Show Them The Money
By Martha Frase-Blunt© www.wetfeet.com. December 16, 2000.
Blame it on the dot coms. Or on a growing national mood of economic apprehension. The fact is, the percentage of Americans who would rather get more money than more workplace perks is rising.
In a new survey by BridgeGate and Market Facts TeleNation Inc., 46 percent of 664 employees surveyed nationwide claimed that “a raise” was the number-one factor that would convince them to stay at their jobs, up from 43 percent last year. Improving benefits ranked second (cited by 18 percent of respondents), a drop of 5 percent from 1999.
In a separate workforce survey conducted by SurveySite for CareerPath.com, 89 percent of 1,383 respondents said the most important factor in considering a job opportunity is salary, and more than 50 percent believe they’re underpaid.
Benefits and Stock Options Take a Back Seat
Benefits simply don’t carry the same weight as cash – they continue to be ancillary “icing” on the employment cake. “With the cooling of the dot com economy, we’re witnessing something of a return to fundamentals,” says Dudley Brown, BridgeGate’s managing director. “For many workers, the so-called ‘intangible’ – notably flexible work schedules and training – are taking a back-seat to more concrete concerns. In any period of uncertainty or change, compensation and its equivalents tend to rise to the top. Workers certainly do care about benefits, just not as much as they do about cash.”
Stock options, once a major draw for highly skilled new economy workers, have lost some of their “zing,” as the NASDAQ eroded from a high of 5,000 points in March 2000 to less than 3,000 in November. “When companies have cash, they use it,” say Mark Meltzer, head of the compensation practice at the Segal Company. “The perception (of recruiters and jobseekers) is that options are less valuable than before – but they are not over by any means.”
“I’m seeing that people want a higher base salary and a lesser quantity of stock,” says Suzanne Neishi, a personal financial planner for PricewaterhouseCoopers in San Francisco. One of Neishi’s roles is to help individuals weigh job offers and financial incentives offered by potential employers. “We still see a lot of signing bonuses, but these days, candidates are going in with their eyes wide open – they are focused on the real compensation and not so much on the upside potential.”
Cash: The New Recruiting Incentive
The trend toward hard cash is not just a by-product of the dot com flameout, Neishi adds, but also reflects the maturing demographics of the new economy workforce. “Employees want to feel the company is taking care of them, not just making promises,” she says. “These days, a hot prospect is likely to have a family, a home, and a mortgage, and needs more stability than a low base and high options.” When a job-seeking client asks Neishi for her advice on competing job offers: “I usually lean toward the more conservative option – the higher salary.”
Gary Kaplan, president of Gary Kaplan and Associates, a Pasadena, California-based executive search firm, notes that the trend toward cash is also being felt in “old economy” businesses. “Over the past few years, many executives have taken positions in established companies where the compensation package was ‘beefed-up’ with options,” he says. “When the stock did not perform as expected, we started to see high-level turnover in well-grounded companies.”
The savviest employers are strategic about compensation and understand that they need to offer more in the way of a competitive base compensation, sweetened by other cash incentives like sign-on bonuses and generous annual bonus packages, says Kaplan. “Across the board, you’ll see more people getting compensated up-front or in installments. On top of that, many will get stock options, but they’re not as weighty. Options are becoming more of a benefit than a compensation tool.”
Pay for Performance
Performance-based pay is also on the rise, points out attorney James McElligott, Jr., a compensation expert and partner with the Richmond, Virginia office of McGuire Woods LLP. “Long- and short-term performance bonuses play a big part in retention, particularly in today’s market,” he says. “A lot of people’s options are underwater, and they are looking for more assurances that they will be rewarded when they hit their (performance) targets. That beats equity that can be affected by other people’s performance and the whims of the stock market.” Compensating people based on performance is also affordable, since it tracks with the company’s fortunes. When employees perform better, it follows that the company performs better, and it can compensate its star players accordingly.
Performance-based pay can also help companies avoid the potentially devastating issue of salary inequity. “Companies are going to have to pay more up front for talent, but they also have to be cognizant that they’re not outpacing existing internal salaries,” cautions Kaplan. “Otherwise they are just creating a revolving door,” losing disgruntled employees who know they can find a level playing field only by switching jobs. “You can’t have an exorbitant pay structure for inward-bound individuals that’s not in sync with those who are in place.” Kaplan suggests employers make necessary adjustments to internal pay structure early in the process of recruiting new talent.
