Recession Hits Salaries and Bonuses, But Firms Still Pay Key Niche Players
Top executives who banked on big bonuses during the boom years have seen a significant portion of their compensation packages washed away during the current recession.
“The guys at the executive levels are the ones taking the biggest hit right now,” says Michael Ketner, head of executive search firm Michael L. Ketner & Associates, Pittsburgh. “They are the ones who benefit the most during good times and suffer the most in bad times.”
On average, executives are facing some of the toughest compensation scenarios in recent decades, says Jeff Robinson, president of research firm Personnel Administration Services, Saline, Mich. Its 2010 contractor executive compensation survey reports the lowest salary increases, on average, since the surveys began in 1984. In 2009, executive salaries rose 3.9% and are set to increase by 3.7% in 2010, according to PAS. In 2007, executive salary increases averaged 5.4%. But Robinson says the 2009 increases remained well above the Consumer Price Index, which was at 2.7% in December. “As long as you stay ahead of CPI, things are at least in positive territory,” he adds. The results are based on data from 2,662 executives and middle managers in 18 positions at about 265 companies.
“The overall theme right now is that firms are focused on hanging on to their best people,” Robinson adds. “At the executive levels, you see a lot of turnover and a lot of people in the twilight of their careers, so you need to do your best to keep them.” While average salary increases have dropped, they still outpace other management- and staff-level positions. Robinson says staff salaries increased 2.9% last year, on average. Typically, executive increases are about 0.5% higher than those for staff, but this year there is an even larger divide, he says.
Likewise, Robinson says roughly 25% of firms reported no increase for executives, while one-third did not offer raises to staff employees. He says nearly half of open-shop craft-level workers did not see an increase last year.
In some cases, current salary increases could be an attempt to temper the loss of bonus compensation. In surveying bonuses, Robinson says PAS saw “wild fluctuations” within the range of results. Many companies gave few or no bonuses, while others were very generous, possibly linked to the firms’ banking on a large backlog of work won before the recession took hold, he points out.
Despite the current compensation results, recruiters say many firms are still desperate for top talent to lead them through the tough times. “We’ve been through a period of reckoning where many firms realized that, as times got tough, some of their people weren’t up to snuff,” Ketner says. “Anyone can make money when times are good. Firms are looking to upgrade to those who can make a difference now.”
In the face of falling revenue, employers are highly motivated to invest whatever is necessary to attract or retain a strong performer, Ketner says. “If a guy says he can’t move because he’ll lose $50,000 in home equity by selling now, you’ll see a company hand that guy a check for $50,000,” he says. “They pay what they need to pay to get the guy that’s qualified now.”
Industry compensation varies by sector. Recruiters say that firms focused on the public sectors, such as transportation, infrastructure and federal building work, are willing to pay well to retain or attract talent. “I’ve done searches for residential developers looking to open a new infrastructure subsidiary or an institutional contractor looking to set up a federal business unit,” says Frank Bruckner, executive vice president at Kimmel & Associates, Asheville, N.C.
According to Tom Helbling, president of executive search firm Helbling & Associates, Wexford, Pa., even in a weak market, employers want job candidates with the right skills and motivation to help the employer succeed. While some executives may choose to hunker down where they are, “if someone feels that his or her existing organization doesn’t have the ability to endure this market or that the individual’s own growth will stagnate, those people are receptive to moving on,” he says.