Variable compensation. Performance based incentives. Commissions. Bonuses. Profit sharing. Employee Stock Ownership Plans.
These all such great ideas — when the markets are booming and business is growing. But in a depressed market (like ours) those plans turn into cruel jokes. I remember working for a NY dot-com firm just before the bubble burst. I received enough stock options to make me very rich is the company just continued along its same growth trajectory. It didn’t. The options were under-water for the entire time I worked there, and the further the stock fell below the strike price, the less confidence I had in the ownership.
Not variable to them
All bosses and HR managers everywhere have to understand a simple but powerful concept. If 25% of a manager’s total compensation in 2007 came from bonus and performance incentives, then that is the new baseline. If 2008 total compensation is 25% lower because the company isn’t making money, then your guy feels like he has been cut by 25%. Bosses feel like the staff has stopped earning an extra benefit or gift. The staff feels like they have had money taken away from them.
Fall-out from a falling economy
Morale, retention and job performance. They are all in jeapordy. Senior management will have to work extra hard to contain the damage and keep spirits high. But this might also be a great time to revisit your compensation plans and craft a more equitable, realistic system.
