Rick Stephens shares his views on pay and benefits at Boeing

When people think about their compensation, the first thing that tends to come to mind is their paycheck. For Boeing employees, compensation is so much more than just a pay-check. Features such as the company match in the savings plan and Boeing’s contributions toward health care and retirement can add significant value to an employee’s overall pay and benefits package

Boeing Frontiers recently sat down with Rick Stephens, senior vice president of Internal Services, to discuss Boeing’s pay and benefits.

Q: What’s the company’s philosophy on pay and benefits?

A: Overall, our philosophy is to offer competitive pay and benefits so we can attract and retain the people that we need and also support our business plans. We also believe in paying for performance by putting programs in place that let employees share in the company’s success. What it comes down to is that pay and benefits are a shared responsibility between employees and the company. The company offers a competitive pay and benefits package—along with information, tools and resources to help employees plan and make decisions. Employees do their part by taking full advantage of Boeing’s pay and benefits package and being actively involved in managing their careers.

Q: What is Boeing doing to help manage health care costs?

A: The challenge is that health care costs are rising faster than inflation, which has a significant impact on financial results for our business. Boeing has to focus on helping to drive health care costs down, and to do this we need to play a more proactive role. That proactive role includes partnering with other organizations to get information on the table so that health care providers, health care plans, employees, and businesses can really understand the cost and quality of providers. Also, we are looking at how we can help give employees incentives to take control of their health—such as the $25 gift card that was offered earlier this year for completion of the Mayo Clinic Health Risk Assessment. Improving the health of our employees and their families can result in lower health care and related costs. We’re going to reach out to stakeholders to work this because it’s going to take all of us to be successful.

Q: Boeing offers both a pension and a 401(k) plan. Why do we continue to offer both?

A: First, employees need to recognize their responsibility to save for retirement by setting aside a portion of whatever they are making today. The Boeing savings plan is a great way to save, particularly because we provide an incentive to contribute in the form of a company match. In addition, having a defined-benefit pension plan provides an additional level of support to employees. Retirement is a shared responsibility. The savings and pension plans, along with employees’ personal savings and Social Security, provide ways to plan for the future.

Q: How well-funded are Boeing’s pension plans?

A: All Boeing-sponsored pension plans meet the minimum funding requirements. We put $4.4 billion in our pension plans last year. The vast majority of these contributions were discretionary, which means they were above and beyond what we were required to contribute. So far in 2005, we’ve contributed $1 billion, and we’ll continue to look at opportunities to make additional contributions. Boeing is committed to maintaining strong and secure pension funds for our retirees and employees.

Q: Any thoughts about expanding the Employee Incentive Plan (EIP) or other gain-sharing programs?

A: I think that every employee should have the opportunity to participate in an incentive program because it helps provide the motivation necessary to go out and take the right actions from a business stand-point. Our businesses are always looking to increase productivity, reduce costs, get a faster cycle time.

We negotiate participation in incentive programs for our union-represented employees as part of the collective bargaining process. We are going to continue to press forward in our labor negotiations to put incentive programs in place where they make sense from a business perspective. Incentive programs have to be based on risk and reward.

Q: What’s the company doing to make sure its pay practices are equitable?

A: When managers make pay decisions, there are many factors that need to be considered—such as market competitiveness, relationship to peers, and recognition of individual contributions. The company has put processes and systems—such as the online salary review tool—in place to help managers make equitable pay decisions.

Q: What can employees do to make the most of the total compensation package Boeing offers?

A: First, seriously consider contributing the maximum you can to the savings plan, because the company matches up to a certain level. It’s a great opportunity that many employees pass up. From a societal standpoint, I don’t think that we learn enough about financial planning early in life. In the Stephens household, my kids have to read “The Millionaire Next Door” (see box at left). I think we have a society today where people don’t save money, they spend it—until they realize they don’t have enough money for retirement. As a company, we only provide the opportunities—it’s up to employees to take the responsibility for saving.

Second, high health care costs are driven by a number of things including health conditions such as high blood pressure, diabetes, obesity, and coronary risks. I encourage our employees to identify their health risks through the Health Risk Assessment and discussions with their medical professionals. This will help them find out where they stand on risk factors, so they can take control of their health.

Third, where we have incentive programs in place, those are intended to help motivate process improvements and changes to how we perform and meet customer needs. If we all continue to optimize what we do, we may see improved cycle time, a drop in cost, improved quality and customer satisfaction numbers. When we’re successful, employees often reap the benefits through incentive-based pay programs. Where we don’t have these programs in place, let’s see what we can do to put programs out there to give employees the opportunity to share in the company’s success.