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At a time when job candidates far outnumber available jobs, it would seem compensation strategy wouldn’t top HR professionals concerns.  But it should.

That’s right. Even in a recession, what you pay matters. Down markets have a tendency to overshadow the long-term benefit of effectively compensating employees by forcing an otherwise strategic decision-making process to become tactical. A negative quarterly report, the Dow Jones slipping, CNN doom and gloom, or losing a big client can result in acting on a common, defensive impulse to deal with today and worry about tomorrow, well, tomorrow.

A long-term approach to an employee compensation strategy can actually leave the visionary human resources professional … optimistic.

For those of us who were part of the local business community in the years following 9/11, we saw a mix of companies that benefited from their effective, down-market compensation decisions and those who experienced a mass-exodus when the market picked up and employees could find jobs elsewhere.

In any market, there are two things to consider when determining compensation. The first is what the cost will be to acquire the employee. The second is what it will cost to retain the employee. Now, inject today’s economic conditions and you will often find yourself focusing on the former and overlooking the latter. The reason? The entire workforce is on sale right?

Think again. While you might be able to get employees for bargain-basement prices now, you’ll pay more later when the economy turns and you have to replace them with much higher salaries and untrained new employees.

First Impressions Matter
Most of us have heard or spoken the phrase, “You only have one chance to make a first impression.” All too often, in the world of employer/employee relationships, we assume this phrase pertains to the job seeker. But those employers interested in retaining a long-term workforce, the true answer lies about 180 degrees away. While a prospective employee’s first impression of an employer is how they are treated during the interview process (certainly not to be discounted), the capstone of their first impression tends to be how their offer and, if applicable, compensation negotiation process was handled. Challenging times only magnify the positive impression of an employer when they offer compensation levels based on what an employee is worth versus what an employee can be landed for.  

Do It Right While You Can
The gift, and curse, of a tough market is the greater selection of prospective employees to choose from. The gift is that employers have rare opportunities to build the teams they want and not the team they must often settle for in a hot market. The curse is that we have a tendency to revert to freshman economics and let the principles of supply and demand dictate. Rewinding to the above concept of making a good first impression, it is advisable to do it right and hire smart while you have the chance and the inventory of applicants.

When times become more prosperous and lucrative opportunities abound, employees will recall, with absolute clarity, how they were valued from the moment they walked through the door. In many cases, this will minimize the “revolving door” effect and negate employers having to hire in bulk during times when qualified applicants are few and far between.

At the End of the Day…
Today’s market can blur anyone’s long-term vision of building a successful workforce. Many people and organizations are in survival mode and are doing what they have to do. The advisable method of talent acquisition and retention is to imagine the following: What if we woke up tomorrow, the Dow was at 12K, unemployment was at 3 percent and there were twice as many open positions as there were qualified people to fill them? How would our employees feel about their jobs and current compensation packages? Your honest and objective answer will dictate how you evaluate compensation decisions moving forward.

Jason Alexander is principal of Alexander Technology Group, a  technology staffing firm in Bedford. He can be reached at (603) 637-1466 or jalexander@alexandertg.com. For more information, visit www.alexandertg.com.