Where to prune, whom to motivate and the all-important issue of credibility!

The approach in pruning compensation seems to have been unscientific and the strategy smacks of Hercules and his easy way out – Pic by Shehan Gunasekara

Friends have been asking me about how to set about making cuts in their salary bills, apart from the legal issues involved. Most of them are taking the easy way like the simple solution of Hercules when faced with the challenge of the cleansing the Augean Stables – just turn a river to wash the stable without considering what could be useful in the future! 

The reaction so far has been a ‘kneejerk’ one with little planning and consideration of what may also be the opportunities of having people with institutional knowledge. The steps taken have been to just save rupees irrespective of the people, their value to the organisation, and how this valuable resource lauded in the past had become a burden.

Another preliminary issue from a ‘human capital’ background, is that all the letters addressed to employees conveying the news of salary cuts and other bad news start by asking about the wellbeing of their families. Would it have been more empathetic if first the question was asked about the wellbeing of the employees and then to address a subsequent letter with specific painful consequences to them?

The first inquiry about their personal safety and wellbeing becomes just window dressing and is not perhaps the best approach when dealing with people whom you once wooed as the backbone of your organisation.

Approach in pruning compensation

The approach in pruning compensation seems to have been unscientific and the strategy smacks of Hercules and his easy way out. The reductions based on salary slabs, although the simplest to impose, disappointed the valuable employees. Do the cuts help in relation to the organisation and the challenges to its viability, and need for cooperation to re-engineer itself to become a viable entity?

If you have two people who are at the same salary point in an organisation which is efficiently managed, it does not automatically mean that both of them are contributing the same value to the organisation. One maybe the head of a unit within the organisation and doing the minimum in terms of achieving performance targets with his brilliant team doing all the work. Another maybe carrying his whole team and doing his best for the organisation sacrificing his spare time thinking of how he could make the unit he works in, more effective, or how some new thoughts could make things better. Both have to accept the same pruning down of compensation in the manner adopted above. 

The better performer may wish to be recognised more for his contribution. This is usually taken into account through a performance appraisal. Would it have been more acceptable to employees to be told: ‘Look we have a serious cash issue and we are able to pay you only X% of your salary at the moment but we will restore your full pay if and when we can. However, we also need to alert you to the fact that external conditions as much as your performance will determine what happens to our organisation which may even have to close if the situation does not improve?’

There are many arguments for adopting the simple method of pruning expenses. However, what may be best is for the organisation to first go back to the drawing board and rethink its budgets and what it hopes to achieve in the rest of the year and set new KPIs for all management staff. Perhaps they could still impose a uniform pay deferment but for those who achieve their revised targets and KPIs they could top up the salaries or pay a bonus which compensates them better than those who have failed to meet their KPIs at the end of the year? I would like to deal with another important aspect of the plight that the employers find themselves in. They have a government and other political parties vying for votes at an election which is imminent. The Government may eventually help the private sector with loans or maybe even a temporary acquisition of shares, hopefully, in the share market and not through arbitrary means. 

The JVP, which is the strongest union in the private sector, is ideally placed to create difficulties for the Government. That said, although initially they took an ‘old fashioned’ stance of being against the private sector, they learnt very fast on the virtues of bargaining and dialogue and have become a respected spokesman for employees in the private sector. 

In the apparel sector they have internal mechanisms for dialogue, the Employee Councils. It is essential that employers see the importance of internal dialogue and leave the Government out of employee related issues. For that the Government must have the confidence that employers are concerned about its priorities, which is the challenge for the chambers and the EFC.

Proper dialogue urgent

It is urgent that a proper dialogue which is not about management conveying their views and their intentions, but listening to the views of employees, and their expectations; and deciding what could be done to be fair without the whole institution being destroyed, takes place. 

The relationship built up by line managers and HR managers will now be seen clearly. Where they have failed to maintain a proper relationship, the higher management will necessarily have to establish a closer relationship and demonstrate that at the highest level the views and aspirations of the employees receive due attention. 

Connected to this point is the need to assure employees that, if redundancies occur, those laid off will receive first preference when recruitment takes place.