This article originally appeared in the April 2010 issue of Smart Business Philadelphia magazine.
The companies that survived 2009 aren’t just looking to weather another year. Instead, many are deciding to take action and lay the groundwork to thrive in 2010 and beyond.
To prepare for this strategy change, companies must take steps not only to retain their top executives but also make the decision to recruit and upgrade their existing talent pool. When owners think of a total compensation package in 2010, they shouldn’t just think of base and bonus. They should also contemplate which intangibles they can offer employees to provide them with the peace of mind that they are advancing their careers.
How have companies’ hiring and compensation practices shifted in the last year?
Retention moved ahead of recruiting in 2009. Much of the focus from an executive compensation standpoint shifted internally; instead of lateral hiring, many companies tried to do more work with fewer people. As a result, many in the work force knew, at least throughout 2009, that they probably weren’t going to earn much from a bonus or raise standpoint.
Most executives were happy to have a job and knew they had to take a team approach; they realized the need to focus not only on being a strong individual performer but also a strong team player to help their company survive and remain competitive.
Companies followed the ideal that they were not going to exceed their financial budget for a new hire. They knew that they could find executive talent that possessed all of their desired skills and abilities and hire them at lower compensation levels.
In 2009, if a newly hired executive desired more in terms of cash compensation, many companies tied incentives to both individual and company performance. These executives were given the potential to make more money, but they had to share in the risk with the company and prove that they earned it.
In 2009, there was also a trend toward getting the entire employee base exposed to and engaged in company initiatives so everyone felt like they had a bigger impact on what was going on in the company. For example, many companies assigned high-potential employees to participate in cross-functional projects that provided executive-level visibility.
Other companies randomly invited certain employees to join C Suite private company meetings. Another tactic involved developing more departmental and one-on-one meetings.
These examples increased employee morale and enabled employees to feel more involved in decision making. From a professional standpoint, even though these tactics did not tie into compensation, they went a long way toward retention.
The successful companies in 2009 were the ones that were proactive in trying to get their work force more excited about the team focus and company as a whole.
What’s in store for the rest of 2010?
If 2010 is off to a stronger start, you must prepare for the possibility that your executives may be exploring job opportunities outside of your company.
Statistics indicate that 50 to 60 percent of executives are determined to make a move once they feel the economy has rebounded. Many executives worked harder for less money in 2009 and feel they now deserve to be repositioned financially to compensate for their sacrifices.
Companies risk losing top performers to their competition. Remember, there has never been a better time to attract and upgrade your work force.
Even many of those currently employed might be contemplating making a career move.
What can companies do right now to retain and incentivize their executives?
First and foremost, companies should identify their top performers; i.e., who can you not live without? Then determine what the marketplace is paying for those same positions in other companies. Identify companies of similar revenue and employee count and determine where you stand as it relates to that benchmark.
If your company is paying below the mean, you should seriously consider increasing cash compensation. If you are paying what the market dictates, the business leaders need to communicate this fact to their executives. Many companies are thinking outside the box as it relates to total compensation for 2010.
Total cash compensation remained either status quo or decreased for many executives in 2009. As a result, to retain executives, companies are doing other things, such as offering an extra week of vacation, paying more of the executives’ health benefits, or providing spontaneous spot bonuses to reward solid performance and production.
Companies should continue to be creative and offer non-compensation perks. Offering in-house classes, training or other forms of career development is another way to give back and invest in your top-performing executives.
Successful companies in 2010 will be those that continue to be proactive in involving their work force and creating strong team work and leadership. ●
Contact us to learn more about this topic.
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