Executives at companies like Hewlett-Packard, New York Times and Best Buy are slashing pay. Many companies are sending centuries of experience out the door. And yet, if they keep ex-employees on alumni networks, they retain a link to that knowledge.
Today, many employees would rather see their direct deposits docked than collect unemployment. But shriveled paychecks can make corporate strivers feel as if their lives are moving in reverse. "Employees know their bonus is going to go up and down, but base pay is supposed to be sacrosanct," says Laura Sejen, global director of rewards at employment consulting firm Watson Wyatt Worldwide.
Some thought leaders in human resources warn that across-the-board pay cuts are anathema to a performance culture. "The last thing you want is for your A players to leave because you've mismanaged your compensation system," says Mark Huselid, a Rutgers University human resources professor and co-author of the new book The Differentiated Workforce.
Earlier this year, Hewlett-Packard CEO Mark Hurd implemented tiered pay cuts, from as little as 2.5% up to 20%, throughout the ranks. He shrunk his own paycheck by 20%. Even when handled well, though, the danger of mass resentment--and an eventual backlash--looms.
If you are about to slash pay at your organization, here are a few things to keep in mind:
Be Transparent by explaining the reasons for the cuts and how long they'll last.
Go Surgical--Don't dock the pay of your superstars.
Give Back--Try time off, more flexibility, even promotions that may be in name only.
For those who leave the company, don't burn relationship bridges. Keep in touch with former employees who might end up as business partners or even return as employees. Steer them to "alumni" social networks. Much like Facebook or LinkedIn, offer former employees and retirees a place to establish profiles and friend lists, share news and ideas with ex-colleagues, and participate on blogs and message boards. Unlike the big public social networks, the company site can feature industry news and job leads. Guide alums to reunions and company events--even offer deals on health insurance.
Alumni networks follow a tenet of the knowledge economy: Personal connections transcend corporate boundaries. With their alumni networks, corporations attempt to dissolve those boundaries themselves, establishing for each company a broad network of people who can keep in touch throughout their careers to benefit from each other's knowledge and contacts.
Source: BUSINESSWEEK, May 4, 2009