With global recession indicators glaring at the Business world, and the timing unfortunately coinciding with performance appraisals for most organizations, businesses will have to re-balance and re-evaluate their compensation decisions in wake of the novel Coronavirus. Let’s explore how the impact of the Coronavirus crisis on businesses and economies is affecting or could affect the compensation and benefits decisions of employers.
Since India has been in a state of lockdown, businesses have suffered a great setback. As no one really knows when the situation will get better, leaders are making business decisions quickly in the best interest of the company, the primary intention being chipping away at the controllable costs to the extent possible. This has most commonly manifested itself as tweaking the Sales/GTM strategies and pricing, revising contracts, analyzing tech stacks to figure out inefficiencies and, obviously, understanding how to keep the cost of human capital to a minimum.
Managing costs among several other things have become critical. But at the same time employers have to retain their best of the best talent and also support their staff and ensure their job security. How do talent and business leaders strike a balance? What compromises should be worth making? As we can already see in many reports and latest updates, some CEOs and business leaders have stepped up and taken the bold decision of taking pay cuts to support their respective companies and deciding to institute a company-wide pay cut to avoid layoffs. But what are the right methods here? Is there a one-size-fits-all approach? What are some of the other trends taking shape across the world right now? Let’s dive in.
Managing Performance Appraisals
At Companies that follow a calendar year of performance, the appraisals have been closed and letters have been distributed in January.
On the other hand, Companies which follow the financial year for performance reviews are watching out for what other companies are doing, since nobody has the right answer or a proven method at this point. Several companies are delaying hiring decisions and in many cases putting an entire freeze on fresh recruitment.
Luckily, Companies that start their appraisals in June or July have more time to react and respond to the economic situation and they also have the option to follow the best practices followed by the other organizations. One can hope that by then there would be some semblance of a playbook in place to guide SMEs and businesses!
All things said, companies need to lay down all cards on the table – from revising KPIs to relaxing quotas if needed, from revisiting scoring methodologies to properly communicating the reasons behind no changes put in place if that’s what is decided upon.
The current situation is surely going to impact overall sentiment and hence may lead to slightly conservative increment pay-outs. There are a few trends that are taking shape:
- Paused Increments: Companies who have just finished their annual appraisals for the year have decided to pause the pay-outs indefinitely due to the uncertainty surrounding the current situation.
- Muted Salary Increase: Anticipating tough quarters ahead, and business getting further impacted, employers are giving low percentage increases.
- Delay Increments by a Quarter: Companies who were in the middle of the appraisal process or were yet to start have decided to put the process on the hold for at least a quarter.
Businesses need to stay logical and fair while being compassionate
Some employers have already rolled out contingency plans. Some have already declared pay cuts. Some have seen no option but to resort to furloughs and layoffs. A lot of employers are also currently taking a cautious wait and watch approach and are contemplating on how to tackle this problem. Whatever internal battles a company might be fighting at this point, there’s no denying the fact that good talent would be of utmost importance for businesses in these times of crisis. To ensure business continuity, to identify opportunities in times of crisis, to innovate, plan and operate new viable business models, companies would need their best people and their teams in place.
Employers need to manage cash flows, keep employee expectations in check and at the same time, retain their top talent. The best way to walk this fine line is to be transparent in communication and table all the facts clearly so that all employees know what is coming their way. It is important to keep communicating, and call a spade, a spade!
Lastly, no one can really be blamed for the decisions that are being made under these unprecedented circumstances. It is a difficult time for all and what everyone can do best at this time of crisis is keep trying. Managers need to keep trying to find that balance between maintaining employees’ and customers’ health and ensuring business continuity, while employees need to dive deeper into the reasons behind decisions taken by companies and honor them, even if realistically they find it difficult to wholeheartedly support them. The challenge for businesses and talent leaders would hence be on how to make informed but compassionate people decisions amid the COVID-19 crisis and ensure that the organization comes out of the crisis with a team strong enough to get them on the path to financial recovery quickly.
Manager – Customer Success