“I know I don’t got a lot up there, but what I got sure don’t feel too good.”
That was Tatum O’Neal’s reaction after getting kicked in the chest in the 1976 movie The Bad News Bears. But it could also sum up how CFOs feel about being forced to skimp on employee raises.
Indeed, it seems employees aren’t the only ones bummed out by the disappointing raises and bonuses of a bad-news-bear economy. According to a survey coming out today from consulting firm Deloitte & Touche LLP, finance executives are starting to get worried about how much longer their best employees will tolerate modest annual increases.
Get this: more than half of the senior finance and human-resources executives at 130 large U.S. companies surveyed (average revenue of $1 billion) are keeping pay increases to 3.5 percent in 2003, the third straight year of modest raises.
Worse, 20 percent of respondents are eliminating bonuses for 2002 for the second consecutive year. Another 25 percent are giving bonuses that are 50 percent or less than what employees received during better times. (Click here for more bad news on bonuses.)
To make matters worse, employee out-of-pocket costs for health care benefits have been increasing as fast as or faster than raises at 76 percent of those companies surveyed. (See Today in Finance for more bad news on benefits.)
Interestingly, 48 percent of the respondents are worried that reduced employee raises and bonuses compensation is contributing to low worker morale. And that low moral, many believe, could lead to a loss of loyalty. Fully three-quarters of the companies surveyed admit that the biggest problem they face from constrained compensation budgets is an inability to sufficiently recognize top performers versus average or poor performers.
“Inadequately rewarding top employees undermines their incentive to perform at their peak, so productivity is almost certainly falling,” says David Glueck, a director in D&T’s performance-management and compensation practice. “And, when the economy picks up, they are much more likely to leave.”
And that seems to be a continual theme these days: when the economy picks up, unhappy employees may bolt. To avoid that scenario, Glueck says managers should identify top performers now, “especially those hired in the last two to seven years. These individuals have the highest expectations and represent the most critical loss.”
Glueck also recommends using other, non-monetary rewards to let top performers know you haven’t forgotten them. One: faster promotion opportunities. In addition, employers should invest in training that directly benefits their skills development, and offer them plum assignments. Finally, acknowledge the reality of bigger workloads for all workers after a downsizing, and explore work/life flexibility options.
Of course, as we reported last week, nothing beats the real thing — job security, pay, and benefits — when it comes to satisfying employees. But by singling out the best players and nurturing them when times are lean, companies can increase the odds that they’ll be around when there’s more cash in the till.
CFOs on the Move
Financial-services vet Jerome H. Bailey was named CFO of Marsh Inc., the insurance subsidiary of Marsh & McLennan Cos. Inc. Bailey succeeds Joseph Salerno, who is retiring. Bailey joins Marsh from financial-news publisher Dow Jones Inc., where he was finance chief. His previous experience includes a CFO stint at Salomon Inc., and a job as managing director and controller of Morgan Stanley … You got Moxie, kid: Music and entertainment retailer Virgin Entertainment Group North America named Jeff Moxie CFO. Moxie joins Virgin from Kinko’s where he was CFO, VP/corporate controller, and accounting director. His other previous jobs include stint as tax manager for Alcan Aluminum Corp. … Pancake-chain operator IHOP Corp., operator of the International House of Pancakes restaurant chain, named former KB Home finance chief Thomas Conforti as its new CFO. Conforti replaces Alan Unger, who is leaving IHOP for another opportunity.