Nokia personnel fume over bonus cuts
Nokia personnel are expressing annoyance over the introduced cuts to the company's bonus system. Save the top management, all Nokia workers missed out on the so-called Connecting People bonus for the second half of 2006, despite the company's record-breaking fourth quarter result.
"When the result is bad, everyone understands why bonuses are not paid. But when the company delights in the best-ever result and the bonuses are still withheld, that is perplexing to say the least", Nokia shop steward Jukka Kivari explains.
A further cause of annoyance is the fact that the missed targets also translate to cuts in the bonus systems paid by individual business groups. Such bonuses are based on the net sales, business profit, and cash flow, among others. Nearly all of Nokia's 68,000 workers belong to the scope of bonus systems as well other than the Connecting People plan.
"The fact that the company as a whole missed its targets set for the second half of the year affects these bonuses as well, but the effects vary from one unit to another", Nokia says.
A special coefficient is used to calculate the effect of the reaching of targets on various unit bonuses. The coefficient can range from 0.3 to 1.5. Nokia is not revealing what the figure is for the various units, but according to information obtained by Helsingin Sanomat, the coefficient for the Nokia Research and Development bonus dropped to 0.51, in other words, close to the minimum level.
How much an individual worker is ultimately rewarded also depends on the achievement of personal targets and the role of the worker. In all, Nokia is paying in the region of EUR 400 million in performance-based bonuses for last year.
Nokia workers have expressed their disappointment in regard to what they feel is an unjust situation on the company's intranet chat groups, where the company directors have also answered some of the questions.
Nokia President and CEO Olli-Pekka Kallasvuo explained the bonus criteria in a Friday video speech, which has since been available on the Nokia intranet.
The personnel representatives have already held talks with the management over the development of the Connecting People, bonus system, which is the most controversial. Nokia has promised to continue to discuss the development of the system world wide.
Shop steward Kivari is of the opinion that the present bonus discussion is a good example of the problems inherent to flexible wage systems.
"In our society in general, there is more and more talk about added flexibility, and a result-based rewarding system is just that. But the system has to work both ways. Good performance should be rewarded. Otherwise there is little hope that it will act as an incentive to improve productivity", Kivari concludes.
Nokia sets its targets for the Connecting People bonus system for six months at a time. The target for the second half of 2006 was a EUR 0.60 result per share.
Based on the quite excellent EUR 0.32 result per share in the fourth quarter, the target could have been achieved. The problem was the disappointing third quarter when the result per share stayed at a modest EUR 0.21.
In the first half of 2006 the bonus targets were achieved.
Previously in HS International Edition:
Nokia announces unexpectedly good result for last year (25.1.2007)
Nokia Christmas sales likely to exceed 100 million handsets (23.1.2007)
Announcing record result, Nokia reiterates faith in Siemens deal (26.1.2007)