Economy Forces Employers to Balance Financial and Employee Challenges – Part 1
By: Jack Roose and H. W. Hennessey
Today’s economy and its impact on the financials of most Hawaii organizations is forcing
employers to balance their short- and long-term financial well-being with the programs,
practices, and policies of managing employees. A survey was recently jointly conducted by
the SHRM Hawaii Chapter and the Honolulu office of Watson Wyatt Worldwide to identify
what the effects today’s economy is having on practices affecting employees. Hawaii
Business magazine has recognized about 10% of the respondents as being among “The
Best Places to Work in Hawaii” and almost one-half of the organizations were listed as
members of the “Top 250 Businesses in Hawaii.”
The impact of the recent economic downturn is apparent in Hawaii’s organizations. 44% of
almost 350 respondents indicated that the slowdown has had a moderately negative impact
on their organization, 19% indicated it has had a severe but likely temporary impact, and
17% indicated that it has had a severe impact, likely lasting a year or longer. That
represents over 120 organizations in this survey that have been severely affected by the
recession.
While contending with this business slowdown, organizations continue to struggle with
challenges of recruiting and retaining appropriately skilled employees. These challenges
are likely to grow over the next few years, despite the increasing number of downsizings
and increases in unemployment. Looming retirements from skilled and experienced Baby
Boomers, the migration of talent out of Hawaii, the shortage of specific skill sets, and the
relative lack of depth in many critical jobs in companies pose a significant threat to any
company’s ability to compete successfully in their industry.
Almost one-half of all responding organizations have had difficulty recruiting and hiring
qualified staff in each of the categories of non-exempt, exempt, and management positions.
About two-thirds of the employers are concerned about retaining valuable employees in
non-exempt, exempt, supervisory, and management job categories. Clearly, appropriate
staffing, both short- and longer-term, remains an issue for Hawaii’s employers.
The ability of an employer to attract and retain skilled and valuable contributors is often
driven by the organization’s reputation, both internally among employees and externally in
the community. The types of practices an organization chooses to implement in dealing
with today’s economy, and the way in which these practices are communicated and
implemented, will have far-reaching effects on current and future recruiting and retention.
Many employers are being forced today to implement practices that may make future
retention and recruiting more difficult, although they may be absolutely required to survive
today, and, hopefully, prosper tomorrow. About one-quarter of the companies responding
to the survey had lay-offs or reductions in force this year, and 16% plan these for 2009.
One-third have had staff reductions through attrition (leading to leaner staffing), and about
one-fourth plan to do so in 2009. Four out of ten have instituted hiring freezes, with 25%
planning this in 2009. Almost 20% have reduced bonus or incentive opportunities, and only
slightly fewer plan to reduce variable pay opportunities in 2009. Almost 40% have or plan
to add or increase travel restrictions.
Slightly more than 15% of respondents have implemented a salary freeze, with a similar
number planning a freeze for 2009. Almost 20% either have in 2008 or plan in 2009 to
slow the pace of giving salary increases. In this sample, the average merit increase budget
as a percent of payroll for 2008 was 3.4%, while the average projected merit increase
budget is 3.3%. The average total compensation increase budget (merit, promotion,
market adjustments, and cost-of-living adjustments) has decreased from 6.2% in 2008 to
4.8% in 2009. Slightly over one-half of those who use salary ranges plan no changes for
2008 or 2009. The average actual salary range adjustment for 2008 for those making
adjustments was 4.6%, and for those planning a change in 2009 it is 3.7%.
Almost one-quarter of the organizations reported using a short-term incentive or bonus
program. These programs can help focus priorities, establish clear expectations, and
reward participants when organizational and individual performance justifies, and when
financial performance allows making such payments. Many of these organizations are
increasing organizational financial performance targets and individual performance
expectations, with about one-fourth of these organizations increasing each of these in 2008
and in 2009.
Join us again next week as we explore ways that companies can positively impact
employee recruiting and retention, even in these difficult economic times.
Jack Roose has been a Human Capital consultant with Watson Wyatt Worldwide for
twenty-four years, and has worked in the Honolulu office for the past seventeen years.
Jack can be reached at (808)535-0510 or jack.roose@watsonwyatt.com.
H. W. (Hank) Hennessey PhD SPHR has researched and taught Human Resource
Management for 30 years, and is currently a Professor of Management at the University of
Hawaii at Hilo. He also serves as Research Director for SHRM Hawaii. Hank can be
reached at (808)974-7767 or hhenness@hawaii.edu.