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Articles > Executive Compensation - 2009 Detailed Analysis of Executive Compensation
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Executive Compensation - 2009 Detailed Analysis of Executive Compensation

By James Del Monte, JDA Professional Services, Inc.

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Thank you to everyone who participated in our executive compensation update.

Several interesting issues arose out of your responses. It seems that salary increases in 2009 were as projected in our 2009 salary survey, coming in at between 2-4 percent. What was surprising, however, was the number of companies which experienced reductions in salaries along with reduced or eliminated bonuses.

Other interesting findings include:

We asked:      What increases were budgeted or expected in 2010?
You answered:     The results ranged from -17 to +7 percent with most in the 2-4 percent range and similar to 2009’s numbers. What was surprising was how many respondents replied with 0 percent, which drove the average increase closer to 2 percent (after taking out the high and low).

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We asked:          What were you budgeting or anticipating for bonuses for 2009?
You answered:      The range was from 0 to 20 percent with most averaging about 5 percent. Bonuses over 10 percent were the exception (less than 5 percent of respondents), and more were anticipating 0.

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We asked:          What were you anticipating or budgeting for bonuses for 2010?
You answered:          Again the average was 0 to 20 percent with the average being about 5 percent, with more companies either not anticipating bonuses in 2010 or limiting bonuses to management where a bigger portion of the compensation is bonus-based.

Analysis of the Data

Salary Adjustment High’s and Low’s
When qualifying the survey results, we found that the lowest [-17 percent] salary adjustment was used as an alternative to further reductions in force. This drastic adjustment was used both to maintain staffing levels and to reduce the stress level of existing employees by not increasing the workload of the remaining staff.

The high-end, or + 7 percent, increase was with a company whose business continued to prosper, and the higher than average increase was viewed as a way to reward those who have continued to contribute and reduce the possibilities of employee turnover. In like fashion, several CIO’s indicated that even if they were not going to increase salaries across the board next year, there was some flexibility on a ‘one off’ basis to make a market adjustment in order to protect their best people.

Bonuses
Regarding bonuses, the lack of projected bonuses will have major impact on the traditional way of rewarding top performers. As the differences in base salaries between the top performers and the average performers in any give salary grade are not that great, this could cause dissatisfaction among your top people and lead to increased turnover. But if numbers are not there…

Contract Rates
Contract rates which are purely market-driven have seen the biggest reduction. Several of the biggest contract employers in Houston have had rate reductions during the past year, ranging from 5-20 percent. Again, faced with few options, most of the contractors decided to stay at the reduced rate. With the projected upturn in the market, however, I can see this changing and, once again, rates or turnover will increase.

Employee Dissatisfaction
With all the cuts in staff, reduction in benefits, and increasing work load, many employees are feeling stressed and unappreciated in their current situations and are open to a change where the perception of greener pastures exists. It only follows that the utilization of an employee retention strategy becomes even more critical to protecting your resources.

For those companies that have had cuts in compensation, it will take years under normal increases to get back to par. For those employed under such circumstances, it makes sense to make a move and recover the lost compensation in one move. We are seeing an increase in employed candidates from such companies.

Turnover Concerns
Several CIO’s have expressed to us their assumptions regarding management’s position concerning increases. These CIO’s believe that management views the market as being slow enough that there are not enough options available to even result in turnover at this time, thereby enabling them to assume that valued staff would not be leaving for lack of options. While this may be true for the general population, for IT professionals, the unemployment rate is still 2-3 percent lower than that of the general population. Additionally, there are clearly options for “A” players who are aggressively being recruited.

Impacts on Hiring
How will this impact hiring? First, consider that there are two groups of people in the market today: (1) the unemployed; namely those who are anxious to get back to work and are more apt to take lesser positions at reduced salaries, and (2) those who are employed and have to be recruited and enticed to make a move. As the employment market begins to improve and more companies are beginning to replace open positions and create new ones, there are several schools of thought on the best way to bring people on:.

Option 1:      Do you hire someone who is well/over-qualified for a position and use them as a skills upgrade, offering them less than what they were making as a market adjustment? While they may seem sincerely happy to accept such a position and get back to work, is this really a long-term solution for them? Since most people have not adjusted their standard of living, it could be a short-term fix for both parties just as easily as it could be a great opportunity for both.

Option 2:      Do you follow traditional hiring protocol, hire someone who is working or unemployed and will grow into the position, and offer them 5-15 percent beyond what they’re making in order to attract and keep them?

Keep in mind that there are some very good people caught up in either corporate restructuring or a bad market, experienced staff who have a lot to offer on a long-term basis. Realize, however, that several of our clients are continuing to request that we find them talented staff that is currently working, basing their theory on the premise that most companies kept their best people.

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If you would like to either receive more information on these findings, learn how we can assist you with your employee retention strategy, or assist you with a current need for full-time or contract staff, please call me at 713.548.5444

And if you enjoyed this article, you will probably enjoy information on IT salaries, and information on the Cost of Hiring, as well as seeing what Executive salaries are doing in Houston.


Sincerely,

James Del Monte, CERS [Certified Employee Retention Specialist]





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