This is an interesting time to think about compensation, and related areas, given the fact that most companies are more worried about costs and how not to compensate rather than the other way around. However, this is actually a good time to revisit some of the principles and test whether they stand the test of time and economics. Here are some random thoughts–hopefully in keeping with the times.
a) Given good economic growth in last couple of decades and the hiring spree of companies, talent often has been overpaid just to be attracted or retained. At an individual level, this may give the illusion of value creation –i.e., because someone is willing to pay me more, I am more competent. This may not be true and in fact, is most likely an outcome of labor market economics, and general business sentiment. When the chips are down, as somewhat now, the wheat will be separated from the chaff, and hopefully a sense of balance will prevail–what am I really worth?
b) On the other side, it is a good test for companies. How much am I willing to pay just for marginal value creation? When competition and tough times really hit, the question of the worth for every single asset paid for (or costing the corporation) is raised–same applying to human capital as well. And underperforming assets have to be dealt with.
c) The usual framework for most employees will change and rather than discussions on salary, other elements will take over. Job security, performance measurement and opportunities for sable growth will be much discussed–as is quite evident in language of managers and employees now, as well as the media. This will take the pressure of management and HR leaders who will hopefully have opportunity to have a more balanced view of other HR functions rather than just hiring/retaining at any cost and sometimes even being blackmailed by talented employees.
d) Most of the younger workforce, and that’s plenty in India, have not really seen tough times. They will get great exposure to “cost cuts”, “asset rebalancing” and may similar phenomenon which should be good for the industry to mature well in the long run. A workforce which sees only white and has not experienced black or even grey is not rounded enough to be a major player in the global economy.
e) B-school students and their prospective employers will also see beyond the sheen of management education. My view is that most companies will strengthen their talent management systems overall and will be better off in the medium run while also setting a more realistic way forward for acquiring, grooming and nurturing talent, which will be healthier for professionals as well as companies.
f) Finally, employees will take a more holistic view of compensation, not just material rewards but development, company brand, learning and overall well being. It has been the attempt of many HR professionals to get there but given the boom over the last few decades, has been almost impossible… Perhaps this economic downturn will support that thought process and the external forces will bring about a much needed change.