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Date: November 30, 2022
Episode Season and Number: Season 1, Episode 17
Episode Title: In this week's episode, Abbey Dean and friend-of-the-pod Jeff Reinke (Editorial Director for Industrial Equipment News) discuss Ford’s decision to offer longtime employees with performance issues the option to voluntarily leave the company with a severance package rather than go through a performance enhancement plan.
To listen to Episode 17 of This Week in Benefits, click here.
Ford Offers Easy Exit to Underperforming Workers, SHRM
Ford Gives Underperforming Employees Option to Take Severance Package, The Detroit News
Abbey Dean: Hi everyone, and welcome to this week's episode of This Week in Benefits, a podcast from the team at Mployer Advisor where we discuss all things in employee benefits. I hope everyone had a wonderful Thanksgiving. We're still getting out of the post Thanksgiving haze, but to help me do that, we have back on the podcast today, my friend and former boss, Jeff Reinke of IEN. And we are going to be discussing an interesting new policy that Ford Motor Company announced earlier this, well, I guess it was a few weeks ago now, but it started November 1st. So we are going to look back at that headline, dig into the kind of meat of the story, and Jeff is going to give some interesting perspectives on what this might mean and also what it could indicate for the larger manufacturing industry. So stay tuned and take a listen to my conversation with Jeff.
Hi everyone, and welcome to another episode of This Week in Benefits. We have a return friend of the podcast on today, Jeff Reinke of IEN. Thanks for coming on again, Jeff.
Jeff Reinke: My pleasure, Abbey. Thanks for having me.
Abbey Dean: Of course, always. Again, just any sort of excuse to talk to you. So <laugh>,
Jeff Reinke: Just trying to relive this Wisconsin weather from South Tennessee.
Abbey Dean: You know, I honestly am so it's a win-win for me.
Jeff Reinke: Well, hey, a couple months we can go ice fishing if you really want to get back into it.
Abbey Dean: Jeff, I never went ice fishing even when I lived there.
Jeff Reinke: Well see. There you go.
Abbey Dean: Would you actually take me?
Jeff Reinke: If you would make the track up here to do it, I would definitely take you on the ice, I think especially because you would last maybe 90 minutes and we'd be done. So <laugh>,
Abbey Dean: Okay, so this is recorded so you can't back out.
Jeff Reinke: I'm in, I'm in.
Abbey Dean: Okay, awesome. So anyway, aside from ice fishing, today, what we are talking about is some news that came out of Ford a few weeks ago. Basically what the news is, is that Ford is giving long-time employees with job performance issues, the option to voluntarily leave the company under a policy update that went into effect officially on November 1st. So what it's doing is it's altering its approach to addressing white collar employees, of which they have around 30,000 who are deemed under performers. And they're telling managers that some of those workers must choose between severance, or a performance enhancement program, and that's internally known as the performance enhancement plan, or PEP. So there's sort of like Jeff, we talked about this a little bit before, but this isn't a new type of plan. There's a lot of sort of structures out there that are similar.
But what is different about this is that the plan before has been in place for U.S. salaried workers with at least eight years of service experience at Ford? So I'm, I'm just very interested in this. Basically, Ford is giving white collar workers who have been flagged for underperformance the option to have weekly check-ins with managers and have new objectives over a six week-ish period. Or they can just go ahead and say, hey, you know, I don't think this is working out for me and take a severance check. So it's very interesting, and I wanna touch on this a little bit but Jeff, when you first heard this news, what was your reaction?
Jeff Reinke: Well, Ford's had a lot of interesting developments going on internally with the way that they're structuring or restructuring their company. And a lot of this, and they're not alone, is based on the fact of just the impact of the electric vehicle market. Earlier this year, I wanna say it was March, they came out with an announcement basically saying they were going to split the company into what they're describing as two interdependent companies.
You're going to have Ford Blue, which is the internal combustion engine production focused vehicle company, and then you're also going to have Ford Model E, which is obviously focused on the production of electric vehicles. So to me, when I first saw this, it seemed like they were taking additional steps to get their company the right size and with the right people to move forward with really going after the electric vehicle market. They've also made announcements by hopefully having, I think 16 electric vehicles within the next three or four years out on the market, which is very aggressive, especially cause right now they're nowhere near that. So a lot of, I think this just to me it reading between the lines, even though they didn't say anything specific, this was another move focused on electric vehicle development
Abbey Dean: Right and then a lot of the coverage I saw surrounding this, they were very clear that this is not I think there was some rumors going around that they might announce another round of layoffs. And so when this news came out, they were like, no, no, no, no, we're actually <laugh> trying to make sure we have the best people in the business who want to be here. And so it's kind of an interesting approach. Actually, the Wall Street Journal they interviewed someone named Liz Weber who's a management consultant, and she said quote, she's "never come across an approach to performance management like Ford's new policy." She also called it "impressive and very gracious, and a move that demonstrates Ford's commitment to supporting underperformers within its white collar ranks." So I don't know about all of that, but it is a very interesting approach.
Jeff Reinke: I think she's being very gracioU.S.there. I think this is kind of a half glass full approach. Basically, Ford is weeding out some of their underperformers, because the dynamic with producing marketing servicing electric vehicles is very different. Now, the supply chain is similar in many respects, but you've got a customer that's going to have to take on a real paradigm shift. You've got different design specifications, you've got just completely different production processes and models. Those models really depend on a little bit more automation fewer hands on the vehicle while it's being made potentially, and leveraging a lot of these new production technologies. So when you're looking at really refocusing so many elements of your internal operation, there's no way that can impact the folks working in the front office who are involved with designing those vehicles, marketing those vehicles, selling those vehicles, dealing with dealerships, dealing with customers.
All of those things are going to be impacted as well, especially because Ford has also taken steps in with their supply chain in terms of developing a lot of their own battery factories especially in the southeastern part of the country. So when you look at an internal combustion engine versU.S.a battery pack, the number of suppliers is less, the design elements are less. So that's going to impact things in the front office as well. And again, I think that's where a lot of this is coming from, identifying these underperformers and getting people in there that are going to be better suited to their EV business.
Abbey Dean: I should also say that I could not find any numbers anywhere about how many underperformers Ford usually has in this existing program too. So I don't know how big of a program this is or how big of a change but it is an interesting policy. Jeff, do you know of other automakers or manufacturers who do have similar programs or initiatives like this?
Jeff Reinke: Well, I mean, the buyout dynamic is not new. We've seen that a lot. But typically it was related to sort of time at the company, maybe certain positions that were being eliminated as opposed to them transferring somebody to a different job. They gave them the option of a buyout. So when it was downsizing or again, letting people retire early, essentially those things are not new for it to be directly tied to a performance program or a performance, for lack of a better word, rating program or ranking program. Yeah, that's very different. Typically, you would see automakers maybe being a little more aggressive depending on the type of job we're talking about now we're talking about front office folks as opposed to UAW workers on the plant floor. So that's a different dynamic too. But again, typically it'll be more about weeding them out more I think in a more democratic way. This is unique to look at performance.
Abbey Dean: Ford also clarified that the updated policy allows, they kind of clarified what you're talking about, what the actual severance payouts would be based on, and apparently it's based on, as you kind of said, length of employment, continuation of benefits, and then also career transition services. I don't know what that part means. Honestly, I think there's, yeah, I know. Yeah, and maybe or maybe there is a position, maybe you could move up elsewhere. I don't know. Maybe that's a different part of this that they didn't go into as much too but the process they say would remain unchanged for those who opt to go into a PAP program rather than leave. So they could be subject determination without severance if they fail to turn around their performance. So I mean it is it an interesting carrot they're putting out there?
Jeff Reinke: Well, it also allows them to move more rapidly. Hopefully we can get these folks essentially off the books. Part of this may also be trying to leverage the fact that there's been a lot of layoffs in the tech industry. Yeah. When you look at social media companies, even some of the more technologically focused companies like Cisco and Microsoft laying off a lot of people right now, Amazon's another one. Maybe Ford is looking at those types of individuals. When you look at data scientists and artificial intelligence people and other developers of different types of technologies, they may be real appealing and this allows them to, pardon the term, just sort of cut some dead weight and move on to get the right people in place. Again, I think this is really focused on advancing their electric vehicle business.
Abbey Dean: And that was going to be my next question, if this change signals anything to you about the state of Ford, but also just large, more largely speaking about the state of the industry right now and all the kind of changes and curve balls that everyone has been hit with this year.
Jeff Reinke: Well, it's unique in the fact that automotive, and again, we're looking more at the plant floor when I say this as opposed to the front office, but labor shortages have been real. I mean, especially in automotive, they've had a very difficult time finding enough workers. So to hear about a program where they're basically allowing those who have come up on the shorter end of the evaluation stick to leave with some money in their pocket is unique. That's different. We haven't heard, we haven't seen that before, how this impacts automotive going forward. I think every one of these companies is embracing the transition to the electric vehicle marketplace in a different way. Some people have gotten out way in front of it. Ford has been a little bit more, I would say, gradual in their approach. They've started with the F-150 Lightning, they started with the Mustang in electrifying those vehicles, which are two of the most popular vehicles on the planet.
I mean, the F150 has been the number one selling vehicle in the U.S.for 40 years. So their approach has been different, but I think that's what you're going to see with a lot of automakers around the world, seeing what they need to do to get the right people in place to really push these electric vehicle programs forward because they have some extremely aggressive goals in terms of the percentage of their portfolio that they want to be electric and the goals that they have in place for making sure the mass majority of the vehicles they produce are EVs.
Abbey Dean: Is there anything else you think we should touch on that's interesting about this or important to mention?
Jeff Reinke: Well, I think what's interesting, remember Ford is obviously the oldest automaker in the U.S. so when they do things, people still pay attention. I think geographically, it's also very interesting with them still being very focused on Detroit. They've been one of those that has not had as strong a move away from sort of the Midwest, although they have opened, they've got a big truck plant, they've got a lot of facilities in Kentucky. So again, and they're even this year, the way that they've done things in terms of the job cuts, we heard about 3000 cuts earlier in the spring, another 8,000 that were rumored this summer. But then we've seen huge investment again in that Kentucky facility where they make trucks, where they're hiring upwards of 500 or more auto workers. So I think everybody does watch a company like Ford and sees what they do, not necessarily to emulate them, but to get a feel for what may or may not work in their plans as well. So it'll be interesting to see how this plays out, and I could see other automakers potentially taking this route in terms of, here's an easier way to, again, get the right people that we need in transitioning towards electric vehicles.
Abbey Dean: Awesome. Well, I hope they maybe do some updates. I'm assuming if it goes well, we'll hear about it. If it doesn't, then maybe we won't.
Jeff Reinke: Yeah, I, and then you kind of feel bad for these folks who didn't take the initial offering. Oh, I know. They're not able to improve their performance level, and they're letting go anyway, and I kind of feel like that Ford is going to be, even though they wouldn't say it in any type of press release or external statement, I think they're pushing these folks to take the deal,
Abbey Dean: Yeah, I bet so too. Okay. Well, thank you, Jeff, Reinke, for all of your insight and expertise. We'll have to have you back on soon. Either that or I'll just come to Wisconsin and we'll go ice fishing.
Jeff Reinke: That would be wonderful. Abbey Dean, thank you so much for having me on your podcast.
Abbey Dean: <laugh>. Awesome. Thank you, Jeff.
Jeff Reinke: All right, see you later.
Abbey Dean: And that wraps up today's episode. Thanks so much to everyone for tuning in. Now, if you have not yet, please subscribe to the podcast. If you leave us a review, I would be forever grateful. Don't forget too, that you can leave us a voicemail message if you want to send along ideas or have follow up questions to past episodes. Also, something that you guys may not be aware of, but if you are an HR professional and you need some SHRM credit, this podcast does qualify for SHRM credit, so be sure to check out our show notes to learn more about how to access that. In the meantime, I hope everyone is doing well, getting into the holiday spirit, and I will see you all next time.
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