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Levi's Pot O' Gold

News: Analysis & Commentary: COMPENSATION


How effective will its lavish incentive system be?

Levi Strauss CEO Robert D. Haas talks so much about politically correct management principles that he sometimes gets a bit of chiding. After reading Levi's "aspiration statement," a newly hired manager once asked if a briefing on New Age crystals came next.

But on June 12, Haas put quite a chunk of Levi's owners' future fortunes where his mouth is. He announced what benefits specialists say may be the richest and most unusual employee reward program ever: If privately held Levi Strauss & Co. reaches cumulative cash flow of $7.6 billion for the next six years, each of the company's 37,500 employees in 60 countries, regardless of position, will get a full year's pay as bonus. Levi's says the benefit could cost its owners, primarily Haas's family, about $750 million.

Haas waxes poetic about the money's ability to change employees' lives. "Imagine yourself in a sewing factory in Valdosta, Georgia," anticipating such a windfall, he says. And he insists: "This transaction does not signal new, more strenuous demands. It says we're all in this together."

This "Global Success Sharing Plan" has some benefits experts scratching their heads, however. For one thing, is it truly an incentive? Given its long time frame and the relatively esoteric cash-flow measure, "no one person may think they can impact the goal," says management consultant Bob Nelson, author of 1001 Ways to Reward Employees.

WITHIN REACH? Then there's the issue of exactly how big this challenge is. Levi's prepared a 15-page background paper that describes the program. But nowhere in it did the privately held company reveal its current cash flow. Given its $735 million 1995 net income, a major component of cash flow, the target may well be within reach. But absent a benchmark, only the top brass can tell. Levi's insists its target is attainable and it will provide employees with updates.

Certainly, Levi's has enjoyed unusual success since Haas took the company private in an LBO in 1985, tripling revenues and paying off the LBO debt early. And Haas' efforts to reward workers are admirable. But it remains to be seen whether this plan motivates employees to do more than stick around.By Joan O'C. Hamilton in San Francisco

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