Technology

Sprint ties executive and employee pay to winning customers who will promote the company

New incentive pay goals at Sprint offer a $24 million “target opportunity” over the next two years for new CEO Marcelo Claure.
New incentive pay goals at Sprint offer a $24 million “target opportunity” over the next two years for new CEO Marcelo Claure. Sprint Corp.

Sprint Corp. has set new goals for its incentive pay programs that cover top executives and 16,000 of its employees: Win subscribers and get them to recommend Sprint to people they know.

It pays, literally, for executives and employees alike to make sure subscribers are happy.

“It’s all about satisfaction,” said Berge Ayvazian, an industry consultant at UBM Tech.

Like many large companies, Sprint set its incentive pay programs to get everyone pulling in the same direction. The idea is to offer compensation beyond normal paychecks and tie the payout to achieving specific corporate goals.

Sprint executives are covered by a long-term incentive plan. The 16,0000 employees are covered by a short-term incentive plan, which also covers the top executives.

Under Sprint’s plans, the company’s financial health naturally counts. But it counts for only 40 percent of the potential payouts under each plan. The rest depends on gaining new customers and getting more Sprint customers to recommend the company to others.

Specifically, Sprint is embracing an increasingly popular measurement called the Net Promoter Score. It purportedly tells Sprint the degree to which its customers are willing to recommend Sprint to people they know.

Ayvazian said former Sprint chief executive Dan Hesse had talked with analysts back in June about the company’s Net Promoter Score, and other carriers are picking up on their scores too.

“Net Promoter Score is being quoted all over the place now. It’s amazing how quickly this has risen,” Ayvazian said.

Here’s how it works: Surveyors ask Sprint customers to rate — from zero to 10 — how willing they are to recommend the company to others. Only nines and 10s count as promoters. Sevens and eights are considered neutral, and anything less comes out as a detractor.

The key for Sprint employees and execs is that 20 percent of their incentive pay is now tied to improving that score.

For now, however, Sprint is not saying publicly what its Net Promoter Score is, spokeswoman Jennifer Schuler said. Nor is it saying how the score’s standing will be revealed to employees along the way.

Sprint reports its financial data and customer counts publicly every quarter.

Sprint, with 54.55 million subscribers at last count, is making these incentive pay changes after dumping plans to merge with T-Mobile US Inc. Regulators in Washington made it clear they weren’t interested in the combination.

A merger would have given Sprint millions of new customers. Sprint turned instead to winning customers on its own.

The company named a new chief executive, Marcelo Claure, and he has said job one is getting customers. Executives’ and employees’ incentive pay is picking up on that new mandate.

“We’ve had significant changes in our business over the last few months,” Schuler said. “Net Promoter Score was added to reflect our even greater focus on the customer.”

Both plans count subscribers for the remaining 40 percent of the incentive payouts. But they count them differently.

All subscribers count under Sprint’s short-term incentive pay plan, which covers about 45 percent of its employees. (Other employees have a different incentive pay plan, Schuler said.)

A new customer getting a Sprint phone counts, as does an existing phone customer who connects a tablet to Sprint’s network. Customers under two-year contracts count. So do those who buy service from month to month.

The customer count is intentionally broad.

“No matter where someone is in the business, they feel like they can affect that number,” Schuler said.

Sprint follows a smaller customer count for executives under their long-term incentive plan. For them, 40 percent depends on boosting the number of “Sprint platform postpaid handset net additions,” according to a company filing with the Securities and Exchange Commission.

This specific wording does not give credit for tablets and the month-to-month subscribers, for example under Sprint’s Virgin and Boost Mobile brands, who have to pay for service in advance. It counts only the most valuable Sprint phone customers who in effect pay for service after using it, often under a two-year contract.

Sprint has been losing these “postpaid” customers in droves even as it has added tablets and month-to-month customers to its ranks. Payday for the executive suite is riding on turning that number around.

The reward for executives could be sweet.

The SEC filing said Claure’s “target opportunity” under the long-term plan for the next two years is worth $24 million in restricted Sprint stock awards. He is also assured of a $12 million “target opportunity” for the third year under the long-term plan.

To reach Mark Davis, call 816-234-4372 or send email to mdavis@kcstar.com. Follow him on Facebook and Twitter at mdkcstar.

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