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Andrew Hall’s name is still in the news. He’s the one who says that Citibank owes him $100 million as a bonus for the hundreds of millions of dollars in profits he created for Citi through its oil-trading offshoot Phibro. The U.S. Government, which owns 34% of Citi, will no doubt send the Pay Czar Kenneth Feinberg on a visit to see if he can calm the public outrage over the news of what seems to 99% of the public (now stockholders) to be an excessive payout of stockholder money.
My problem with Citi is not over the $100 million. After all, Citi executives appeared to have made a promise to Mr. Hall. If they did, they should honor it. However, I will say that considering that there might not have been a company at this point had it not been for the Government bailout, Mr. Hall might have done himself a favor if he had tried to work out a deal, which would not have garnered as much attention and would have satisfied him in the long run. His wisdom though is not the real topic of this blog.
No, my problem with Citi is that as a result of taking this Government money, it will continue to do business as usual. (Positive reinforcement increases the behavior that is occurring when you get it –not behavior you hope for in the future -- the essence of a bribe.) The Government made a big mistake in the way it handed out the billions of dollars of bailout money, but that is another story for another time. The way the money was given it could only support on-going ways of doing business. There was no requirement for receipt of the money for Citi to be better managers or change the management structure of the business. Money paid prior to change subverts the need to change anything about the way the company motivates and develops people.
Habits are hard to break—especially habits that are superstitiously linked to ‘why’ a company is successful (another blog at another time). Because of what they have done in the past -- paying huge salaries to people that they think they cannot operate without -- Citi is now being held hostage by Mr. Hall. However, they made a promise on the superstition that without him they cannot get to their end goal. If they pay him this money now after the dispute of maybe we will and maybe we won’t, he will most likely want more money in the future and he will likely get it as there is a clear belief in the company that he is the best in the world at what he does. They also think that the bonus is necessary to keep him at Citi.
I predict that he will leave because getting the bonus at this point will inadvertently reinforce him for being unhappy as he has threatened to sue the bank if he doesn’t get the money. If he has any self-referred grandeur, and I am sure he has plenty, as the ‘reason for the success of his business unit, you can bet he will make a big deal out of his personal attributes that are essential for the continued success of his part of the company
Any time employees “have you over a barrel” you will most likely positively reinforce the wrong behavior and neither you nor the employee will be happy in the long run. My recommendation for Citi is that they pay him the money and find the best candidate that they can to replace him. Take your medicine now and you will be healthier in the long run. Change the way you look at talent. Why does Citi not have people who can take his place if he leaves?
The Hall debacle exposes at least two problems at Citi: 1.From my reading, Citi does not appear to be smart in the way it uses money. 2. From the way they view talent, they are wasting a lot of time and money.
In my opinion, for Citi to prosper, their executives must get serious about understanding the science of behavior because their lack of understanding of the basics of positive reinforcement is costing the company and the taxpayers a lot of money
© Aubrey Daniels International, Inc. All rights reserved. 2022