4 Keys to Compensation Planning in Turbulent Times

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“An economist's guess is liable to be as good as anybody else's.”
--Will Rogers

Let's reflect back to the fall of 2009 - all of us were reacting to the disastrous free-fall of the financial world. Business plans were scrapped or dramatically revised, cuts made, and resources carefully utilized. Common practices to reduce labor costs included layoffs, reduced work weeks, pay increases frozen, 10-20% salary reductions, and no incentive or bonus payouts. For many, the recession is still not over, but there are positive signs in the economy. It's not too early to consider compensation planning for next year. As company leaders begin to plan, set goals and allocate resources, it is important to focus on 4 Keys in Compensation Planning during Turbulent Times.

1. Review and Realign Performance Plans to today’s business strategies
   Whether Sales Plans, Executive/Management Incentive Plans or other Pay-for-Performance plans, make sure all plans accurately reflect and support the company’s direction and focus. Plans may need to be re-designed, re-balanced, and targets, caps and thresholds adjusted in light of the uncharted future. For Human Resources professionals, it has never been more important to understand the current business, and ensure HR and Compensation programs and pay practices are aligned to support those goals.
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2. Maintain Competitive Salary Ranges
   Retaining your best people continues to be a long-range goal to ensure a strong organization, both today and tomorrow. This requires competitive total rewards programs, regardless of the economy. It is imperative to continue to benchmark positions with the best available market survey data and update salary ranges. Knowing how your current pay practices measure up with the market will ensure your labor budgets are accurate, and assist with future hiring decisions and merit increase recommendations.
   (Note: A prudent decision may still be not to increase salaries and related costs at this time, but it is important to have current market data.)
   
   
3. Thawing the Freeze
   According to a recent Watson Wyatt survey, 54% of employers plan to unfreeze previously frozen salaries, and 49% of companies plan to thaw hiring freezes as business conditions improve. If you plan to reinstate increases, this requires careful consideration and planning. While it’s important to know the merit increase projections, to “thaw freezes” you must also consider for your organization what is fair and consistent, the financial impact to the company, employee expectations, as well as clarify the implementation and communication processes.
   
   
4. Think Marathon, not Sprint
   Your A-Team has been asked to do the near-impossible with fewer resources, often less pay, and the losses of colleagues to layoffs. They have stepped up and run far and fast, achieving record levels of productivity, as touted proudly in the business press. It is dangerous to think these levels are sustainable in the long term without appropriate rewards, ongoing training and development, and additional staff. Companies have retained their most valuable performers, and future compensation planning and rewards must ensure they are paid competitively. Top talent is always in demand and is especially critical coming out of challenging times.
   
   

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