Some of the big business news this past week came out of Texas, where CEO Kevin Rollins left Dell Computer and founder Michael Dell returned. Back in the CEO slot, one of Dell’s first actions was to shoot this email out to his top staff.

Most notably were these few sentences: “Last year, we worked really hard and there were many sacrifices. Thanks! We had great efforts, but not great results. This is disappointing and it is unacceptable. The result is that there will be no bonus this year. I know this is a big deal for you and your teams. We’re going to fix that so that our efforts translate into great results and success for our teams. “

Pay for performance is a two-sided coin, and this decisive action by the founder makes it pretty clear that if the company doesn’t perform – no one is getting paid. It sends a pretty strong message of “we’re all in this together,” but he manages to say that with an optimistic, forward looking tone. 

But perhaps even more  interesting is what IS being done to reward people. Again, from the email:

“But we still have great people who made great efforts. It’s important to recognize your hard work, though our results fell short. Limited discretionary awards will be available to all but the most senior people. We can’t cover everyone, but it will be a tool you can use. And we are also budgeting for above-market raises this year.  For stock awards, we will shorten the vesting period from five to three years for future grants and move to restricted stock units. And we’re going to set the annual bonus plan against realistic targets. “

This strikes me as a very clever alignment of interests  between the company and its employees. Bonuses aren’t going to be widely distributed – but we can recognize special cases to continue to motivate those who have worked hard. We’re going to pay people more, so they understand that we think highly of them. We’re going to shorten vesting periods so that people will be able to see personal benefit from the results of their efforts and we’re going to make sure that bonuses are again available next year based on realistic performance targets for the company.

In any sort of turnaround situation, focusing on the people first seems like an excellent new beginning – and it looks like Michael Dell is doing just that.