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Will Your Best People Flee Once Recovery Takes Hold?

by Eric Daugherty

In the next few weeks we will be publishing the results from our 2009 Sales Compensation study. Compiling the data was a lengthy, arduous, and enlightening process. As you would expect, data reveal that quantum changes have taken hold since our last Sales Comp study in 2007. More interesting to me than the data itself, though, is what we heard from the many interviews we conducted with industry executives. Companies reacted to the economic crisis and changed their treatment of employees in a multitude of different ways.

Broadly, companies reacted to the crisis on a continuum that ranges from "duck and cover" (change nothing, wait for the storm to pass) to "opportunistic rationalization" (use the crisis as an opportunity to make needed and innovative change). Most striking, however, is the difference in how companies are treating their employees, particularly their best performers, during the crisis. Some companies continue to reward their best employees handsomely while cutting back the pay or positions of lower performers. Other companies seem to be intent on sharing the corporate pain equally across all employees, cutting pay, perks, and positions across the board.

This latter option is dangerous. While it sounds good, fair, and right to share the pain across the board, the reality is that doing so puts the long-term health of the firm at risk. We all know that top performers add far more value than lower performers (to the tune of 2-4x the level of productivity). The 80/20 rule is real. Top performers are also most likely to continue to work their tails off despite the challenging environment, and may be discouraged if this extra effort yields reduced pay. They are the ones who will have the most opportunities to leap to a competitor if/when the market turns around. Our interviews reinforced that this industry is a tightly-linked network. Your competitors all know who your best people are, and they will snatch them from you if you do not keep them engaged and happy.

So, what do you do when resources are at a premium? We found that a few companies are getting creative:

• Eliminating other roles instead of making compensation cuts for high performers


• Using discretionary bonus pools to disproportionately reward higher performers


• Giving high performers additional responsibility, territories, perks, recognition or other things to ensure they know how important they are to the organization

It would be easy to ignore the threat of turnover these days. There are enough other things to worry about: cash flows, regulation, etc. However, as the financial market rebounds, so too will the job market. The first employees to leave will be high performers who feel unloved. Start thinking about this now, because replacing high performers is difficult.