When it all goes wrong

Sudden
windfalls can be hard to adjust to – but not as hard as losing it all. How can
HR help dotcom dropouts overcome the shock? By Alison Thomas

Not
so very long ago a US psychologist called Stephen Goldbart coined a new phrase:
sudden wealth syndrome. Young executives who had become overnight millionaires
were having trouble coming to terms with their dramatic change in lifestyle.

Now
he has coined another: sudden loss of wealth syndrome. The burst of the dotcom
bubble has brought not only financial distress in its wake, but psychological
problems too.

It
is not all doom and gloom, however. Peter Kilgour, managing director of Towers
Perrin UK, has noticed that many of the people with specialist skills who
deserted other sectors to join the dotcom bonanza are returning to the
corporate womb. Quite maturely, their former employers are organising welcome
back programmes for the lawyers and consultants they once failed to keep.
Perhaps this time they will stay, for they are older, wiser, more content with
life and less enthusiastic about going it alone.

Severe
pay cuts

That
is one scenario. Another is the company which has suffered setbacks without
going under, and whose wealthy employees face severe cuts in pay. This is particularly
acute if their earnings are tied up in stock options. Talented people are even
more valuable when you are going through a rough patch. How do you keep them on
board?

Mark
Childs of Fidelity Investments sees it as a communication exercise. "Like
investors, employees make a flight to quality in recessionary times. You have
to make them believe in the future prospects of the company. If you have a good
business case to present when things go wrong, you should be out there
convincing the executives. If not, the future looks bleak and they will
probably leave. All you can do then is to learn from your mistakes and move on."

Pleasing
disgruntled staff

If
stock options are massively underwater, it may be harder to appease disgruntled
staff. However, if these are granted in regular cycles, the situation is still
tolerable, as the gains and losses should even out over time.

The
real problem lies with block grants, a common feature of start-up packages.
Some companies offer short-term cash bonuses to compensate, but it is a costly
solution at a time when finances are tight. Another possibility is to regrant,
but this is unpopular with investors and you have to present a very good case
to justify it.

Getting
rid of ‘fleas’

A
third alternative is to do nothing, and focus your efforts on persuading
employees to re-engage with your vision of the future.

"Downturns
and recessions are a fact of economic life," says Damian Carnell,
principal in the executive compensation practice at Towers Perrin. "In
many ways, it is like the economic fox ridding itself of fleas. When you go
through the downturn, the well-run companies with good ideas and good people
will survive.

"As
you come out the other side, the fluff, the inefficient, the ill-conceived
ideas have all been washed away. The survivors then have a clean playing field
and it is a strong platform for future growth. It is a painful thing to say,
but that is how the economy works. I just hope the present slowdown does not
last too long."

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