Prevalence of Cost Cutting Measures Rises Over Past Months

A quick rundown of changes in cost cutting measures over the past two months (October to December) as reported in a Watson Wyatt study released today:

The Recession Is Causing Companies to Change a Broad Array of HR Programs    I have updated yesterday's post regarding the most recent 2009 salary planning news with the Watson Wyatt findings as well. I am running hard today nailing down client commitments, so not a lot of time to add commentary, but I would welcome reader observations and thoughts!

Comments

[E. James (Jim) Brennan]

Quite fitting, that while others are belt-tightening, you are nailing down work. No suprise, if the old reality of The Day still applies, that the demand for compensation expertise is contracyclical. Does that old rule still hold true? (The reasons are obvious, but that probably means they should be explained.)

[Ann Bares]

Jim:

My experience would suggest... not entirely. I think the nature of compensation consulting work is different in down cycles than in up. In my experience, down cycles see a lot more demand for incentive and variable pay design, up cycles a lot more demand for competitive audits and reviews. Me, I'm just grateful to have work.

[E. James (Jim) Brennan]

Used to see a lot more priority placed on all comp decisions in bad times than in good times. When payroll dollars are particularly tight, far more evidence is required to justify treatment that would be shrugged off as no big deal in fat times. When fewer get increases, thus the extreme outliers are far more obvious and differtial treatments become more problematic. But times change.

[Wally Bock]

The prominence of layoffs in this makes me both angry and sad. If I'm reading this right, layoffs are seen as more effective than other more shared-sacrifice cost reduction methods like salary freezes or reductions.

[Ann Bares]

Jim:

You make the assumption that comp consultants are engaged to proactively manage and retool programs, rather than in a reaction to severe pain (in the form of productivity losses or retention issues).

Wally:

I can't disagree with your assessment. Although I keep hearing that "we" are being so much more careful and forward thinking in our response to this economic downturn, as opposed to past downturns, these statistics do not bear that out. Since I am not privy to the discussions leading up to these decisions, it is difficult to know how seriously other cost reductions approaches are being considered, or if whether there is simply a knee-jerk leap to the conclusion that layoffs are the inevitable answer.

[E James (Jim) Brennan]

Consultants are hired for all sorts of reasons, most involving severe pain (as a matter of fact) but the timing for projects is variable, with some kinds of pain permitting forward budgeting for the solutions and others requiring immediate slam/dunk fixes. When conventional stock award programs go underwater, how many consultants do you see refusing to replace them with more "guaranteed" incentives (which literally ain't)? Wally's point re layoffs is valid but nothing new, since Xmas was ever the season for firms to cut the fat they added (frequently for budget insulation)over the year. It's frequently considered better to drop the last hired least needed instead of cancelling year-end bonuses for key contributors.