Sweeping change


West Europe & CEE


In the middle of an economic downturn, today’s graduates are not just looking for an attractive salary as part of a job offer. Personal development is high on their wish list, as Bo Kremer-Jones discovers


There is little doubt that the economic downturn, which started in the US, has made its way over the Atlantic and is now rippling across Europe. There is increasing evidence of companies in the region introducing hiring freezes and initiating other cost-cutting measures as they prepare for bad times ahead. However, despite the gloomy outlook, the so-called war for talent is by no means over.


As firms once again struggle to do more with less, attracting and retaining the right people is becoming even more vital. How to do this effectively is one of the biggest challenges companies face. One weapon in their armour for battle is the compensation and benefits they offer.


However, this is by no means the only factor people take into account when considering where they want to work – as a recent study by the Community of European Management Schools has found in which pay ranked third in importance of what today’s graduates are looking for in an employer. The top two on their wish list, according to the study, were “an employer that not only offers opportunities for personal development (95 per cent) but one that is innovative (92.5 per cent).”


These results hold true in central and Eastern Europe too. “A few years ago people would jump for any amount of money, but this is changing as the market matures,” says an executive search director in the region. He continues, “There’s a shift in terms of what people want. Before it was compensation and pay, now it’s training and development. They are looking for career opportunities.”


However, offering good pay and other desirable perks can go a long way to being seen as an employer of choice and helps to hang on to much sought-after talent. Explains Mike Johnson, author of “How to become a Talent Magnet -Getting Talented People to Work for You (Financial Times/ Prentice Hall), “Not getting a raise, getting a meagre bonus can both be time-to-go triggers. In these times of shortage, you can almost guarantee that you can get more money elsewhere, if that is all you want,” he adds.


And he continues, “That is also, conversely, another reason people quit – new hires being brought into the company at much higher levels of compensation. This, sadly is almost inevitable as the market for scarce talent moves upwards.”


So who are the companies in Europe getting it right? Research-based pharmaceutical firm Schering has introduced a new share ownership plan for all employees, which, it reports, is the perfect solution for rewarding company performance. Above all expectations, three-quarters of employees eligible for the scheme invested in the plan. They clearly believe it’s an attractive benefit too.


Market research company ACNielsen has also found a great way to make sure managers keep their employees happy. “Twenty-five per cent of the incentive bonuses of our senior people are based on how satisfied the employees are,” explains Richard Savage, head of HR for Europe, Africa and the Middle East.


Sandwich chain Pràt   Manger goes one better. “When you are promoted in the company, you receive a cash bonus, but you are not allowed to keep it – you have to give it away to your staff.” Says founder Julian Metcalf, “people have gone out of their way to help you and you should give something back to them.” It is a great way to build company culture.


In the UK, DERA – a former part of the UK’s Ministry of Defence – pays considerably below market rates. Retention is very high, however. The reason is that it gives people what they want, including the ability to work on exciting projects, time off to speak at international conferences, encouragement to take lead roles on professional organisations all over the world and the creation of a “fellowship” programme for long stays that allows for time off to do blue sky research (cutting edge research of their choice).


Companies in central and Eastern Europe face problems too in retaining key staff. It is made particularly harder in the region as salaries are much lower than in the West. A spokesman for Global compensation adviser Watson Wyatt laments, “Compensation practices are labour-market driven, with qualified managers and specialists in short supply, particularly in Russia. So top management positions are generally staffed by expatriates, especially in start-ups.”


Yet, he adds, “There is still a wide differential when comparing local salaries in CEE with those in Western Europe, with local general managers paid 30 to 50 per cent less than in the West. Equally, he continues, “There is a wide discrepancy in wages between multinationals and local companies.”


This is especially true in Poland, says Watson Wyatt where, “multinationals’ pay levels are about 25 per cent above local companies. However, the spokesman adds, “Local employers are closely monitoring multinationals’ pay levels, both to compete for quality labour and to establish better salary benchmarks for recruiting.”


Recent research by Watson Wyatt has also found that, “The desire to retain key employees may be a driver in the increasing use of long-term incentives and deferred compensation. The use of variable compensation appears to be becoming more widespread, with more than 50 per cent of professionals now eligible.


“Although this is considerably less prevalent than in Western Europe, the numerous tax and other obstacles which employers face in implementing stock option plans and similar incentives largely account for this,” it notes.


So, no matter where you are, pay and compensation are no simple matters these days. But, they are important if companies want to have its share of the best talent.

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