Wednesday, December 31, 2008

People Management

People Management

Cut, Yet Keep!Convincing employees to stay despite a bonus cut… ..

Key learnings:

  • Prudence has it that even the most stable of organisations take preventive measures to face recession
  • Not paying bonus is one such measure

With recession spreading to more and more countries, even the most stable of organisations will have to start taking anticipatory counter-measures. Of course, most of these measures will be in the form of monetary cuts since cost-cutting is taken as a synonym for survival! But if employees see that things are still OK with their company, and that recession will not hit their industry badly, the one thing that they will not graciously accept is being asked to forgo monetary rewards. In other words, they will still expect the annual or festival bonus.

During an economic downturn, smart organisations would rather not pay bonuses than cut training and recruiting budgets. “Once the economy gets back on track, the bonuses can be dished out. But reviving the functions of recruiting and training after a slump is not easy. Therefore, it is in the interest of every organisation to keep these functions going,” says an expert.

This stand may appear logical to business heads, but unfortunately employees suffer from a short-term vision. So how can organisations, which haven’t been hit hard by recession, convince employees that some counter-measures are imperative regardless of how they are doing during a downturn? This week’s mailer attempts to suggest a strategy on that.

Target talent
Not receiving the annual is the first sign of eventual doom, especially in small enterprises. This assumption, even in the worst of economic times can prompt employees to start looking out. One way to curb this is to form a nexus with top performers and employees with large influence circles, and share with them the real reason for holding back on bonus. Convincing this lot that the bonus cut is a temporary and preventive measure should help convey the message to the bottom-line in a more persuasive manner. Employees are likely to say, “So if they can go without the bonus for all they have done, so can we.” They may also think that if top performers are taking a bonus cut and not leaving, then things outside maybe pretty bad!

Being taken into confidence by the management makes the selected few feel special and they do a good job as spokespersons.

Do not compare
The typical approach to sharing the bad news is informing employees how badly the other industries have been hit, while they are still managing to sail. Then employees will ask, “If we are still posting profits then why penalise us for what others are experiencing?” From an employee’s perspective, if the annual bonus is a promised part of his package, then he should be receiving it whenever the organisation records profits.

Rhetorical speeches on how what is happening to others can also happen to us fall on deaf ears. It is not because the employees are unconcerned, only that they fail to appreciate the long-term measures. Therefore, an effective way to get them to see a bonus-cut as a preventive and temporary measure is to communicate the doom side of recession regularly and subtlety.

Newsletters that carry case studies of enterprises being hit by recession, managers referring to how a friend’s company had to layoff employees, C-level executives commenting on the recession in blogs and fewer organisation-sponsored social events should convey the message that all may not be well below the surface. While these efforts should prepare employees not to be shocked when a bonus cut is announced, the green balance sheet should keep them indoors!

The current volatility of the economy should serve as a warning to organisations structuring their bonus packages. In addition to promising realistic bonuses, a prudent move is to share bonuses on a biannual or quarterly basis. Employees who do not receive their Diwali bonus will still look forward to the quarter. Waiting an entire year in the hope of bonus is too long a wait for an employee, especially when the bonus is skipped.

Denying employees their bonus while the going is good is not easy. But with the economy ‘misbehaving’, even the best of businesses have to tread cautiously, and cutting bonuses is a step in that direction.

Ref: TheManageMentor

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