Understanding Trends Can Help with Compensation Planning

There's no escaping the current recession's impact. News outlets tell story after story of companies that are cutting costs, laying off workers, or closing altogether. Even organizations that are performing relatively well are affected by market influences such as increased unemployment and reduced lending levels.

Compensation is one area that all organizations should monitor given these economic conditions. Recent surveys indicate that the downturn has led many companies to decrease base pay and revise incentive plans, and leaders should consider this as they plan or revisit their compensation programs in the months ahead.

Below we include some of the key survey findings related to compensation, and we discuss how this data may impact your own organization's operations.

Base Pay
In late summer of 2008, organizations began revising downward their budgets for 2009 base-salary increases. According to a December 2008 Culpepper and Associates Trend Survey, the average global budgeted base-salary increase dropped more than 25 percent, from 4.18 percent to 3.08 percent.

In January, further data suggested that merit budget projections continued to fall because of the accelerated economic decline in Q4 of 2008. A survey and report by World at Work indicated that the average merit increase this year will be between 2.5 and 3.0 percent.

Additional studies find that:

• More companies are freezing salaries for 2009 (around 30 percent of companies, according to World at Work), even for executives.
• Many organizations are implementing weekly furloughs for salaried employees; this appears to be a new trend in the white collar and exempt ranks.
• More than a third of organizations are reducing their pay budget, according to the Bureau of Labor Statistics.

Variable Pay
A December 2008 survey by Hewitt Associates found that most companies are not planning to make drastic cuts to existing variable pay programs. For salaried exempt employees, the survey found, 2009 spending on variable pay as a percentage of payroll was expected to be 11.1 percent, a decrease from July projections of 12.1 percent.

Research identifies the following trends:

• All-for-one bonus plans (that is, programs that provide bonuses to all employees, regardless of performance) are seeing the biggest cutbacks.
• Incentive plans are now focusing more on specific company objectives.
• Companies are still willing to pay top performers for results, and more of them are strategically using bonuses to help retain top talent.

What These Findings Mean for You
The data outlined above demonstrates that organizations more than ever need to be creative when developing their compensation programs. Because of the overall business decline and a large labor pool, you'll likely be able to control your base-pay increases and still be able to hire and retain good employees. But you have to think down the road. When the economy turns around, will that change? Will the compensation you offer be enough to attract and keep a quality workforce? Even with limited resources, are there tools you can put in place now (training opportunities, mentoring programs, etc.) that will promote long-term employee engagement and loyalty?

Also, it's clear that you'll need to be strategic in the way you deal with your key performers. A good practice is to identify the roles that are most important to your organization's success and growth. You'll want to look at ways that you can reward these positions. This may mean that you put together a variable pay program that provides greater bonus opportunities to these key positions. If resources are tight, you might have to choose to give bonuses to some employees and not to others. Clearly the trend is moving away from across-the-board incentive plans and toward pay-for-performance programs, so you should strongly consider going in that direction if you already haven't.

You need to develop a compensation program that you can afford, that allows you to be competitive, that promotes efficiencies, and that supports your organization's strategic growth. Coming up with a plan that fulfills all these functions can be challenging. FlashPoint can help. Our experienced consultants have experience conducting compensation research, benchmarking positions, and building and maintaining salary structures. We have tools to help you identify your organization's strategic positions, and we can help structure a creative program to reward top performers. For more information about our compensation services, visit the compensation page on our website.

New Laws Affecting HR

Sign Up Now for The Leadership Challenge® Workshop!

As managers struggle to balance budgets, control cash flow, and save jobs in today's economy, it's more important than ever that they develop and demonstrate strong leadership skills. For many, this is not an area in which they excel.

To help, FlashPoint offers The Leadership Challenge® Workshop, a twice yearly leadership development program. The registration deadline for our spring workshop is April 3.

The workshop is based on the research of Jim Kouzes and Barry Posner, who have studied leadership development for more than 25 years. Sessions will focus on Kouzes and Posner's Five Practices of Exemplary Leadership® and on behaviors that support the practices, including:

• Building credibility by ensuring consistency between your personal values and your actions
• Creating and communicating a shared vision
• Aligning employee and team behaviors with strategic direction
• Cultivating new operating methods, taking calculated risks, and acting strategically
• Fostering an environment of employee accountability
• Giving and receiving feedback

The workshop is ideal for mid- to upper-level functional-area managers, plant leaders, or high-potential managers in any industry. Leaders in growing small- to medium-size organizations will also benefit.

Dates: April 23, May 21, and June 25
Time: 8:00-4:30 (breakfast and lunch included each day)
Location: Barnes & Thornburg LLP, 11 S. Meridian St., Indianapolis
Facilitated by: FlashPoint consultants Andrea M. Moore, CPLP, CEC, and Jeremy King, SPHR
Cost:  $1,800 for FlashPoint clients, $2,200 for nonclients; includes the three-day workshop, a Leadership Practices Inventory assessment, an hour-long one-on-one coaching session, and more. Send three people and the fourth is free! Also, ask us for details about our discount for charitable nonprofits.
Register: By April 3--space is limited! To register, call 317.229.3035 or e-mail info@FlashPointHR.com.

For more information, view the Leadership Challenge® Workshop page on our website.

Upcoming Events

HR 101: Understanding the Basics
April 14, Indianapolis
Presented by FlashPoint's Andrea Cranfill and Jeremy York
Sponsored by the Indiana Chamber
Do you need to develop a blueprint for effectively managing your human resource function? Whether you are charged with starting an HR department or responsible for managing its various activities, proper development of your HR programs can be one of the most important functions in your business. Though this might seem overwhelming, by putting clear and efficient systems and processes in place, you can ensure success. You will walk away from this daylong session with a binder of resources, including sample forms and checklists you can use in your own organization. The cost is $299 for Indiana Chamber members and $329 for nonmembers. Send three participants and the fourth is free. Visit the event listing on the Indiana Chamber's website for more information and to register.

Getting Buy-In and Support for Your HR Initiatives
May 6, Indianapolis
Presented by FlashPoint's Andrea Cranfill as part of the Indiana Chamber's Annual Human Resources Conference and Expo
Lack of support, executive and financial, can kill an HR initiative. How often have you promoted a project only to learn it "won't work" or "isn't in the budget"? Learn how to turn the situation around by demonstrating ROI, building relationships, and speaking the language of your business. This session is part of the Indiana Chamber's 45th Annual Human Resources Conference and Expo, May 5-6 at the Marriott East in Indianapolis. For more information, including a conference brochure and registration details, visit the event listing on the Indiana Chamber's website.

Indiana Chamber HR Workshops
FlashPoint sponsors the Indiana Chamber's 2009 HR Training Series. Information about the following workshops is available at 800.824.6885 or the Chamber's website.

• HR 101: Understanding the Basics, April 14 (see details above)
• Employee Benefits Seminar, April 16

Continuing Education Workshops in Indianapolis
Looking for cost-effective training opportunities for yourself or your employees? FlashPoint facilitates noncredit courses through the IUPUI Community Learning Network. For more information on the following workshops or to register, visit the Community Learning Network's website.

• Manage Your Time by Managing Yourself!, April 24
• Pump Up Your Communication, June 12

Congratulations and Celebrations

The Indiana Chamber of Commerce earlier this month named 70 companies as a "Best Place to Work in Indiana." FlashPoint congratulates the following organizations with whom we're currently working:

• BSA LifeStructures
• Group RCI
• Hancock Regional Hospital
• VMS

The program honors companies that have demonstrated a strong workplace environment that values employees, as determined through employer reports and comprehensive employee surveys. Winners were selected from two categories: small to medium companies of between 25 and 249 employees, and large companies consisting of 250 or more employees. For more information on the Indiana Chamber's Best Places to Work program, visit the program's website.