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No fun sharing bad news, but I guess it's part of my job. A few clients have been in touch requesting the most recent data on pay freezes and cuts - and as it happens, new research in this regard has been released in just the past week.
The tables below feature a summary, prepared by me, of the most recent information I've been able to find on pay freezes and cuts, from studies released by Hewitt Associates, Watson Wyatt, Hay Group and Mercer. (Note also that the releases and reports behind these links feature a lot of information beyond pay freezes and cuts, so you may want to click through and take a look.)
It appears that a lot of decisions to freeze or reduce wages/salaries have happened in the last month or so, as you can see in the jumps from the March and January studies to those completed more recently.
Hopefully we're reaching the end of it.
We compensation professionals have a tendency to get fixated on measurement. After all, without measuring performance, we cannot reward performance - yes? And we LIVE to reward performance...
In our zealous pursuit of performance measurement, however, it is good to have someone from outside our profession give us the occasional gentle prod and cautionary reminder (or, as needed, kick in the pants). Charles Green of the Trust Matters blog has done just that with his gem of a post Success and Measuring Success.
He begins with the question of how we measure the degree to which a loved one loves us. By their attention? That special look in their eyes? Or how about flowers? Yes, there is an easy-to-identify, quantifiable measure. Flowers!
Charlie takes the analogy over to business, and to profits as the measure of business success. Most of us understand that flowers would be simply a measure of love, not love itself. But are we making the appropriate distinction between profits and business success?
From Charlie's post:
So, would you ever mistake the measure—profits—for the success they purport to measure? Do profits really equal success?
Unlike love-and-roses, all too often our answer is 'yes.' Yes, we say, the whole point of business is to make profits. Success consists of making money. It seems silly, we say, to differentiate between the two--the poor sucker who does so is sadly self-deluded and likely to get fleeced by sharper competitors.
In amore, we know the difference between love itself and pale trailing indicators of its recent presence. But in business, we confuse the yardstick with length itself; we’ve lost the ability to distinguish maps from reality.
When did profit move from being a measure of success, to being iconized as success itself?
For those of us laboring in the for-profit world, we need to be careful about discounting the importance of profits. True even in the not-for-profit world: as the saying goes ... "no margin, no mission". But I think Charlie's point is well taken in that an unwillingness to distinguish between what is the means versus what is the ends here may ultimately come back to bite us.
I'll leave the last word to him.
If all you focus on is roses, you'll at least have flowers at the end of the day; but you’ll fail at love. In business, if all you focus on is profits, you won't even get that. Because, simply, we don’t trust people who are only in it for the money.
Image: Creative Commons Photo "Single Rose of Love" by Subramanian Kabilan
I finished the newest edition of workspan (the monthly publication of WorldatWork) this weekend. In reading through a number of the articles on various reward topics, I was struck by a repeated theme of centralization - partly because it was there and partly because it's been on my mind lately as well.
For example ...
In their article "10 New Rules for Managing Compensation in a Recession", Brad Hill and Christine Tande of Tandehill Human Capital identify Centralize compensation management as Rule #1 and it's difficult to argue with their logic.
Immediately take a more macro perspective on performance and pay to ensure that the right dollars get allocated to the right areas of the organization in the timeliest manner. To that end, human resources needs to flex its cost control muscle to ensure that local managers are making pay decisions that best serve the entire organization and not just doing what's best for them.
Addressing sales compensation in their article "Business as Usual: Making Global Compensation Work for You", authors John Bremen, Marcus Minton and Jon Randall of Watson Wyatt Worldwide advise readers to embrace the opportunity for central assessment and re-alignment offered by the economic crisis.
During times of robust economic growth and aggressive entry into new markets, companies often employ a more decentralized management approach in order to provide flexibility and nimbleness to respond to local market and/or business unit opportunities. ...Today's business environment provides the ideal opportunity to take inventory of current plans, assess them against best principles and identify legitimate opportunities for streamlining, realigning and common sizing.
I made this point myself several months ago, as the economic picture grew progressively ugly, with Tough Times May Demand a Centralized Pay Inventory. In that post, I advocated a centralized assessment of all reward programs to ensure that our increasingly rare and precious pay dollars were being used well.
Decentralization is fine in good times when not only salaries and incentive payouts but also jobs themselves are not in jeopardy. Today, those making tough decisions need to have access to all information on where dollars are being spent.
The time has arrived for all cards to be laid on the table, and that requires centrally coordinated effort.
Image: Creative Commons Photo "Monitoring Room" by Matti Mattila.
The effects of the recession continue to impact pay, benefits and job prospects for employees around the globe, according to the findings of Hay Group's just released Reward in a downturn study.
Select overall findings include the following:
Executive pay seems to be hit hardest but job restructuring with an aim to reduce staffing levels is highest for white collar employees.
A range of HR programs are hitting the chopping block.
Most short-term incentive plans are paying out at levels below target.
Long-term variable pay value has dropped significantly.
And yet, most participating employers report that talent management remains a high priority for their organizations.
Compensation Cafe contributor Becky Regan provides her own detailed look at the findings of the Hay study: click over to read her post.
Image: Creative Commons Photo: "Blue Marble (Planet Earth)" by woodley wonderworks
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