Businesses Scrambling to Keep and Attract Key Employees

Posted on | October 31, 2008 | No Comments

Prior to the recession, businesses used pricey incentives like stock options, equity stakes, profit-sharing and performance bonuses to attract and retain talented employees.  But, decreased earnings and obliterated stock prices have left many companies scrambling to salvage those incentives and retain key employees.

A new survey from Deloitte revealed that, of the 151 U.S. companies surveyed, 59 percent expect their annual incentive plans to pay out below target, while 11 percent believed there would be no pay out at all.

Among those companies offering stock options, 63 percent report that all or most of their stock options granted within the past five years are currently “underwater” (the exercise price is above the current stock price).

At the time of the survey, 40 percent of companies had already implemented an employee retention program to try to hang onto key executives and other valued employees, with another one-third taking a “wait and see” approach.

So, what can you expect if you’re one of the chosen few, the key execs or employees?

Of companies that have or plan to implement retention programs, 33 percent say they created special programs for small groups of key employees that they are most concerned about keeping.

About 25 percent of these companies say they will modify short- or long-term incentives to increase their value to employees, but 78 percent say they won’t rejigger their annual incentive programs just yet.

Instead, most companies (53%) are promising to change 2009 bonus criteria and performance metrics to make them more achievable in light of current economic conditions.

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