Workscape Institute

It’s widely believed that significant economic shifts can alter the perceptions and behaviors of those populations impacted by them. Theories about increased savings rates and altered consumer behavior as a result of the “Great Recession” abound.   In the HR world, leaders are scrambling gain clarity as to whether the profound effects of this recent downturn have shifted the priorities of their employees.  Findings from Towers Watson’s 2010 Global Workforce Study, discussed at the 2010 WorldatWork Total Rewards Conference (membership required), would suggest that the short answer to that question is a clear “Yes.”

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And, while the data may not be shocking for many, the findings suggest a gap in the needs of businesses and employees that may cause vendors and practitioners to reconsider their strategies for retaining top talent.

In the United States, most businesses are still carefully managing labor costs. This approach is reflected in merit budgets that have recovered somewhat from 2009 levels but are still substantially below 2008 levels.  Towers Watson’s 2010 Global Flash Survey found that nearly twice as many U.S. organizations planned to give 0% merit increases in 2010 as had in 2008 (11% up from 6%, respectively), despite signs of a recovering economy.

This prudent management of employee compensation spend is not surprising in light of the tepid growth projected for 2010 and 2011, and the uncertainty of when and whether or not the boom times will return.  However, it’s a difficult road to hoe when examined against the changed expectations of employees in the aftermath of 2009’s turbulence.

While emerging countries, whose economies were less directly affected by the core causes of the downturn, employees are still confident enough to be looking ahead: “career development opportunities” topped the list of attraction drivers in China and India.  The next biggest factor in deciding where to work in those countries was “learning and development opportunities” – presumably because it held the promise of career advancement!  A similar thread could be found in U.S. or U.K. employee surveys in 2006-07, but the story has changed.

In the U.S., U.K., and Germany – and for the aggregate global results – “competitive base pay” was cited as the top attraction driver for a job among employees surveyed in late 2009 to early 2010.  Compensation often been cited in the top 5… but in recent years it has tended to round out that list versus sit squarely atop it.  And among U.S. respondents, this notable shift is also evident by virtue of “competitive health care benefits” – which has jumped to number 3 on the list.  The latter may be somewhat affected by the winds of change in healthcare reform legislation, but arguably the same economic concerns that have precipitated compensation’s rise to the top of employees’ minds has also increased the weighting of other total rewards elements.

In an environment where employees view pay as the chief reason to stay with or leave an organization, but organizations are reticent to boost spending – the importance of leveraging scarce compensation resources in effective program designs and targeting the right talent to retain only stands to increase if the economy continues to recover.