Wednesday, March 18, 2009


Gail's previous post set forth the general outrage about the AIG bonuses. This gives us a chance to explain a concept from our Leadership Workshops, Work the Process. The CEO Liddy is actually pretty innocent in this to a point. But he didn't work the process!

People often ask us, 'what does work the process mean?' So, I will describe it here. Liddy was not the CEO when the bonus contracts were entered into. He was appointed by the Bush administration when the original dose of bailout money went to AIG.

Working the process requires that you set the context in the beginning. Liddy should lead off every discussion on the contracts with "I was not connected with the AIG when the bonus arrangements were entered into. I came on board when......" This reminds everyone that he was not connected. Never take for granted that everyone knows this or will remember this.

The next step is that Liddy should have said, "My predecessor entered into these contracts. They were entered into at a time when the previous management thought AIG would remain in the financial products business and needed to offer 'stay bonuses' to retain their key people. I disagree with the stay bonuses and find them offensive." Work the process, lets everyone know where you stand.

The third step in work the process is to say "Here is everything we did to get out of the contracts. We hired a law firm that specializes in labor and contract law. We then....."

The fourth step is to lay out the results of the legal analysis. For example Liddy could have said, "Our attorneys gave us an opinion that we were legally obligated to make the bonus payments. I told the attorneys that the payments were ridiculous and I am not making them. The attorneys told me that if I didn't make the payments, AIG would be sued in court in the State of Connecticut where AIG would lose because it had no legal grounds for withholding the bonuses according to the contracts that had been signed. Worse, the attorneys said that AIG would be subject to the penalty of paying the affected employees double their bonus and their legal fees."

Finally, working the process properly would have required that Liddy present all this to the Secretary of the Treasury a month prior to the payment of the bonuses. He should have said, "Secretary I don't want to make these payments. But I have no legal standing not to make the payments. Let's work together to see how we can get out of making these payments."

Had Liddy followed work the process he would not be testifying in front of Congress today for contracts he inherited and had no way out of.

There you have it, Work the Process!

Cheers, Mike


  1. In listening to Liddy's testimony did you get the feeling that the Congressman did not understand that the retention bonuses had served their purpose? They could not get over that people had left right after receiving the bonuses. The payments were designed to get the employees to stay and liquidate their positions which apparently had been accomplished.

  2. Mike, this was great. You and Gail emphasized this in class, and your blog post reinforced this lesson for me so that it is sustainable and repeatable.

    Thanks again, let me know when the two of you make it to DC.

  3. Anon, I don't think that Liddy did a good job explaining the retention bonuses. Therefore, the congressmen and women who didn't have previous experience with such bonuses, didn't appear to understand.

    Cheers, Mike

  4. Stephen, thanks for your kind comments. It is always hard for me to explain "work the process". This was a great example to use. I am going to use it in a Leadership Workshop on Monday.

    Cheers, Mike