Talent Management Considerations to Conserve Cash
The costs of maintaining a company's workforce or "talent" make up a significant portion of the operating budget of most companies. This makes salary and benefit costs a natural bull's-eye for cost reductions in these economic times. It is currently estimated by, The Pension Rights Center Web site that over 80 companies have cut the matching contribution in their 401(k) plan. These cutbacks are on top of the "freezing" of defined benefit pension plans and increased cost sharing of healthcare costs by many companies over the past several years. Employers in general are considering benefits reductions as part of their strategies to conserve cash. What impact this will have on talent retention is yet to be seen.
Any company CFO that is considering these types of cost savings need to step back and be sure they understand all the parameters they can work with. Where can you chip away to get the biggest bang for your buck and minimize damage either to current morale or long-term reputation? Employee morale, retention and the attractiveness of the company to future talent must also be kept in mind. The current economic environment obviously affects employee morale; employees today watch the news and know how bad the economy is. Many are thankful they have a job and recognize the need to cut costs. But the tug-of-war for talent is not over. Company promises and the way benefits are managed now will shape employee trust in their employers. Usually a CFO will work with a retirement committee that mediates changes before any new plans can go to the Board.
CFOs will have to ensure consistent policies and communication on talent rewards. Employees will understand as long as they see the benefit change as a consistent corporate policy. Cutting benefits to lower-level employees while providing cash bonuses for the senior executives is unlikely to play well as the company comes out of the recession. When you go back to the...