Facing a Recession: How Can Companies Manage Compensation Challenges?

Hi All,

I request your suggestions on how companies can overcome the effects of a recession on compensation.

Thank you.

There you are!!

You are facing one of the most complicated issues for the last year. Nobody, NOBODY here comes up with a single-line solution. Nobody dares to answer you.

Hi Deepa,

It's a tricky situation. There will be no increase for the time being, but we are hopeful for the best. We can consider including it in the PIPs/bonuses. Some employees who are eagerly seeking a raise may choose to leave. Having fewer employees might mean slightly higher compensation for those remaining.

Dear Deep,

Few only dare to give you advice, right? Shhhhh... their fingers burn when they type it!
1. Stop any type of increments.
2. Find out all unnecessary posts and extra tails in every nook & corner, then CUT it!
3. Reduce the use of all stationery with memos to each department and division manager.
4. Find employees who can handle different jobs simultaneously.
5. Use one secretary for a minimum of 2 managers.

More advice is EXPENSIVE! 🌟

Dear Deepa,

Really, it's a good discussion, Deepa. According to me, a few strategies should be made.

1. Outsourcing the payroll. Benefits include major cost-cutting by involving fewer manpower, no headache of purchasing payroll software, less paperwork, time-saving, and reduced penalties on legal mistakes.

2. Outsourcing the recruitment process. Benefits include time-saving, cost-cutting by involving less manpower, and enough time to concentrate on other HR activities.

3. Don't hire new employees for senior positions. Conduct competency mapping and multi-skilled mapping to identify real top potential and multi-skilled employees who can handle different jobs simultaneously. Use these employees to fill the gap through increasing job responsibility, job rotation, or promotion. Benefits from this activity include cost-cutting, building employee morale, and employee retention.

4. Review employee performance evaluations to ensure the company cannot afford to lose anyone.

5. Try to avoid outsourced training consultants and prefer internal training. After conducting a multi-skill test, you will find many multi-skilled individuals who can deliver training on different subjects or be great mentors. Utilize these employees and give them a chance to showcase their talents. Benefits include building employee morale, cost-cutting, career planning, and internal branding.

6. Reduce the use of all stationery.

7. Give normal increments to employees and show them a long-term vision.

8. Keep them motivated and busy.

There are many other activities to overcome this recession, but I think this is enough to discuss here. If you require more, I can provide it.

Please don't forget to give feedback.

Hi Deepa,

I agree with Satyam. As per today's scenario, cost-cutting is one of the best ways to minimize resources, especially financial. In addition to that, you should consider cutting extra expenditures such as stationery. Employees who are not very useful can be sent on holidays or, if necessary, downsized.

I would like to give thanks to Deepa for bringing up the topic and to Satyam's response, who had given me more confidence to go ahead with the strategies. It's the performance evaluation and more staff engagements to show that the company cannot afford the loss that I feel so strongly to push.

Being in HR, you have access to each employee's compensation and benefits, and you'll see who is more hardworking and who is slacking. Evaluating the strengths and weaknesses of each employee and preparing recommendations on how we can get the most out of the current human capital, especially in critical situations or economic conditions, is a good strategy.

You are right... Cost Cutting + building employee morale + employee retention!

Recession and India in October 2009 - interesting. I believe most of the companies are moving forward with good increments despite the economic times. The impact of the recession was felt in India, as per the definition: "Recession is when the economy shrinks for two consecutive quarters with a decrease in GDP." Thank you.

Sarfaraz

I guess the issue at present is no longer relevant. Now, the focus should be on "Capitalizing on the lessons learned from the great Recession." Let us be forward-looking.

Regards.

Hi,

As far as my concern, “Recession is in our MIND not in the MARKET”;

There is a story about a man who sold hot dogs by the roadside. He was illiterate, so he never read newspapers. He was hard of hearing, so he never listened to the radio. His eyes were weak, so he never watched television. But enthusiastically, he sold lots of hot dogs. His sales and profit went up.

He ordered more meat and got himself a bigger and a better stove. As his business was growing, the son, who had recently graduated from college, joined his father. Then something strange happened. The son asked, "Dad, aren't you aware of the great recession that is coming our way?" The father replied, "No, but tell me about it." The son said, "The international situation is terrible. The domestic is even worse. We should be prepared for the coming bad time.

"The man thought that since his son had been to college, read the papers, and listened to the radio, he ought to know and his advice should not be taken lightly. So the next day, the father cut down his order for the meat and buns, took down the sign and was no longer enthusiastic.

Very soon, fewer and fewer people bothered to stop at his hot dog stand. And his sales started coming down rapidly. The father said to his son, "Son, you were right. We are in the middle of a recession. I am glad you warned me ahead of time."

IF AN ORGANISATION OR AN INDIVIDUAL HAVE THE FOLLOWING VALUES, RECESSION WILL NOT BE A FACT.

1. DELIGHTING THE CUSTOMER

2. PASSION FOR PERFORMANCE: Work with CAN DO Attitude

3. ENERGY FOR RENEWAL: Continous Improvement in the Process

4. WINNING TOGETHER: Sharing Ideas, Work and finally Victory.

Regards,

Jaheer Ismail

Hi All,

Thank you all for your time spent discussing this topic. I am working on a project on "Recession Impacts on Compensation Management." Once it's done, I will surely upload it on the website. There are different salary survey reports from 2009 that could be useful to many of us. I will await your comments on the same.

It's really encouraging me to put forward more topics for discussion. Keep writing!

Regards,
Deepa Deshmukh

Dear Friends,

Please go through this; I hope this would add value to this discussion topic.

(Here is a question asked by archishagarg)

Respected Sir,

It was a pleasure reading your skill set. I am too young and absolutely not potential enough to comment upon it. But one thing that I would like to know from you as a matter of knowledge alone is that when you yourself support personality tests for matching the right person with the right job, which means you are well-versed in recruitment, don't you think outsourcing it may not be a very profitable deal? I personally feel if you have an efficient HR department, it can best understand the company's requirements. I am referring to this as you had mentioned this as a solution on "how companies can overcome the effects of the recession on compensation." I fail to understand this logic.

Rather, I feel making effective employee engagement strategies can help to some extent. Please correct me if I am wrong. Since you are well-versed in this, you shall better know the pros and cons of the same. I will really be obliged if you could guide me on this issue and your post related to it. I apologize if I am wrong somewhere or if you found me rude anywhere above. I will really be looking forward to your reply.

Posted Yesterday at 06:48 PM by archishagarg

My Dear friend, (Here is my answer)

I strongly support my statement about outsourcing the recruitment process and my skill set mentioned in the above post. I can prove it in practice as well. I request you to go and read my post about how companies can overcome the effects of the recession on compensation. You will find that I have mentioned only the recruitment process, not the selection process. For your information, there is a difference between the recruitment and selection process. Both recruitment and selection are the two phases of the employment process. The differences between the two are:

Recruitment is the process of searching for candidates for employment and stimulating them to apply for jobs in the organization, whereas selection involves the series of steps by which the candidates are screened to choose the most suitable persons for vacant posts. The basic purpose of recruitment is to create a talent pool of candidates to enable the selection of the best candidates for the organization by attracting more employees to apply to the organization. The basic purpose of the selection process is to choose the right candidate to fill the various positions in the organization.

Recruitment is a positive process, i.e., encouraging more employees to apply, whereas selection is a negative process as it involves rejecting unsuitable candidates. Recruitment is concerned with tapping the sources of human resources, whereas selection is concerned with selecting the most suitable candidate through various interviews and tests.

Hence, the recruitment cost involved when the company does recruitment by itself is the cost incurred for job portals (Jobsahead, Monster, and Naukri), the cost of posters and banners, headhunting, internal referrals, the salary of the employee involved in all these activities, PF, ESI, gratuity, superannuation contribution on that salary, annual incentives and bonuses to these employees, training and development costs, and time spent on all these activities.

The most important point is that you may have to bear these costs until you choose the best candidate. Think, when large companies hire hundreds and thousands of employees per year, these costs can take a significant portion of the HR budget and total operating expenses.

On the other hand, when you hire through any recruitment agencies, they will manage the recruitment process from start to finish. Recruitment agencies hold large databases of candidates and can advertise on your behalf. Their advertising methods include both print and online mediums, although the latter has become more common in recent years.

Advantages include:

- Reducing the impact on company resources and time spent on recruitment.
- You can often get a rebate for unsuitable placements within a specific period of time or be provided with another candidate.
- Expertise and knowledge in their specialist field without training costs.

Now the most important point is:
1. Recruitment agencies are paid only when we choose the best candidate.
2. We have to pay only a percentage (10 or 20) of the employee's first-year annual salary.

We do not have to spend the entire treasure.

Now you tell me, which one will be more cost-effective: internal recruitment or through agencies?

ABOUT PERSONALITY TESTS:

I have mentioned the use of personality tests for selecting the right candidate, i.e., for the post-recruitment means the selection process. Personality tests are not the only tool for the selection process; they can be used for many purposes such as:

1. Motivation - understanding the personality of another person, as well as your own, helps in motivating others.
2. Judging behavior style at work, motivation, and thinking styles of people.
3. Career counseling, mentoring, outplacements, and training needs.
4. Employee self-evaluation and development.
5. Learning styles, hence useful in designing training modules and methods.
6. Performance appraisal.
7. Team building.
8. Helps in employee engagement and retention activities.
9. Management development.
10. Sales development.

In this way, we can not only make effective employee engagement strategies but also improve all other HR practices.

I hope I have been able to clear your doubts. If not, feel free to discuss.

I am waiting for your reply.

Thank you.

SATYAM