Employee Pay and Pay Raises in the “New Normal”—Hey Google, What’s Up?

I do not have to tell any of you that the past couple of years have been rough.  Most companies and industries have really struggled, making very intense cuts to their workforces and for many companies, their existing payrolls.  All but a few of my clients have either implemented pay increase freezes or instituted 5, 10, or 15% pay cuts across the board.

What is different about this downturn is that it has been lingering for a long time.  Even the downturn after 9/11 which was projected to last for at least two years recovered well in 6-8 months. It has been a long haul and a tough grind for most employees. Not only have they taken pay cuts or haven’t seen a raise, but with all of the layoffs companies are lean and everyone has been picking up the slack for their laid-off counterparts.  And it almost seems in synchronicity that employees in companies in the past few weeks are starting to clamor publically about getting their pay restored or are looking for raises.  And this is interesting as the economy, although showing some positives, is still weak.  So, in the past month I have been reflecting about why now.  Is there a statute of ‘emotional limitations” for employees that projects that is just has been too long?  Are people simply too stressed out about finances, is this a Gen-x or Gen-y thing, are people  incited by the riots ion Europe or are employees yearning for better days more intensely due to the long wait?

Yesterday, Google made headlines for giving 10% pay raises to the entire workforce…their entire workforce.  Wow!  Shortly after the news of this was released, I received an interesting email asking my opinion on this move asking:

“Is this healthy, wise, and prudent?”

What a great question.  Will the raise just be a superficial fix or is this a brilliant leadership move in a very morale-downtrodden work environment?

And the answer to this is not as simple as it might be in a healthier economy.  There are some subtle and not-so-subtle aspects to take into consideration.

In general, throwing money at problems rarely works.  Too often it is used as a quick and temporary fix to a deeper issue.  And worst, in cases where it is used to avoid dealing with core issues, it will only set a bad precedent and will come back to hurt and haunt companies. As for Google, I would imagine they are taking this into consideration as they have a long standing positive reputation for investing in their culture and attention to employee engagement.

But here is something to consider.  Employees are burnt out in many ways.  And many, rightly or wrongly, have hard feelings towards their companies due to the pay restrictions over the past two years.  And even if they know intellectually that it is just a natural part of the downturn, their emotional sides feel differently.  It might by analogous to dating someone during a time of your life where something really bad happens to you.  You  might not be with that person over time just because you associate them with the tragedy, a sort of guilt by proximity or association..

Following is an example of some of the torment companies are struggling with currently.  Over the past holiday season and the one coming up, companies are having intense meetings to determine whether or not to hold holiday parties. This is probably what it sounds like in that holiday party planning meeting. “This will show hope and appreciation.”  “Will we be sending the right message?”  “Should we drop the party and give people bonuses as it has been long overdue.” “I’d rather have more money in my paycheck then have a stupid party.”  “But the party will help bond us and give us a chance to relax and laugh as a team as it has been so long.”

This is what companies are struggling with.  Employees are not happy with all of the uncertainly and pain of the day.  Keep in mind that it is historically typical to have mass movements out of companies after a downturn when the economy starts to pick up.  This is because there may be just too many bad feelings for people or that they feel their career has stalled for two years and they have to do something to fast track it.  This is why companies better be communicating hope and vision for the future and have a clear strategic plan in place to show their employees they are on top of things and good things are coming.  The War for Talent is back on again except right now it is a cold war that will eventually erupt into a full-on combat.

Companies today need to start being forward-thinking again.

For many organizations, they have had to shorten their horizon view due to basic survival.  But a company cannot stay there for long.  Great companies over all industries have already begun to reposition  and reinvent themselves for the future.  Now, it cannot be change for change’s sakes but it must be a thoughtful anticipation of  balancing surviving today while preparing to take advantage of the opportunities of the future.  This is not only important to the business but to the employees.  When employees see an innovative and thoughtful plan for the future they start to get their needs met and see the ‘fast-track’ opportunity by staying with their current employer.  Failure to do this will put an organization on the losing end of  the deal.  In fact, greet companies right now are already poaching great talent. Take a look around and you will see it for yourself.

So back to Google’s move and its efficacy.  To analyze it well, one must look at the specific company. What may be good for Google may or may not be good for your company.  The key is the how and why.  If this is a last ditch and/or an uncreative effort to keep employees firm grumbling, it is probably not a good move.  But if the culture has been taken care of throughout the past two years, this move can be an extremely smart step.  Of course the other factor is, can the company afford it.  If it cannot, I guess the  question is moot.  But Google’s revenue rose 23% so far this year, are hiring again and have optimistic projections so I think it is safe to say they can afford it.

So it is a good move?  If it is a part of a bigger integrated plan of employee engagement and business strategy I would probably say yes. But a bad plan if it is a desperate measure to keep employees from leaving, that never works. Only time will tell if Google made the right move.