Sun Spots SunDax CEO Dax Hollandsworth turns his leather desk chair from the blinding sunlight streaming through the large office window and leans back, facing Mark Roberts, the company CFO. “You know, Mark, on the surface this seems impossible. We look at the numbers, we look at energy trends, we look at tax breaks and the grants and loans poured into this effort, and…” his voice trails off as he raises his hands in a gesture of surrender. “I dread the quarterly meeting and video feed,” Mark says. “Everyone has been working really hard and they’ve come to expect the year-end bonus. Hell, they plan for it, their families budget for it.” “I realize this will come as a huge disappointment, but I really don’t think it will come as a big shock to them. Do you want some of these?” Dax asks, taking a handful of jelly beans and extending the jar to Mark who takes a few. “They’re working their tails off, but I’ve detected a decline in overall morale. Everyone here keeps a close eye on the industry and on the mood and efforts at the Federal level. They deal every day with the competition from the Chinese, and they see this big trend toward mergers and acquisitions. They may not want to admit it any more than we want to say it, but I think they know the bonus pool is empty and they wonder what the future holds.” The question hanging over the offices throughout the U.S. solar industry echoes that of California-based SunDax, “how could this happen?” To the outsider, things appear great for solar power. The numbers are staggering with an over-all increase in usage of more than 60 percent over the previous year. And American home and commercial construction shows the rising popularity of solar energy as a viable power alternative. Like the electric automobile, it is the wave of the future. But the public sees only the sun; industry insiders are looking at the sun spots. Private investments in the early years followed by federal tax credits and Energy Department loan guarantees enabled solar companies such as SunDax to refine their products, increase inventory, and expand sales worldwide. Boom time brought U.S. Treasury grants to the industry of several hundred million dollars, and as sales increased so did employee bonuses. Many bonuses equaled up to a third of an employee’s salary—money for a child’s college tuition, down-payments on homes, trips, and other luxuries. Now, amid shaky global economic conditions, SunDax and others see a decline in U.S. and European solar energy incentives while Chinese competitors undercut costs, providing an inventory glut for many U.S. producers. In this climate, there is reluctance on the part of Congress to renew mini-grants or to extend tax credits. The stimulus packages upon which so many companies depended to jump-start market expansion are a thing of the past. “I’m afraid that employees will believe we are bending to public pressure in withholding their bonuses or they will think we are holding onto financial assets in order to look stronger for a potential merger or acquisition,” Dax tells Mark. “Mergers and acquisitions are the trend right now and some big names have given in. If we are acquired, they can share in the gains.” “We’re not there yet,” Dax says. “Our challenge is to shore up faith in our future among employees while dealing with the realities of the market. But if you say ‘look at all of these challenges’ and, ‘oh, by the way, don’t expect a year-end bonus,’ what can we offer to shore up that faith and restore enthusiasm?”
1. What options can you think of for Dax and Mark to mitigate the damage from unfilled expectations for the annual bonus?
2. What specific steps would you take if you were a senior manager in this situation? Explain why for each step.
3. Do you consider it motivational and equitable when a substantial part of an employee pay is a bonus based on company results in a highly uncertain environment? Why?