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Dear Workforce How Do We Retain People Despite Being Unable to Raise Pay

We are a retail company enduring tough times. It’s looking increasingly like we won’t be able to give pay increases in 2009. How should we handle this in our performance reviews? How do we communicate this news so that we don’t see a huge spike in turnover?
February 18, 2009
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Related Topics: Career Development, Employee Career Development, Retention, Dear Workforce
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Dear In the Doldrums:

Many companies are facing the difficult decision regarding the tradeoff between staying within lower budgets and rewarding employees to maintain morale and motivation. While doing performance reviews without pay increases is not ideal, there are ways you can communicate this without sending the wrong message and creating turmoil among your staff. Some important points to consider are:
  • Don't hide the truth. Be open and honest about your current economic condition, and explain to your employees why pay increases are not being offered. If you hide the real reason, they may begin to assume another rationale was used to make the decision, and feel personal blame or resentment toward other members or parties within the company.
  • Be sure you place extra focus on praising each individual for their positive efforts and responsibilities they handled successfully. For those who have areas where improvement is needed, be ready with a detailed development plan that you, as their manager, will provide and/or coordinate. This will position the company as one that values personal and professional development and is willing to provide the time and resources to help each individual boost their performance.
  • Focus on the company's future plans for rewarding their efforts. A goal-driven bonus, such as a certain level in sales, a specific number of outbound calls or company profits, will likely motivate them to work toward that goal. Not only will you postpone the expense, but because it is based on performance, it will occur only if performance increases, creating a true win-win situation.
  • Identify your top performers, or those employees who you feel are most important to the company's future success, and consider sharing a more promising approach that involves higher rewards for these individuals. They will not only be the most disappointed about the news of no pay increases, but you also need to be most concerned about this group's morale and continued commitment to the company.
While you may not be able to completely avoid any negative feelings or signs of disappointment, companies can take specific action to communicate a positive message during performance reviews. The important thing to remember, no matter what approach your company takes, is to keep an optimistic attitude and position yourself as a leader.

Giving your employees the feeling that you are unsure about the future of the company will be the most significant factor in an increase in turnover following this situation.

SOURCE: Jim Robins, TTI Performance Systems Ltd., Scottsdale, Arizona, January 20, 2009

LEARN MORE: Companies across varying sectors are encountering similar challenges.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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