Should Employee Compensation Practitioners Care about the Economy?

The Bay Area Compensation Association (BACA) is celebrating the holidays with a keynote speech previewing the 2018 economy. Our speaker is Gary Schlossberg, Senior Economist at Wells Capital Management, so we’re banking on up-to-the minute information on next year’s fiscal and monetary policies, as well as worldwide market trends.

Taking a look around, many other compensation groups offer similar presentations on the economy during the year. It’s clear what they offer to executive compensation practitioners, but if I’m into employee compensation or Total Rewards, why bother? I think that this is an important question to answer, so I’m going to dig in.

As the economy goes, so goes your merit and bonus budget. This is, of course, a simplification but the “optics” are accurate. Haven’t we all scratched our heads at the seemingly endless U.S. growth cycle, given its backdrop of deep-seated structural issues including the lingering effects of the 2008-09 financial “meltdown?” Nevertheless when it comes to credit, lending stays low, and so do salaries. What’s that about?

As we all experienced during the Recession, when your company makes less, employees make less. If a big change is coming, you should know about it so you can help with the planning. I just spoke with a financial advisor who said a slowdown is coming in 2018. I’m expecting to be briefed on this at Gary’s talk to see if the experts agree on where things are going. Using this as an example, even if you are an analyst, it helps to know that an economic shift is coming so you can help with the planning.

Your HR strategic priorities respond to economic trends. When the economy is humming, odds are your company is hiring at a good pace, including the high-priced specialists you haven’t been able to afford in the past. Income getting tight? You’ll be slowing down talent acquisition and perhaps looking overseas for new markets or lower cost production options.

Problems with overseas economies can seriously affect your organization, too. The terrible losses in Puerto Rico are affecting hospitals and medical device companies throughout the U.S. right now. For decades, Puerto Rico has been the source of low cost, specialty manufacturing of medical equipment. Their losses are influencing cost and availability of materials in businesses throughout the U.S., which has had a sudden effect on production, services and staffing. Over time, this situation can influence the need for certain U.S. jobs if we have to adjust to new production strategies.

It will help you advance in your career. Your executives are financial experts. Your HR executive needs to make expensive financial decisions influenced by business strategy, too. When I talk with people in these positions, I have far more credibility when I can help them plan, taking the next year’s financials into account.

No matter where you are in your career, you have a shot at becoming a more trusted advisor if you understand that what is shaping the economy is shaping your company’s financial and operational plans, which is shaping the company’s staffing and reward plans, and so on . . .

So when you have a chance to attend an update on the economy, get it on your calendar. If my experience is any guide, these presentations can be fascinating. And if you happen to be in San Francisco on December 14? Come join us to learn about the 2018 U.S. economic and financial market outlook. There will be no dust on Gary’s up-to-the minute insights — and you’ll return to work with increased confidence in your future judgments.

Margaret O’Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at

This post originally appeared on Compensation Cafe
Author: Margaret O’Hanlon