Tuesday, November 11, 2008


IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations
-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor
---------------------- Stuart Basefsky
New York, NY 10016
-------------------------------Director, IWS News Bureau

Towers Perrin

Press Release 7 November 2008
Towers Perrin Survey Finds that the Economy is Forcing Companies to Evaluate Compensation and Incentive Plans
Current Approach to Cutbacks Reflects Smarter Strategies and a Focus on Long-Term Profitability

STAMFORD, CT, November 7, 2008 ­ Current economic pressures are forcing many companies to take a hard look at their compensation and incentive programs to find ways to cut costs, according to survey findings released today by global professional services firm Towers Perrin.  Contrary to past economic downturns, however, the focus on mass workforce reductions has shifted to more targeted, strategic workforce reductions and cuts in other discretionary spending.

The "pulse" survey of more than 450 companies from a range of industries and sizes was conducted in mid- to late October 2008, and provides the most current insights into how U.S. companies are thinking about the workforce and compensation trends in response to recent economic turbulence.

"The commitment to the retention of key talent is a significant shift from past national recessionary periods, when a slash-and-burn mentality reigned," said Ravin Jesuthasan, Managing Principal in Towers Perrin's Chicago office and a leader of the firm's Rewards and Performance Management practice globally.  "Companies are entering this period with leaner workforces and the knowledge that across-the-board mass layoffs can create significant long-term problems."

In fact, the study found that 66% of respondents believe a significant reduction in head-count at their organization is somewhat or very unlikely, while less than half (46%) think a more targeted head-count reduction is probable.  Nearly half (49%) of those polled are somewhat or very likely to reduce pay/merit increase budgets, and nearly four out of 10 (39%) are considering a reduction in annual incentives and bonuses.

While cuts to bonus and salary increase pools may be preferential to mass workforce reductions, organizations recognize the importance of rewarding key talent and honoring bonus commitments in some form.  A full 54% of those polled are somewhat to very concerned about turnover of their high-performing and business-critical employees as a result of the way the organization handles the economic crisis.  To address this issue, many organizations are taking a proactive approach: 30% are considering cash retention awards and 41% are considering targeted salary increases to help retain and motivate top performers.

The survey also found that, in the companies most adversely affected by economic and market turmoil, compensation and rewards cutbacks are targeted for all levels ­ from the senior executive ranks to line workers.  For example, when comparing expected 2008 bonus payouts with those from 2007, respondents noted that any changes or reductions in compensation will be roughly the same for senior executives, middle managers, supervisors and nonmanagement staff: A quarter of the companies surveyed expect bonuses will drop more than 25% year over year across the board, while 39% of those surveyed believe 2008 bonuses will stay about the same as last year's for all employee groups.

AND MORE....scroll to 2 CHARTS at bottom of page....

This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       
E-mail: smb6@cornell.edu                  

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