THOUGHT LEADER : Doing Nothing Is Not Okay

The recently released 2009 survey of chief executive pay scales by national consulting firm Sheffield drew the usual headlines regarding executive remuneration and its relationship – or lack of it – to corporate results and the economic environment. But bigger issue emerges beyond this single-minded focus on CEO pay. This year all employers face set of remuneration decisions that are ultimately of much greater impact: what compensation strategy is best to adopt for everyone other than the CEO?
Even in these most uncertain of times, doing nothing is not okay. It is irresponsible to sit on the sidelines hoping the current economic climate will blow over, or that new insights will suddenly become clear.
Remuneration decisions are never easy for employers. The consensus among employers right now seems to be to freeze everything if possible; keep the powder dry; hold costs down; do nothing. These may, in theory, seem sensible moves. But they ignore the fact that remuneration consists of more than just base salary dollars. They also ignore the fact that it is now, during these challenging times, when employers need maximum engagement and productivity from each and every employee in order to weather the storm of recession successfully.
Remuneration, as I said, consists of so much more than just base salaries. It includes benefits, work terms and conditions, personal development opportunities and any form of performance, or incentive pay. Perhaps there is some room for creativity in these areas at time when base salary budgets are strapped.
What about benefits? With the advent of KiwiSaver, virtually every employer is back in the benefits game. After years of cashing up benefits, companies might now take the initiative by asking staff what sort of benefits they consider valuable. The answers will likely reflect the demographics of the particular workforce. New graduates would clearly be attracted to different sorts of benefits than dual-income parents. Workers nearing retirement naturally opt for altogether other types of benefits.
Sure, some benefits are costly. Vehicles are costly. Superannuation is costly. But, thinking creatively, there is range of benefits that are relatively low cost, but highly valued by some individuals. How about subsidised gym membership? How about Southern Cross’ Activa card? The costs of income protection or disability insurance can be quite modest. Will staff view any of these as gesture that their employer cares about them?
The options with the lowest cash cost are available in flexibility of scheduling and workplace. If employers haven’t offered range of flexible hours, or working remotely, or job sharing, or part-time arrangements to staff, there are host of options. Work/life balance issues still loom large for dual-income workers, and flexibility is critical to managing those issues without undue stress or hardship.
Studies prove that employer flexibility results in strong employee loyalty and appreciation – I call it retention glue. In many cases, flexibility is virtually cost free to the employer. All the employer needs to do is organise the work so that less regimented face time with the manager is required, and this is as much an attitude as process. Face time for face time’s sake is concept of the autocratic command-and-control school of management, which has surely done its dash.
Why not consider personal development options, especially for organisation or emerging leaders? This can be as simple as rotational assignment in different department, or participation in cross-functional team that provides higher level exposure. Establishing mentoring arrangements for some of business’ bright young things sends message that the organisation values its employees. Personal development does not necessarily involve formal training programmes or costly training budget. Actions can be relatively low cost, but highly valued by staff. They can improve employee engagement and “glue in” your stars.
Perhaps now is also the time to get serious about designing and implementing performance pay plans, in which specific measurable results must be achieved before payments are made. Results are delivered which add value to shareholders, and the value can be shared with those delivering the results. Simply – no gain, no payment; there is effectively no net cost.
Many Kiwi companies currently offer relatively small, discretionary bonuses which are paid virtually regardless of performance. That’s not good enough. It’s time to add some rigour to these plans, incorporate some specific “stretch” targets and challenge staff. This way, individuals have genuine upside opportunities to earn more money (even when base salaries are frozen). Bonuses can help retain stars, by sharing exceptional results with those individuals who truly deliver the goods. They will certainly improve the overall level of employee morale when engagement is so critical to the success or even survival of business. Be sure the glass is half full at your organisation. M

Sherry Maier is consultant specialising in senior managerial and director remuneration.

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