Repetition Compulsion at Citigroup

When I saw an article reported in the New York Times about Citigroup’s plan to increase employees' base salaries by a much as 50% to offset the reduction in bonuses I was reminded of Sigmund Freud’s repetition compulsion. Wikipedia defines it as a, “psychological phenomenon in which a person repeats a traumatic event or its circumstances over and over again. This includes reenacting the event or putting oneself in situations that have a high probability of the event occurring again.” This is exactly what Citi is doing. They are repeating the mistakes of the past, only this time they are actually making them worse. It is one thing to reduce or forego a bonus because of bad results; it is quite another to reduce a salary. To compound the error, they are planning to award millions in new stock options. While employees will take them and some will be grateful, they will do nothing to increase the long term viability of the organization. The consequences of stock options are way off in the future and very uncertain.

I have written more about this in my book, OOPs, but in a nutshell, I predict that increasing salaries to offset bonuses and offering stock options will accomplish none of the stated goals of Citi. They will not attract or retain the best talent. They will not improve productivity or customer service. They will put a burden on future earnings.

Now is the time for Citi to correct the sins of the past, not repeat them.