Total Rewards Philosophies & the Economic Downturn

When I first stepped into my current role I was greeted with a Total Rewards Philosophy that had been lifted nearly word for word from the example presented in the WorldatWork T1 course binder.  It wasn’t in any way personalized for our organization.  It became a priority to rework the philosophy so that it actually reflected the business strategy, values and philosophy of our company.  Now I find myself having to reevaluate the philosophy again due to changing business conditions.

Philosophies are intended to be long-standing documents that apply under various situations.  But we’ve all seen some of the fall-out from compensation programs that weren’t designed to adequately address the drop in the market.  I wonder how many philosophies have also been victims of the market.  Or did they all survive intact as intended because they were specific enough to be meaningful and broad enough to apply in differing circumstances?

Some philosophy statements talk about the use of equity as a reward strategy.  So what happens when equity is no longer a “reward” since everyone’s options are underwater?  Or what if the business actually needs to change in order to survive the downturn and afterwards?  Shouldn’t the philosophy change in that case since it should be driven by the business strategy?  Our Total Rewards philosophy (not the original generic one, but the updated one) has survived intact thus far.  However, questions are starting to arise about our reward strategy for the future that don’t always align with the philosophy.  So I know it’s just a matter of time until we look at what is working and will continue to work, and what has to evolve under the new economic conditions.

What do you think?  How many others are looking at their philosophies and thinking of evolution?

Darcy Dees works as the Compensation Manager for Rock Bottom Restaurants, Inc., headquartered in Louisville, CO.  She has been working in Compensation for over 5 years now and recently attained her Certified Compensation Professional (CCP) designation.  She spends what little free time she has hiking and reading.

Creative Commons Image:  The Philosophy Room by MingJun Chen

 

Comments

[Paul Hebert]

Darcy - If you reward philosophy is still intact you should take a well deserved bow for putting it together correctly.

I think when a proper philosophy is put together the "tactic" or delivery mechanism can change. In your example of underwater stock options - equity is a tactic - the philosophy is to share the growth of the company. How you do it can be variable.

It would have to be a pretty big change in the business model to really impact a reward philosophy in my mind. Again, if properly articulated.

Still - it would be interesting to see how many philosophies have to change because they were tactical plans in the first place.

[Doug Sayed]

Thoughtful post Darcy and discussion (Darcy and Paul).

It seems there should a meaningful change in business strategy to make a meaningful change of comp philosophy and strategy. Tactics may change (like Paul comments) in the short-term, but the overall philosophy need not necessarily change.

In today's environment a lot of companies are making short-term adjustments, but hopefully once they and the economy regains its footing, a return to an aligned and sound comp strategy (and the tactics utilized to implement it) will take back over.