by Bill Lindsay
We’ve all heard the good news about the economy: that the recession is crawling to a resolution and things will slowly get back to normal.
Most of the executives I know don’t believe it.
In fact, many financial analysts are predicting that unemployment levels will remain where they are at least through the end of this year, so we have a “jobless recovery” in the making. Now that we have reduced our workforces, frozen salaries, eliminated bonuses and suspended 401(k) matches, the question remains: When the recovery does occur, is any of that going to change?
Employee-focused HR folks are hoping it all will; that we’ll get back to business as usual on the comp and benefits front. But you might want to run that by your chief financial officer.
Most of the CFOs I’ve talked to are going to be loath to revert to 2007 spending levels, even for valuable —at least until unemployment drops so low that you won’t be able to hire good employees without reinstating all of those benefits and then some.
What is driving a lot of organizations in terms of earnings is not increased production or innovation; it’s decreased expenses. And as long as we’re working in an employer-driven market with high unemployment, I don’t see those 401(k) matches showing up. It’s just an unfortunate fact of a market that favors employers.
Employers aren’t so worried about recruiting because they don’t have many open jobs. They’re not so worried about retention; in fact, attrition means they don’t have to lay off so many employees.
All of this varies by industry, of course. The health care industry, for example, is an exception—it’s suffering through a nursing shortage. So hospitals are still handing out bonuses and matching employee contributions to their 401(k) plans.
In other fields, the focus is more on high-performing employees—the top quartile of employees who managers believe will keep or make them profitable. Many organizations are ranking employees in terms of their value to the company. They don’t worry about turnover among the lower ranks, and they limit their spending on raises, bonuses and benefits for the superstars they want to keep from defecting to the competition.
Even for them, the trend toward the low-budget, at least for now. Managers are offering personal thank-yous, dinner invitations for employees and spouses, special training and other small but significant tokens of appreciation that aren’t directly tied to monetary rewards.
Keeping those top performers happy is critical to keeping them on board. Otherwise, when the market does take an upward turn, the organization won’t be able to react in the most positive manner.
And even for superstars, I don’t see employers enriching their benefits packages, insurance or flexibility. They’ve cut their workforces, and they simply have to stretch both employees and budgets.
The tactic seems to be working. In this economy, U.S. workers are achieving significant productivity gains—because they have to when fewer people are expected to get the work done, and because they feel they have to if they want to keep their jobs.
We’re in a really crass environment right now. It’s not employee friendly.
When one job opening draws hundreds of applicants, employers simply don’t have to sweeten the pot. So most of them won’t.
The economy has changed comp and benefits for the long term. Best bet: Know which employees are most valuable to your organization, and find personal, low-cost ways to recognize them for their good work.
Author: Bill Lindsay is president of Lockton, the world’s largest privately owned insurance broker. Contact him at (303) 414-6000.
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