"Our policy is to have no more promotions or raises this year. We need to show that this company is serious about doing what is necessary for profits in 2009."
Have you heard this type of statement at your organization yet? It seems to be an approach that’s gaining in popularity; particularly in large public entities.
Two large organizations with whom I work have already implemented it as a strategy. I expect to hear more about it as people worry about continuing bad business reports and the outlook. I believe it’s a bad policy. It probably can’t remain in force for any length of time. But during that time, a lot of unintended consequences can occur.
Here's why: Generally this type of policy has a negative impact on two types of people pretty quickly. First are those individuals who are regarded as high potentials or stars. It causes them to wonder if there’s any reason to stick around: "I know I’m good and valuable; but if I can’t move ahead in either title or comp, why not move elsewhere?" It can also get others in the org wondering about the same thing but for a slightly different reason. I’m talking about those who have felt for a long time that they are "due" for a raise or promotion because they have been neglected or underpaid and may feel a bit cranky already. Now told that they can’t expect any change this year, what’s the downside to shopping for another role?
So the organization has an entropic environment started. There's more good stuff going out than coming in. And those who are left may be the people who don’t make the most significant contributions. Then, after a while, the organization’s leadership starts making "exceptions to the rule" to try to keep the good ones from leaving. And word gets out. This causes more consternation and disappointment within those who’d stayed within the policy guidelines. End result is a net loss in talent and productivity.
My advice - don’t make this type of policy in the first place.
That said, I have recently come across something of interest for those of you who are already living in an organization that doesn’t intend to do what it takes to keep their best players. It’s a fairly new website that could help you figure out what other opportunities look like.
In an article in the February Portfolio Magazine by Kevin Maney, he mentions a new site that seems to be getting all the funding it needs to grow during this economy. It’s a neat idea, providing a person who signs on to it to get insight into how other managers and leaders are paid at other organizations.
Called Glassdoor, it’s a site full of actual pay levels and titles at real companies in various communities across the country. To find out what someone with the same title is making at a competitor, all you have to do is sign up and agree to provide (anonymously) your information. Then, voila, secrets at your fingertips!
Maney goes on to note that even during bad times, there’s money for startups in the tech sector. He sites some great examples like HP which started in 1939 (your Grandpa’s Depression), Microsoft came about in 1975 - and that economy was regarded at the time, by a lot of boomers, as the beginning of the end of capitalism. Cisco was founded in 1984 during an era of impossibly high interest rates and lack of capital. And, he reminds us, the dotcom bust in the 90s begat LinkedIn, MySpace, Vonage and Wikipedia.
All that to say that good talent doesn’t need to - and won’t - stay in a place where they’re landlocked.
John M. McKee is the founder and CEO of BusinessSuccessCoach.net, an international consulting and coaching practice with subscribers in 43 countries. One of the founding senior executives of DIRECTV, his hands-on experience includes leading billion dollar organizations and launching start-ups in both the U.S. and Canada. The author of two published books, he is frequently seen providing advice on TV, in magazines, and newspapers.