By Korn Ferry
If we imagine the global economy as a racetrack, then COVID-19 is the blind corner that comes out of nowhere. The natural reaction is to slam on the brakes and many organisations travelling this wild road have done just that. But as we ease through the turn, visibility is returning and leaders are poised to accelerate their business again.
We have been tracking how organisations’ actions have evolved through the crisis through pulse surveys taken in March, April and now May. Clarity on the impact of the pandemic has continued to increase over the months, and we can begin to see how organisations are ordering their change priorities for reward and benefits programs as the global economy steadily reopens and we begin to look beyond the curve.
Salary and Benefits Trends Across APAC
As uncertainty about the impact of the crisis has decreased, the realisation of the significance of that impact has taken hold. Across APAC, 74 percent of organisations expect a decline in revenues, with 51 percent expecting a significant (or worse) decline.
There is, of course, some expected variation across sectors reflecting the changes in wider social and economical habits. Among those most impacted are the leisure and hospitality, retail, transportation, oil and gas, construction and FMCG sectors. The least impacted include utilities, life sciences, insurance, natural resources, telecoms and banking.
One of the key findings from these surveys is around how organisations are utilising cost management measures within their existing reward and benefits programs.
Organisations have reported an increased use of salary freezes (27 percent, up from 19 percent) and base salary cuts (16 percent, up from 14 percent) since the April survey. Simultaneously, organisations have used both permanent layoffs and/or temporary measures (e.g. furloughs) to reduce their workforce capacity, many of which are supported by state intervention in participants’ countries of operation.
Here’s a snapshot of how these and other trends are playing out across the ASEAN and ANZ nations.
Grey Clouds Linger in ASEAN, with Some Silver Linings
The view from ASEAN organisations remains more negative than that of their ANZ counterparts. 81 percent of ASEAN organisations expect a decline in revenues, with 61 percent expecting a significant (or worse) decline. In ANZ the respective figures are 69 percent and 41 percent.
ASEAN businesses have followed the APAC trend on salary impacts, with an increasing percentage of organisations introducing both salary freezes and salary cuts. For context, 48 percent of organisations have already provided base salary increases to most employees, limiting their ability to control costs via this mechanism.
These responses indicate the lingering grey clouds that ASEAN leaders are contending with, but there are also some silver linings in the long term impact that COVID-19 will have on workforce management practices. Approximately 60 percent of participants expect to continue operating more virtually once the crisis is over. 67 percent of organisations feel they will be more disciplined about cost management once the crisis is over, while 52 percent are committed to more open, transparent, and frequent two way employee communication.
Open and transparent communication will be critical as leaders consider making changes to their total rewards offer. 72 percent of organisations are considering or planning to make changes to their programs over the next six months to two years. We anticipate leaders will look to reflect increased organisational agility in their reward approach, focusing on adjusting their overall reward strategy to the post-pandemic reality and overhauling performance management.
ANZ Continues to Implement Tough Measures
As leaders in ANZ have struggled to predict their future workforce needs, current cost management techniques have remained tough. While the proportion of organisations that are implementing salary cuts has decreased from 19 percent to 16 percent since our April survey, ANZ organisations are implementing freezes on base salary increases at a greater rate than ASEAN businesses (27 percent in ANZ versus 17 percent in ASEAN). 30 percent of organisations have already provided base salary increases to most employees.
ANZ businesses too are considering the positive impacts that this otherwise disastrous event has had on operations. Around half feel they will be more disciplined about cost management and will continue the more open and transparent communication channels between leaders and their people established during the pandemic. The great majority (84 percent) will continue to make use of virtual ways of working post crisis.
ANZ businesses are slightly less likely to be considering or making changes to their reward programs (68 percent, compared to 72 percent in ASEAN). Priorities are aligned across APAC, however, with ANZ businesses also considering what the new reality means for their overall reward strategy and doubling down on overhauling performance management.
An Agile Reward Future
The view beyond the bend continues to remain elusive for many leaders and indeed, there may well be more twists and turns to come. There’s no doubt, however, that increasing organisational agility will be critical to future success and this must also be reflected in any measures to realign reward strategies and programs.
In practice, this means:
- Moving toward a culture of real-time feedback
- Focusing performance conversations on the things that will enable near-term future success
- Incentivising performance that models results AND positive behaviours
- Creating clear KPIs that allow for greater autonomy and accountability.