or are now looking for gainful employment elsewhere. In the long run, of course, this hurts no one more than the customers, who will have to endure the long and arduous training process, be handled by inexperienced replacements, and experience longer and longer waiting times while the stores bring newbies up to speed. But what of those who are disgruntled, but choose to stay? It seems rather unwise to piss off those who directly handle your customer experiences, as you would have to trust these people not to let their experiences with management seep into their customer interactions. As professional as most of these folks are, they are only human, and it’s bound to have a negative impact here as well.

Destroying morale is actually a rather tried and true “rebuilding” method used throughout the corporate world. If you can’t or won’t fire or lay off a group of experienced, highly paid veterans, you can make life miserable enough that they leave on their own, freeing up the payroll to hire two or three newbies per veteran that leaves. While I’ve never heard of this practice being used in a retail environment, I can’t help but wonder if that’s the case here. Intentional or not, it looks like it’s working.

The shirts are in! You can order one here. We’re out of M, and running out of L, XL, and XXL quickly! As soon as we sell most of these, we can order the 661-3178 shirts (and others).

¹ There have been a couple of iPod give-aways in Apple Retail, but nothing to match the grandiose or scope of what is routinely given away in Corporate Branches.

² Honestly, I possibly would have preferred the trip to MWNY, but my wife worked for Apple at the time… and it was a trip for one. They said they’d send her, too, if she’d work the booth. I saw that for the disaster it appeared, and opted for the PowerBook instead.

³ To be fair, most large companies have this point of view; retailers are just among the worst offenders.