Friday, February 4, 2011
Positioning Total Rewards as the Economy Continues to Recover
Friday, February 04, 2011
While the economy appears to continue on a steady but slow recovery, organizations are beginning to feel pressure on their labor forces. In December private-sector employment was up by 113,000, health care industry added 36,000, and the hospitality industry was up by 47,000 net new jobs. Although unemployment is still at historically high levels, some markets are recovering at a faster pace than others are. Just as the economy cooled at different rates for different sectors, the economy will strengthen at different rates. What should organizations be doing to prepare their compensation practices as the economy continues on its recovery? The issues facing organizations during a recovery are going to focus on employee retention, productivity, and expansion.
Many organizations were forced to reduce staff, close facilities, and withdraw from markets during the recession. As those markets and business lines begin to spin back up, talent is going to be looking for opportunities after several years of minimal or no salary increases, benefit cut-backs, and declining bonuses. Those organizations, which have been pre-positioned to reward and recognize performance are going to be the organizations who will be in the forefront of their competitors. It is essential that an organization’s total rewards strategies must align with and support the goals and objective of the business. If they have not done so already, many organizations will want to review their total rewards strategies for both short and long-term gains.
The organization’s current total rewards strategies must align with the expectations and vision of the C-suite leadership and drive the results needed to achieve market position and penetration. Rewards and recognition that got the business through the hard times will not work as the economy heats-up. A rewards strategy that does not engage and excite the team is incapable of delivering results. This does not translate into giving the bank away, but to get results, a rewards strategy must be effective. If the organization has not been gathering feedback on what the troops are thinking and saying, the organization needs to act now. Leadership cannot expect stellar results from the front lines if no one has faith in the rewards and recognitions of the organization to motivate employees to take action.
What are competitors doing? Organizations who are out front already know what their top competitors are doing because they have been tracking it for the last several years. Remember, organizations have to know who their competitors are and it may be someone in another industry, across the street or a hemisphere away. After all, labor is a commodity, and it will flow to the highest bidder.
When was the last time the organization updated job descriptions, evaluated pay levels, reviewed short and long-term incentives? Depending on the organization’s business segment, jobs, job descriptions, and job families should be reviewed and evaluated at least every 3-5 years. Yes, job descriptions are still important, even in flat, self-directed organizations.
Careful attention should be paid to both short and long-term bonus and incentive plans. If they were adjusted in the recession to account for down markets, their payouts may be out of alignment with expanding markets. A 25% incentive payout in a depressed market might require adjusting to 15% to avoid a windfall. On the other hand, a 10% incentive payout in an emerging product market may need to be upped for the organization to focus on and corner a particular market.
Organizations have an opportunity to send a strong message every time an employee is paid. Even if the organization does not utilize a total rewards statement, the employee’s pay stub or check deposit is a means of reinforcing the competitive value of the employees rewards.