Finally, giving some back to employees

  • Article by: DEE DEPASS , Star Tribune
  • Updated: January 19, 2011 - 6:34 AM

As the recovery strengthens, employers are finding it in their self-interest to restore some pay and perks for weary workers.

For three years, employees have toiled nervously with their heads down, working feverishly lest they get shown the door like 17 million Americans before them.

Company survival was the chief worry of the Great Recession, not employee satisfaction. But that's changing.

"When this market resets, some companies' high-potential employees will be looking for other opportunities," said Gaye Lindfors, the former Northwest Airlines human resources director who now heads an employment consulting firm. Employees "have hung in there during tough times and want a fresh start. And they are going to be leaving. So companies need to be prepared."

Although government agencies don't track such matters, whispers about pay raises, 401(k) matches, more-flexible work shifts -- even the reappearance of free coffee -- are softly echoing across the state. It appears that hundreds of recession-weary firms are shifting from survival mode toward considering the warmer-and-fuzzier aspects of employee retention.

FedEx, the St. Paul Hotel, Ford Motor Co., Winnebago and the McKnight Foundation, among others, have recently restored perks that evaporated in tough times.

Companies don't really have a choice. "You will see improvements in compensation and benefits and working conditions just so companies can protect themselves,'' said State Economist Tom Stinson. "It will be in the firms' best interest."

Here's why: The recession cut workplaces to the bone, creating overworked, highly trained and exquisitely productive staffs. Competitors will come sniffing for talent as the economy recovers, Stinson said, "so the pendulum will swing back to the middle with firms being a little more employee-friendly."

In addition, baby boomers begin turning 65 this year and will soon exit the workforce. Replacing workers is expensive.

HR managers worry about losing top talent, said Kerry Chou, senior compensation leader at WorldatWork, a Scottsdale, Ariz.-based professional association that tracks compensation and benefits. Some are asking CEOs to award strategic bonuses for top performers who haven't gotten wage increases or promotions lately. Promotions were down significantly across the country in 2009, said Chou, who last week released a survey on the topic.

Chou added that cash-strapped firms should think about giving "employees another day off, upping their tuition reimbursements [or] other things that don't have a ... cash impact."

Morale boosters

To manage the recovery, some Minnesota employers are conducting employee surveys, hiring humorists or just bringing back the coffee and cookies that disappeared as expenses were slashed.

In Blaine, beauty products firm Aveda lifted its ban on employee travel. FedEx and Minnesota Public Radio recently reinstated 401(k) and 403(b) matches. The once-beleaguered Ford Motor Co., which makes the Ranger truck in the soon-to-be-closed St. Paul plant, saw company sales jump 19 percent last year, a performance so surprising that officials just slashed the furlough schedule for 2011 to just one round instead of the usual four. Ford also plans to add 7,000 U.S. workers this year, although not in Minnesota.

There have been other modest nods to boost morale. Hillary Feder, owner of Hillarys Hand Painted and Personalized Gifts in Hopkins, saw corporate orders for employee gifts grow 35 percent since the recession forced her to go from five to four employees and cut hours 15 percent. Today, Hillarys, where a single order can run $35 to $3,000 per gift, is again approaching $1 million in sales. Clients now tell Feder: "The more you invest in your own people, the more they give back to you and the more loyal they become," she said.

In December, business picked up enough at the St. Paul Hotel that it returned most of its 275 hourly workers to full-time status after cutting hours for three years. The hotel also broke out the brownies, cookies and popcorn to revive its all-employee meetings in November. The hotel cancelled the meetings, normally held three times a year, in 2008 and 2009 to save money.

The return of employee perks large and small hits multiple industries. Post-it maker 3M Co. froze wages in 2009, but reinstated merit pay last year. Quartz countertop maker Cambria Inc. rehired about 70 laid-off factory workers last year.

Creeping optimism

The Marsh fitness club in Minnetonka held its first staff party Jan. 7 after a three-year hiatus. "We are certainly feeling more optimistic ... and as a result we [held] a holiday party for our staff," complete with a taco bar, games, entertainment, door prizes and gifts for everyone, said Marsh spokeswoman Deb Garvey. "People really seem to appreciate the gesture."

The creeping optimism is in stark contrast to the recession's dark days, when payrolls were cut fast and deep in late 2008 and early 2009. Minnesota-based 3M, H.B. Fuller, Hutchinson Technology, Andersen Windows, Imation, Polaris and other corporate stalwarts shed thousands during the recession, pushing state unemployment to 8.4 percent in 2009 versus 7.1 percent today.

"As the economy begins to improve, employers large and small are bringing back their 401(k) matching programs," said Beth McHugh, Fidelity's VP of market insights.

As of March, 44 percent of 270 large Fidelity clients had reinstated matches. By December that rose to 55 percent. About 15 percent of clients with fewer than 100 workers had reinstated 401(k) matches as of March. By December, the figure was 27 percent.

McHugh said that, on average, workers are receiving $890 in annual 401(k) contributions from employers. That figure will rise. "The richness of your match can drive loyalty," McHugh said.

Fidelity spokesman Michael Shamrell agreed. "You don't want to be out there when the recovery comes into full swing, competing for talent, and be the only one of your competitors that doesn't offer a plan.''

But management experts warn that successful companies learn what really motivates employees. It could be an effective supervisor, the company's values or a flexible schedule. Food works, too. It's not always just money, they say.

Calabrio Inc., a software company in Plymouth, provides 96 workers free coffee, tea and soda, sponsors their softball and soccer games, gives them gifts from Hillarys and regularly offers food at company meetings -- expenses most companies cut years ago. With the economy improving, officials plan to expand management training offerings. They had one program last year. This year, they're planning three.

"We have had our fair share of ups and downs,'' said HR manager Debbie Williams. "But we just strive to keep our employees engaged ... Turnover costs a lot."

Dee DePass • 612-673-7725

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