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<i>Dear Workforce</i> How Do We Soften the Blow When Pay Is Frozen and Salary Levels Are Being Slashed

August 17, 2010
Dear Money Is Tight:
During tough economic times like these, leaders need to think about “rewards” in a context broader than just the financial aspect. Line leaders, in addition to HR, need to take responsibility for communicating a “total rewards” perspective that goes beyond pay. Failure to communicate is not an option. To decide what it is they wish to communicate, leaders should answer the following the questions:
1. Do we expect to overcome the financial challenges we face and, if so, when?
2. Besides the financial component, what can we communicate about other aspects of our business, work environment and culture that we know employees appreciate? What is happening in the broader context in the market and are other companies in a similar pickle?
Once these questions are answered, leaders should get employees together—ideally face to face in a group—and have an open discussion. One certainty is that these discussions are already happening at water coolers, kitchen tables and restaurants between employees. Leaders need to be part of these conversations.

Consider compensation reallocation options
The fact is that, in all businesses, some positions (not necessarily the people in them) are more important than others due to the impact such positions have on the company. These positions also are not always at the most senior level. Consider segmenting positions into the categories below (without thinking about the people in the positions currently).
Strategic
These positions are critical to driving the organization's long-term competitive advantage and value. Employees in these roles have highly specialized skills or knowledge.
Action: Invest and grow
Core
The “engine of the enterprise,” these positions are central to the company's ability to deliver its services and brand promise.
Action: Consolidate and protect
Requisite
Although the organization cannot do without the work these positions perform, their value can often be delivered through alternative staffing.
Action: Streamline

Next, determine if your compensation spending lines up with the positions that add greatest value. If you need to make additional cuts, make them from requisite or core positions, not strategic ones. Also, pay special attention to strategic jobs occupied by high performers—have separate conversations with these people to ensure their retention, ideally directing a small amount of compensation to them, if the budget permits.
SOURCE: Garrett J. Sheridan, Axiom Consulting Partners, Chicago, July 6, 2010
LEARN MORE: The number of companies freezing salaries is on the rise.
Workforce Management Online, August 2010 -- Register Now!
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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