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US tech firms continue to overhaul reward programmes

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US tech firms continue to overhaul reward programmes

A year after the dot-com bubble began to bust in the US, west coast technology firms continue to fine-tune their compensation programmes to achieve the right balance between employee attraction and retention, cost control, and preparing for economic recovery, according to a new survey from Mercer Human Resource Consulting.

Key survey findings

  • Three-quarters of large technology firms in the western US (75%) have lower salary increase budgets for 2002 compared with a year ago. "Yet most of the firms surveyed are holding relatively steady on their new-hire offerings, their use of stock options, and many elements of their incentive programmes all designed to support employee attraction and retention," says Reese Bacon, a senior compensation consultant and technology industry specialist in Mercer's San Francisco office.
  • The companies surveyed have taken a number of steps to manage their compensation costs in the difficult economic environment. The most common include: targeting pay increases only for top performers delaying pay increases and decreasing the workforce/layoffs.

"Technology companies are generally more willing to make tough decisions related to reward allocation in a period of diminishing resources," Bacon says. "Because of the relentless volatility of this sector, daily survival is a top priority, so their management tends to be much more comfortable with thorny issues about who is recognised and rewarded, and who isn't."

  • Stock options remain an important part of the total compensation package for most survey respondents, especially at the executive and management levels. Not surprisingly, most survey respondents are dealing with "underwater" stock options. A fifth of firms are making another "out of cycle" grant to address this issue, while a smaller number plan to cancel the underwater options and grant new options after six months.

A final word

"Technology firms today are contending with a number of competing forces. They have smaller overall reward budgets, but they have to prepare for the future by adequately rewarding their star performers and competing for new employees in a job market that remains relatively tight, especially for technical specialists who can easily migrate to more lucrative opportunities elsewhere." — Reese Bacon, Mercer Human Resource Consulting.

Want to know more?

Title: 2002 Tech Sector Compensation Practices Survey, Mercer Human Resource Consulting.

Sample: Conducted in March 2002 by Mercer's Technology Industry Group, the survey drew responses from 64 large technology firms in the western US. The largest group of respondents (42%) is from the pacific north-west (Oregon and Washington), followed by the mountain region (Arizona, Colorado, Texas, and Utah) at 26%.

Business sectors: The largest industry sector represented was computer software/services (31% of respondents), followed by semi-conductors (22%) and telecommunications (17%). More than half of the respondents (55%) have 1,000 or more employees and more than a quarter (27%) have $1 billion or more in annual revenues.

Availability: For more information, visit www.mercertechconsulting.com.

Take a look at the press release, see what you think . . .

www.mercerHR.com/pressrelease/details.jhtml?idContent=1062030

Mercer Human Resource Consulting (formerly William M Mercer) is a global firm that "helps organisations create business value through their people". With more than 13,000 employees in some 40 countries serving clients worldwide, the company is part of Mercer Consulting Group, a wholly owned subsidiary of Marsh & McLennan Companies, Inc.

For more information visit the Mercer web site on www.mercerHR.com.

Mercer's technology industry group focuses on the specific human resource challenges facing technology companies today. The group is guided by an advisory board consisting of 20 vice-presidents of human resources at technology companies and two academics whose research focuses on technology enterprises.

Posted 24 July 2002