Corporate Holiday Traditions

Judy Olian

(Judy Olian is Dean of Penn State's Smeal College of Business and a leading expert in strategic human resources management.)

'Tis the season again, and it's interesting to observe how companies are choosing to celebrate the year end. These choices, like most other corporate decisions, are as much about the company's traditions and values as they are about parties, gifts, or bonuses.

In the heyday of the 90's, lavish parties were an extension of unlimited spending accounts, royal perks and insane compensation levels that pervaded the high rollers. It was the era of anything goes. No more. Today, companies ponder how much celebrating is right without sending the wrong signals to employees or angering shareholders. At the same time, these events can be important symbols that reinforce intangible values and a sense of community that unite the company.

Hewitt Associates conducted a survey to determine celebration intentions among American firms. Almost two-thirds of the over 400 corporate respondents still intend to hold holiday parties, more or less on par with last year. But there are shifts. In previous years, there would be the rock band, gourmet catering, and an evening of dancing and drinking at a fancy night club rented for the event, much to the chagrin of company lawyers. This year, the holiday party is more likely to be held in the employee cafeteria with musical entertainment provided by a few guys from the IT group. TIME, a unit of Time-Warner, cancelled its party and instead gave each employee a $100 gift certificate. Bloomberg, the New York-based financial information provider founded by the city's current mayor, has replaced its holiday party tradition with a program called BOB. BOB stands for "Best of Bloomberg" which is a designated week in December when employees can take time off to participate in charitable activities. Bloomberg's management felt that the gesture was more in tune with the passions of its employees and the values of the firm.

Parties are not the only holiday tradition. About one-third of the companies surveyed by Hewitt Associates distribute gifts (cash, a gift, or food). However, many holiday gift programs have been abandoned because of the perception that they had become an entitlement, undifferentiated by performance.

The year-end coincides also with decisions about performance-based bonuses, a practice affecting a growing segment of the workforce. These year-end bonuses (usually awarded the next spring) fluctuate annually depending on performance, and are not built into the base package. According to the Bureau of Labor Statistics, 45 percent of the private sector is employed by companies that provide annual bonuses. About 80 percent of the Fortune 1000 now give performance-based bonus pay to non-executive employees, compared to just 50 percent 10 years ago. And, according to Hewitt Associates, 10.9 percent of U.S. companies' payroll is in the form of performance-based bonuses, compared to 10.5 percent in 2001, and 5.7 percent just a decade ago.

For some, the year-end bonus is tied to corporate rather than individual performance. At BankAtlantic, a Fort Lauderdale based financial institution, bonuses equaling 10 to 25 percent of salaries are tied to customer service and profitability goals of the business units. At Admiralty Bancorp in Florida, each employee received a cash award when the bank topped $600 million in assets, repeated every time the bank has reached another $100 million milestone.

How does it look for year-end bonuses? The Securities Industry Association surveyed its constituency—financial services firms—and 16 percent said that they would offer bonuses slightly or significantly below those of last year. Thirty-three percent reported that bonuses would not change. That isn't anything to write home about since last year according to the Office of the New York Controller, bonuses were 30 percent below the level of 2000. Mercer Human Resource Consulting reports that among executives, 37 percent expect bonuses on par with 2001 levels, 36 percent anticipate bonus reductions, and 27 percent believe they'll do better than last year. Executive bonuses will equal 29.4 percent of their base pay, half a percentage point more than last year's payout according to Mercer.

That's not chump change.

So the holiday brings cheer and expectations—celebration of the values that matter in a corporate culture, and for many U.S. workers the holiday coincides with decisions about a major component of their earnings. For a few, there will be significant cause for celebration but for most, the partying will be more muted. At least one group will be happy—the lawyers.