Grahall’s Garry Rogers, in a recent Editorial Board meeting, observed that this recession was born of and fueled by greed. And now it is those highest paid executives, in some cases even the greediest and perhaps most responsible for the recession, for whom the future looks brightest. Right now recovery seems to be limited to organizations’ top tier employees. For the average American, the bill collector still blocks the light at the end of the tunnel. Wages and benefits remain low.
In his August 1, 2009 for the “Wall Street Journal, article “Squeeze on Pay, Benefits May Crimp Recovery” Conor Dougherty says: “Many companies have cut wages and benefits to avoid layoffs. Keeping a lid on compensation growth has helped businesses contain costs and underpin profits.”
So what does this top-down recovery mean for the American worker? Making do with less for the foreseeable future, a longer working career and, then most likely making do with less in a later-than-planned retirement.
The recession has impacted all organizational levels below the very top, from the long- service veterans to the newly hired graduates. Everyone is feeling the pinch. In a randomly conducted poll, Grahall’s Claudia DeFrancisco found that retention concerns also exist at all levels: “Speaking with recent college gradates, I have heard that across industries they are seeing their base and incentive pay shrink along with their benefits and perquisites. Many, and maybe even the best and brightest of these new hires, what would be called the “future leaders”, are considering leaving their current firms and starting their own business. It is also not in doubt that if key longer service employees think the grass is greener elsewhere, or even in their own backyard, so to speak, they might just leave.”
So turnover of both key long-service individuals and high-potential new hires is a real risk that American businesses runs in the wake of this recession. But can entrepreneurship make it in the troubled economic times? In their May 27th Posting in The Fast Draw Mitch Butler and Josh Landis talk about the opportunities that present themselves during a recession with a high level of unemployment. They say: “When history looks back on these years it will discover a list of companies that got started during this recession — and went on to change the world.”
This is an interesting concept: that entrepreneurship can grow from the seeds of despair. But we think it’s not just entrepreneurs who can rise from the ashes. Existing companies of all sizes can find new ways to compete with compelling new strategies for their businesses. They can ensure that these new business approaches will foster growth and profit once they are aligned with new people and rewards strategies .
How can companies go about this transformation? First companies need to carefully identify the key individuals in their organizations – and view importance, performance and potential with a longer lens. The cost of replacing potentially high performing individuals or key employees could grow very high when the economy finally recovers at all levels. And the cost will be paid not simply in “hard dollars” from bonuses and compensation, but also in the softer areas includiung extended recruitment time and opportunities lost because staff is not available to meet client or customer demand.
But if money for retention bonuses is lacking these days, what can companies do to create some “stickiness” with these future leaders and help to retain the key veteran employees who drive the business results? Here are a few suggestions to consider:
· Instead of cutting compensation expenses across the board, conduct an internal analysis to identify critical individuals at the forefront of the value creation chain who would drive the strategy for recovery.
· Once identified, design surgical compensation plans for those key individuals to shrink the total compensation dollars spent but not the total rewards packages for key talent.
· Design creative total rewards programs that don’t require immediate cash if cash flow is an issue. (Such programs might include start-up company style compensation plans, which are typically more heavily towards equity compensation).
· Communicate with your key talent and provide “intrinsic” rewards such as succession and career planning paths, which can be very retentive. These intrinsic rewards can provide clearly defined advancement opportunities, peer recognition programs, learning and training opportunities and challenging responsibilities that enhance personal and professional development.
It’s not easy to keep people when money is tight. Compensation is a clear motivator for retention, but not the most important. In study after study compensation weighs in at about #8 on a list of what people look for in a work place. So that means American business has at least seven better ways to address the talent retention problem than to throw money at it.