Are Bonuses a Thing of the Past?

By Pamela Williams, CAE

Although the cable industry has fared better than most during the recession, nearly every company has had to trim expenses to some extent. In most cases, belt-tightening measures have impacted bonus awards. One of the questions I hear frequently is whether this classic form of rewarding high performance and attracting key talent will return in full force when the economic picture brightens, or whether award bonuses will fade into history.

Based on my discussions with HR professionals in our industry and experts who study compensation trends, it appears that bonuses have staying power. Exactly how and when they will be used, though, and what part they will play in an overall compensation package is less certain.

Rewarding Performance

CTHRA annually conducts compensation surveys to monitor trends and establish industry benchmarks. In 2009, comprehensive data was submitted by 60 cable operators, satellite providers, programmers and broadcasters, including 7 of the top 10 largest multiple system operators (MSOs), 6 more of the top largest 25 MSOs, all of the top 25 national cable networks and all 5 national broadcast networks.

Based on results from the 2009 surveys, our industry experienced a decline in bonus awards based on performance during January-December 2008.

However, programmer and broadcast network employees were hit harder than their MSO counterparts. The programmers and broadcast networks experienced a 7.8 percent drop in bonus awards over the year prior, double that of MSOs’ 3.7 percent decline.

Hali Croner, president and CEO of the Croner Company, which conducted the surveys for CTHRA, expects to see further declines in CTHRA’s 2010 survey results because they will reflect bonuses awarded in for 2009 performance, when the economy plunged deeper into recession. However, given a slight upward turn at the end of 2009, she foresees a rise in performance-based bonuses during the 2010 fiscal year.

Just how important are performance-based bonuses in attracting and retaining talented employees? That depends on whom you ask. In survey after survey, The Croner Company has found that the importance to employees varies not by industry, but by job category. “Sales employees tend to value them tremendously,” said Ms. Croner. “Other employee categories tend to value fixed base salary more.”

Categories aside, studies by both professional survey firms and individual employers consistently show that although nearly everyone appreciates healthy financial compensation, there are other factors that score just as high on the ratings charts. These include chances to work on new technologies or content, ample opportunities for career growth, working with a great team, a strong company culture, managers who provide explicit feedback, and a reasonable balance between work and personal life.

Furthermore, it appears that the strongest performers are the ones least motivated by monetary reward. To them, autonomy and the ability to make decisions are more enticing reasons to stay on the job. Rosalind Clay Carter, senior vice president of human resources, A&E Television Networks, and a CTHRA board member, believes the formula for retaining truly stellar stars is “coupling a strong compensation package with access to challenging opportunities, the chance to work with a supportive leader, being part of a high-performing team, and having access to resources needed to get the job done.”

Pros and Cons
From an employer’s standpoint, there are advantages and disadvantages to bonus awards. Ms. Croner explains the potential downside, “Bonuses, routinely delivered, can quickly become perceived as entitlements. If employees don’t see a clear connection between their variable pay and the company’s performance, when the company performs poorly, they still believe they have worked hard and gotten less. That leaves employers with a morale problem on their hands.”

On the plus side, when bonuses are tied to clear corporate performance goals that are communicated, measured and evaluated on a regular basis, a

nd the prizes are delivered only when they’ve been earned, Ms. Croner has found that, “they can tie both sales and non-sales employees’ interests and rewards to the interests and rewards of the company and its shareholders.”

Attracting Talent
Sign-on bonuses are typically used in the cable industry to address a particular need that would not be included in the normal compensation package, for instance to help offset a loss of performance-reward bonus or soon-to-be-vested long-term incentive provided by the former employer. According to Ms. Clay Carter, “In most instances, a signing bonus is not what attracts the candidate. However, during times when the demand is high for a particular skill or talent, a one-time bonus added to a market -competitive package can often seal the deal when an applicant has several options.”

Empirical evidence suggests that like annual bonuses, sign-on bonuses have declined over the past few years for one simple reason: In the current economic climate, the competition for jobs has outpaced the competition for talent. Ms. Croner provided further insight, “We don’t see companies as having done away with sign-on bonuses, but rather having used this tool less in their new-employment negotiations.”

Ms. Carter observed that the dot.com days of bidding wars for talent have dissipated. However, she believes there will always be a role for sign-on bonuses because “there is always stiff competition for the best talent.”

So while bonuses have declined due to the recession, bonuses of all types are expected to remain an indispensable tool in employers’ arsenal for attracting and retaining talent.