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New responsibilities merit
increased compensation

Millions of American managers are taking on more responsibilities than ever before. But in too many cases pay and promotions are not keeping pace. Leaner organizations, longer hours, and the tendency of job responsibilities to lag behind reward and recognition are creating a compensation gap that’s leading to higher turnover and lower morale in many companies.

“Some executives are doing the work of two or three people,” says Michael Carrillo, president of CPGjoblist. “Middle- management ranks have been slashed and support personnel have been cut. Pay and promotions policies that reward and recognize productivity are needed,” Carrillo says.

One-two punch

“Increased work without increased pay is a costly one-two punch to retention,” Carrillo says. The cost of hiring and training a top executive can range from $75,000 to $100,000 or even higher, according to an article published by the American Management Association. “Estimates of turnover costs may range from 25 percent to almost 200 percent of annual compensation,” F. Leigh Branham writes. And these figures do not include more difficult to measure metrics such as “customer service disruption, emotional costs, loss of morale, burnout and absenteeism among remaining employees, loss of experience [and] continuity, and corporate memory,” the consultant says.

Retention expert Gregory Smith says the top reason employees quit their jobs is that “management demands that one person do the jobs of two or more people, resulting in longer days and weekend work.” He ranks cutbacks in administrative support and frozen raises and promotions as the next most common causes of preventable turnover.

“When an employee can find a comparable job earning 10 or 20 percent more at another company, it’s no surprise so many valuable managers vote with their feet,” Carrillo says.

Recognition important, too

“When someone is doing a vice president’s work,” Carrillo says, “they not only expect a vice president’s pay, but a vice president’s title. A sense of recognition is just as important as pay to many executives,” he says. “Employers don’t need to pay the highest wages in the industry in order to recruit and retain valuable employees, but they must stay competitive--and they must provide the increased recognition that goes with increased responsibilities.

Performance-based bonuses are one way to reward and retain talented executives. “Top executives are paid for performance,” Carrillo says, “and so should other managers. Research shows that performance-based bonuses for middle managers can improve total profitability even more than CEO stock options.”

“The beauty of performance bonuses is that they grow and shrinkwith profitability,” according to Bill Coleman, senior vice president of compensation at Salary.com. “In contrast to base salary, bonuses are usually not guaranteed from year to year, so they can be an effective way for an employer to have a lower fixed component of its personnel budget,” he said.

Carrillo points out that bonuses tied to profits not only incentivize output but help hold down costs by discouraging executive-driven expenditures.

Salaries lag behind

Compensation is lagging behind both profits and productivity. While productivity--the output of goods and services per hour worked--has grown 4.1 percent annually since 2001, worker compensation has grown only 37 percent as fast as productivity, the Economic Policy Institute reports.

Commerce Department data released last month show that wages are falling behind profits. Wages and salaries have grown at a 1.9 percent average annual rate, after adjusting for inflation, half the rate of previous recoveries. Corporate profits, by contrast, have grown 12.8 percent per year.

Today’s motivation problem is tomorrow’s retention problem, Carrillo says. Competitive compensation is key to retaining a productive workforce, along with career development, flexible work/life options, and strong leadership.

“The organizations with the lowest turnover are those where leadership makes retention a priority,” Carrillo says. “Too many companies delegate the retention issue to human resource departments instead of holding top leadership accountable.”

“When employees step up, companies need to reward and recognize them--or risk losing these valuable assets to other companies,” he says. “Paying competitive salaries is not an altruistic gesture--it’s a competitive tool that pays for itself through higher productivity, better motivated managers, and higher retention of your most valuable asset of all—people.”

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ALL-STAR EVENTS: Colin Powell, Carly Fiorina, and National Diversity Council CEO and Founder Dennis Kennedy will appear at the Texas Diversity and Leadership Conference and HealthCare Diversity Summit, May 15-16 in Dallas. Other speakers at the May event will include United States Treasurer Anna Escobedo Cabral and Dr. Larry Faulkner, president of the Houston Endowment. The California Diversity Council is hosting the Greater Los Angeles Women in Leadership Symposium June 5, 8 to 11:30 a.m., at the Hyatt Regency Century Plaza in Los Angeles. Speakers will include Edith Perez, partner, Latham & Watkins, and Apalla Chopra, partner, O'Melveny & Myers LLP. The California Diversity Council will host its own California Diversity and Leadership Conference and Healthcare Diversity Summit in San Francisco, September 20-21. Speakers at the California event will include Kennedy, actress Geena Davis and Chris Gardner, the Wall Street success story who inspired the film, “The Pursuit of Happyness.” Chancellor Robert Birgenau of the University of California, Berkeley, is honorary chair of the California summit. CPGjoblist is a sponsor of the California event and the California and Texas Diversity Councils, both part of the National Diversity Council. http://www.nationaldiversitycouncil.org

MARK YOUR CALENDARS: For the National Association of Chain Drug Stores, April 21-25 in Scottsdale; the National Frozen and Refrigerated Food Association Executive Conference, April 30-May 2 in Tempe, Ariz.; General Merchandise Marketing Conference, June 1-5, in Scottsdale; the IDFA Milk Technology Conference, June 4-6 in Denver; International Dairy-Deli-Bake 2007, June 3-5 in Anaheim, Calif.; and the GMA Executive Conference, June 6-11 in White Sulphur Springs, W. Va. See CPGjoblist’s Calendar for more events and updates.

ON THE MOVE: Jack Laurendeau has been appointed vice chair of AcostaMary Minnick, EVP and president of marketing, strategy and innovation, will leave Coca-Cola to “pursue a combination of professional and personal goals” in the UKBeam Global Spirits & Wine has appointed John Walter to the new position of director of corporate affairs, international...The Brewers Association has appointed Julia Herz director of craft beer marketing. She replaces Ray Daniels, who remains with the association as director of publicationsSend your company news to editor@CPGjoblist.com

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