As you finally recover from your Halloween-induced sugar coma (just in time for Thanksgiving), emerge from annual benefits planning and enrollment, and finalize next year’s budget, it’s important to identify your organization’s compensation strategy for 2010 and commit resources to ensuring that your compensation program aligns with the organization’s overall strategy.

We wish we could predict the future, and we certainly dream of better days ahead, but of course when it comes to the economy it is difficult to know what the employment landscape will be for employees and employers alike in 2010 and beyond. However, there is little reservation about what employers should focus on as they prepare for an uncertain future:

• Develop a compensation philosophy. If you don’t have a compensation philosophy, work with your leadership to develop a written statement that describes how your pay programs will support the organization’s strategy, how they will compare to the market, and what the appropriate mix of pay (e.g., base pay, short-term incentives, equity, etc.) is for various employee groups. If you already have a compensation philosophy, be sure to revisit it and make sure it still aligns with your organization’s short-term strategy for 2010. Don’t be afraid to revisit this philosophy midyear or to apply a different philosophy to different areas of your business (e.g., job families, geographies, business lines, etc.).
• Budget for salary increases. Just because you budget for salary increases in 2010 doesn’t mean you have to spend the money, but you do want to allow yourself the flexibility to respond to market forces if the economy recovers and you start to lose good talent. According to Watson Wyatt’s 2009/2010 U.S. Strategic Rewards Survey, 79 percent of organizations anticipate reversing salary freezes in 2010, and the average projected merit increase budget in 2010 is 3 percent.
• Focus on employee engagement. Economic and workload pressures from layoffs, salary reductions, and reorganizations have left employees distracted, discouraged, and often “running on fumes.” According to the Conference Board’s recent publication on employee engagement, “Highly engaged employees are 87 percent less likely to leave their jobs than their disengaged counterparts.” Allocate resources to providing inexpensive opportunities for employees to reengage with their jobs and with the organization. This could include:
  • Highlighting training opportunities or on-the-job learning experiences
  • Celebrating small wins and successes through pitch-ins, early closures, casual dress days, or other activities that resonate with your employee population
  • Offering gift cards or other personalized gifts to employees or teams who have gone above and beyond; you should revisit your employee recognition program if it has been collecting dust over the years
    Furthermore, redirect employees’ attention back to the behaviors and activities that will drive the performance and profitability of the company; help them understand how they can make a difference and highlight their ability to significantly impact change.
• Communicate with a capital “C.” Employees understand that times are tough, but they don’t want to be left in the dark. Share as much information as possible with them about the organization’s strength and strategy. Utilize multiple platforms for connecting with your employees (e.g., town hall meetings, intranet site, e-mails from the CEO, departmental meetings, etc.) that provide an opportunity to communicate important and timely information and allow them to ask questions. Solicit employee feedback and respond to their concerns with honesty and as much transparency as possible.
• Keep an eye on your top talent. Many organizations continue to fill vital roles, even during a hiring freeze. Even if resources are tight, it is important to focus your energy on keeping your top talent engaged and rewarded, both financially and professionally. To the extent possible, commit to a “pay for performance” model that puts more dollars into the hands of this critical group. Above all else, take the time to communicate regularly with this group about the value they add to the organization, the opportunities that await them as the organization continues to grow, and the impact they have on ensuring that the organization will successfully emerge from a difficult economy.

In the months ahead, remain cautious yet steadfastly strategic. Focus on ensuring you have the systems and processes in place to respond quickly to changes and support the organization’s strategy for navigating the undoubtedly distinctive year 2010. If you need assistance in your planning, remember that FlashPoint can help. To read about how we did so with one of our clients, the Town of Plainfield, view our case study. And for more information, contact us.