[Palm’s Employee Retention Handcuffs] Can They Stop the Exit Hemorrhaging?

Palm, the maker of mobile products, is losing talent.

Tech journalist Kara Swisher has commented that Palm is a company with nine lives. This, by my count, is number ten.

Michael Abbott, SVP of Software, and Caitlin Spaan, VP of Carrier Marketing, have both left Palm. Abbott landed at Twitter. SEC filings indicate that CFO Doug Jeffries and Global Operations Senior Vice President Jeff Devine both were paid $250K bonuses and provided stock options as part of a formal retention plan (bad news when a company’s CFO has to be paid more to stay).There’s word that the incentives have also been offered to most of the balance of Palm’s executive staff.

Will Palm’s retention program retain people? Will it work?

No – not in this case.

My experience as an HR exec with retention schemes is that there’s a narrow set of situations where you can implement a program and have it work.

Palm does not appear to be in one of those few situation where retention programs do work, and the their retention efforts for execs are likely to do two things. People who would have stayed anyway – the true Palm “believers, people for whom working at Palm is just too darn convenient to leave, and people who don’t have many outside choices – will have additional cash, and some additional stock options. People who are headed out the door may have additional cash which they’ll either piggy bank and not spend (in anticipation of leaving) or ask firms recruiting them to help defray the cost. The plan won’t freeze movement though, as the climate becomes one where people are waiting for the next shoe to drop – and the next exec to give notice.

Even with employment contracts – which I have not heard Palm is dishing out – it’s unlikely to be able to retain folks. California’s employment laws, which enable employees to break those contracts in most cases (note: employers are generally bound to the terms of the contracts however), don’t act as much of deterrent as well. To add fuel to the mix, hiring in high tech is markedly different than it was 18 months ago. Tech hiring has picked up in Silicon Valley, and Palm’s employees may have any number of choices, particularly if they’re of the engineering variety.

The research that Dan Pink, author of Drive: The Surprising Truth About What Motivates Us, cites regarding “carrot and stick” incentives (retention bonuses are carrots) also makes it pretty clear that throwing money to motivate people to stay is an unlikely to work. Once you’ve reached a certain “adequate” compensation level, paying someone more does little to shift behavior positively – in fact, Pink states, it may have the opposite effect.

So when do retention programs work? My experience is that retention programs work when you’ve got a shorter term challenge with a path – or reasonable hope – to solving it: something such as a situation where you’re about to close e a favorable sale, or have a new product that will launch and get a company righted.

Palm’s case is that it’s become the laggard in the smartphone market, its new products have gotten very limited traction, and there is no apparent eager buyer ready to step in and purchase the firm. In such a case, the newly issued stock – restricted or options –  are unlikely to have any real upside, and what Palm will have done is doled out some cash to people with the stipulation that they stay around for a period of time.

There is irony in all of this. Palm earlier success was arguably on the shoulders of an earlier, much dissed product by Apple known as the Newton. Now Apple’s iPhone has taken steam out of Palm’s products, and additional competition by Windows (Microsoft) and Android (Google) smartphones means that there is little opportunity for Palm to regain market traction.

And Palm’s retention attempt? Valiant: just don’t expect it to work.

Life Back West is an occasional set of writings focused on ways people, teams and organizations can be both more effective (doing the right thing) and more efficient (doing the right thing well). More about executive and team coaching services can be found at the “About J. Mike Smith and Back West, Inc.” sidebar or the “Hire Me” tab above.