Expert Perspective from Grahall
The article by Katharine Q. Seelye (New York Times reporter) titled “What Happens to the American Dream in a Recession?” published in the New York Times on May 8, 2009 was a helpful reminder of the durability and flexibility of the American dream. Few people in our circle of friends have not been personally affected by the economic crisis. Many find themselves working for companies in Chapter 11, or facing pay freezes, or bonus reductions, or loss of employment. Optimism ebbs and flows, but interestingly, whether they work for companies large or small their sentiments are much the same.
First, and foremost people are connecting with their networks and each other to build ‘side businesses’ and find new employment opportunities, distrusting the security of their jobs and certain that they cannot rely on loyalty from their employer. These folks want to work hard, but they sense that the payoff and rewards for hard work are no longer there. The most significant blow to employees (other than job loss) has been pay freezes and bonus deferment, and for sales people commissions have been slashed. Less of a direct financial impact to employees, travel budgets and training budgets have been slashed. Perhaps most detrimental to morale, employees are concerned because they see a much slower path for career development. As organizations flatten and become more efficient, there are fewer opportunities for career growth (and salary increases) from management experience.
People tell us that they and their colleagues need to feel that if they work hard and help their company to thrive, their careers will continue to accelerate and they can earn meaningful incentive compensation. They know there is money to pay employees who contribute with hard work, that is done well and that supports the company’s business objectives. Now more than ever, employers must pay the right people the right amounts, not spread peanut butter along the curve.
Garry Rogers, one of Grahall’s senior consultants have commented on the article.
Garry Rogers: The article and the attached survey present interesting albeit muddled findings. As a result of the recession, prevailing wisdom, indicated by the poll, is that the relative importance of “financial security/steady job” has diminished in the vision of “the American Dream.”
I’m thinking about what this means in economic recovery. Counter intuitively, I hold to my view that, at least in the U.S., turnover will accelerate at most or all levels of the work force, and especially at professional/managerial/executive levels. Two things will drive it:
>Lost wealth creation — 30 to 40%+ for most — and the desire to recapture it as quickly as possible (especially for the 40+ crowd).
>Diminished loyalty, due to the impact of layoffs and the lack of meaningful retentive vehicles for wealth creation/retirement; i.e., the 401(k) problems and 409A challenges now (and the social security problem later).
Garry Rogers: It will be interesting to see the impact on culture, as we believe more companies will differentiate between the “haves and have nots” as the primary way to reward and retain best employees while still managing cost. Email: email@example.com