The economic slump continues to take its toll on workers throughout North America, as a vast majority of companies reduced salary budgets, eliminated jobs, or put hiring moratoriums in place this year, says a new survey of 431 companies conducted by Watson Wyatt Worldwide.
The human-resources consultancy’s 2002 Strategic Rewards survey also polled more than 3,000 top-performing employees at various companies and found that most are hoping to hold on to cash compensation in salary and bonuses, preferring instead to give up stock-based rewards and professional development opportunities to help their companies deal with financial strain.
It looks like those employees will get what they are asking for. The survey also revealed that pay raises are set to increase to 2001 levels. For instance, merit increase budgets are expected to rebound to 3.8 percent in 2003, from 3.4 percent in 2002, say the report’s authors.
In the past year, says Laura Sejen, head of Watson Wyatt’s strategic-rewards practice, most companies dealt with the crunch by reducing staff and cutting raises. Indeed, a whopping 82 percent of the companies surveyed implemented at least one of the following belt-tightening measures during 2002: staff reductions (53 percent); salary-increase budget reductions (46 percent); frozen or greatly reduced hiring (46 percent); increase employee contribution for benefits (38 percent); eliminated or severely cut bonuses (21 percent).
The trick, says Sejen, is to invest in strategies that ease the pain in the short term, without letting top talent walk out the door—and yes, employee-retention is still an issue despite company cutbacks.
Forty-five percent of company executives said it is difficult to attract critical skill employees, according to the study; 26 percent say they have trouble retaining them. The health care industry continues to face the biggest attraction and retention challenges. Eighty-one percent of health care organizations surveyed said they are having difficulty attracting critical skill employees, compared with 41 percent for all other industries.
The cream of the crop cited dissatisfaction with pay as the top reason for leaving their companies, followed by dissatisfaction with management, and lack of promotion opportunities. If their company faced financial difficulties and needed to cut costs, only two percent of top-performing employees said companies should first cut their benefits or reduce their salaries/bonuses, while 47 percent would prefer to lose their stock-based rewards first.
So what’s the key to keeping the best? According to Watson Wyatt experts, the best employees—more so than average employees—want to see good old-fashioned cash and benefits. And when it comes to monetary rewards, top performers place the highest value on annual bonuses, stock grants, and project incentives. The most valuable non-monetary rewards, according to high performers, are flexible schedules, advancement opportunities, and work-at-home arrangements.
“Companies interested in retaining top-performing employees need to make certain they are using their rewards programs to distinguish between top-performing and average employees,” says Sejen. “Despite research that shows that such distinctions matter, fewer than 40 percent of top-performing employees believe they receive moderately or significantly better pay raises, annual bonuses or total pay than do employees with average performance.”
CFOs on the Move
Raymond M. Nowak was named EVP, CFO, and chief administrative officer for the North American operations of Viacom Outdoor, the outdoor advertising unit of Viacom Inc. Nowak will also serve as finance chief of Viacom Outdoor Europe. Previously, Nowak was SVP and controller of Warner Music Group … Panamerican Beverages Inc. named Annette Franqui CFO. Franqui joined Panamco in April 2001 as VP of corporate finance, with responsibilities for mergers and acquisitions and investor relations. She succeeds Mario Gonzalez Padilla, who left to pursue other interests.