The shadow of a recession looming over the nation has forced industry leaders to make some vital decisions about the ways in which they do business, including reevaluating hiring and compensation packages.
“Industry to industry it’s very different – from company to company. It depends on who you are,” said Bill Hayes, New England district director for staffing company Robert Half International.
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While what Hayes referred to as “rust bucket” industries – banking, hospitals, and real estate – are still hiring, others, such as tourism, are hurting. And, the current economic climate can have an even more far-reaching impact than its effect on the way business is conducted today.
“For surviving companies – if they make it – this becomes a real important factor in how they do business in good times and in bad times,” said Hayes.
Salary and benefits packages may be restructured, and full-timers replaced with temporary workers, often for a fraction of the price.
And with layoffs resulting in a larger hiring pool, Hayes said employers have the luxury of being a little more choosy.
“Companies feel they have the option of choosing people who have not changed jobs frequently – they’re making the market work for them,” he said.
Internet security firms and family-oriented restaurants are two industry niches Hayes mentioned as potentially benefiting from the cutbacks of others.
“You’ve got to look at it as ‘That’s a great opportunity,'” he said. “Should they expand? Probably not, but you have to take it while you can.
“I feel it’s a great opportunity to reassess from a business point of view who the real keepers are and the ones who have been dilettantes. The benefit of a recession is that it kind of sets our expectations back to a reality, and there’s nothing wrong with that,” said Hayes.
A new survey from global management consulting and outsourcing firm Hewitt Associates indicates that economic conditions and the events of September 11 are prompting some companies to modify their 2002 salary increase projections.
In Hewitt’s 25th annual “U.S. Salary Increase Survey,” conducted before September 11, the company surveyed 953 organizations and found that average salary increases for 2002 were projected to be 4.5 percent for salaried exempt employees, 4.4 percent for salaried nonexempt employees, 4.3 percent for nonunion hourly workers and 4.6 percent for executives.
A second, follow-up study (of 660 respondents) conducted by Hewitt after September 11 suggests that, on average, 2002 projections will be reduced slightly. Estimates based on this study are 4.0 percent for salaried exempt employees, 4.0 percent for salaried nonexempt employees, 3.9 percent for nonunion hourly workers and 4.1 percent for executives.
“Although companies are experiencing unprecedented levels of uncertainty and need to be fiscally prudent, they also realize that motivating and retaining their best talent is critical to the company’s success,” said Ken Abosch, senior consultant for Hewitt Associates. “As a result, a number of companies have not changed their original salary increase budgets for next year, while some have lowered projections, and still others are waiting until after the current quarter to make a decision.”
Meanwhile, the number of companies implementing variable compensation plans – a performance-related award that must be re-earned each year and does not permanently increase base salary – continues to grow.
According to Hewitt, 81 percent of surveyed organizations have at least one type of variable pay plan in place, up from 78 percent last year and 51 percent in 1991.
However, despite the growing popularity of variable pay, more than two-thirds (68 percent) of employers don’t track or don’t know if these plans directly improve business results.
“Traditionally, variable pay was used mainly as a reactive tool, rewarding for performance and results that already occurred,” said Abosch. “However, in today’s environment, it’s essential that companies design these plans in a way that motivates employee behavior throughout the year, by aligning daily work functions with the company’s overall goals.
“This type of focus relies on early and frequent communication from the employer, enabling employees to know right from the start how they can impact the bottom line. This approach also will allow organizations to better measure plan effectiveness,” Abosch added.
