How should I treat reviews and raises for 2011? Is the cost of living going up, down or staying even? What are other companies doing?
The cost of living is only one factor to consider when thinking through raises for 2011. Other items to look at include competition for labor, rates of change in employment, employee satisfaction compared to the work force pool for the same job, and ease of replacement for different employees and positions.
When considering the Consumer Price Index, or CPI, it”™s important to note that different industries had widely varying experiences. The overall CPI increase was 1.5 percent for 2010. Many companies will carefully watch the Bureau of Labor Statistic”™s releases to monitor the economy”™s progress. January 2011 CPI data will be released on Feb. 17.
Facts and figures
In 2010, private sector downsizings, layoffs and job cuts fell 60 percent to 90 percent from their peak in 2009. Nonprofits improved more slowly, with an approximate 17 percent reduction in job cuts. The government (federal, state and local) may see an increase in layoffs in 2011. Private sector full-time employment increases will come slowly this year, as companies stretch things out as long as they can.
Companies will delay spending on their current work force by keeping a lid on overtime, pay increases and promotions. Most will expand as long as they can by adding temporary and part-time workers.
At the same time, according to Challenger, Gray & Christmas Inc., an estimated 84 percent of workers say they plan to look for new employment as the economy improves, up from 60 percent a year ago ”“ a high indication of dissatisfaction with the status quo.
What does all of that data mean to you? First, figure out where your industry is going. Then figure out where your work force stands. Finally, know what your company needs to get through the next three to five years. Then decide who gets paid what in the future.
Assess industry, workers
Here are some questions you can ask, to assess your industry.
- What are the industry”™s growth expectations: up, down or flat?
- What”™s the work force depth: available capacity and transfers in or out?
- What kind of special expertise is needed and what kinds of educational opportunities exist for potential entrants and those climbing up?
Next, assess your work force:
- Who needs to pick up their game?
- Who needs to be recognized for extraordinary contributions to the bottom line?
- Which employees/skills are highly desirable to other companies?
- Who is paid above/below market scale?
- What is the growth potential of each employee?
- What would it cost to train a replacement for each position?
Finally, the company”™s three-year outlook:
- Which positions are critical to success going forward?
- Which positions will no longer be needed?
- What additional positions/skills need to be added?
- How sharp will the competition be for employee resources?
Put it all together
Don”™t kid yourself that key employees in critical positions with marketable skills are likely to stay. Across the board raises are out the window, as companies assess employees one review, one position at a time.
Raises and reviews will become more targeted. Key players, doing their jobs well, with additional growth potential are your top priority. Next come workhorses who will be the glue of the company, doing their work reliably in areas that continue to be crucial to success. Least important are individuals filling roles that will no longer be needed, or individuals that can be easily replaced at the same or lower cost.
So how much of a raise do you give? Employees contributing to increased profits, in growing companies, in growing industries will likely get the biggest raises. Consider golden handcuffs to incent specifically valuable individuals to stick around. Employees underperforming in dead-end jobs in industries and companies with declining revenue and profit are unlikely to get ahead financially.
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Andi Gray is president of Strategy Leaders Inc., www.StrategyLeaders.com, a business consulting firm that specializes in helping entrepreneurial firms grow. Questions may be e-mailed to her at AskAndi@StrategyLeaders.com or mailed to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514. Phone: 877-238-3535. Visit www.AskAndi.com for archived Ask Andi articles.
