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By Staff Report
Sep. 23, 2008
Although government officials are rushing to provide retention bonuses to keep key employees at Fannie Mae and Freddie Mac, it might not be enough.
On September 7, the Federal Reserve announced that it was taking over the two mortgage finance companies to prevent them from collapsing. To ensure that key employees stayed with the agencies, the Federal Housing Finance Agency, which is overseeing the two companies, is developing a retention plan that includes bonuses.
Retention bonuses are a good place to start, but it’s a tactic that is easily replicated, says Richard Smith, senior vice president at Sibson Consulting, a New York-based consulting firm. “If the bo¬nuses are really good, it’s just a matter of time before other employers come to these employees with the same offer,” he says.
Fannie Mae and Freddie Mac should create long-term incentive plans that provide employees with cash or stock if they meet three- or five-year performance goals, he says.
Observers note that the two companies have differentiated themselves by offering competitive benefits and perks.
For example, both offer backup dependent-care services and adoption reimbursement. Freddie Mac has an on-site fitness center and concierge ser- vices, and Fannie Mae offers seminars on work/life issues and paid time off for employees to do volunteer work, their Web sites say.
Such benefits and perks are going to be more important for the companies going forward, experts say.
“Companies shouldn’t underestimate the value of the total rewards package, which consists of benefits, work/life balance, and training and development,” says Jim Stoeckmann, compensation practice leader for WorldatWork. “If they cut back on those programs, it sends a message to people that they are not valued as much as they were in the past.”
Stress is the top reason that people leave their employers, according to Watson Wyatt Worldwide. And it’s likely that the 4,700 employees at Fannie Mae and 5,000 employees at Freddie Mac are feeling stress about the transition, says Jamie Hale, practice leader of workforce planning at Watson Wyatt.
“If as employers they can do anything to alleviate some of that stress by continuing to emphasize work/life balance, then that would help them retain people,” she says.
Shawn Flaherty, a spokeswoman for Freddie Mac, says as of now, there are no plans to change benefits or perks.
“The director of the Federal Housing Finance Authority and our new CEO told us that they feel that keeping talent at Freddie Mac is a priority,” she says.
Fannie Mae spokeswoman Amy Bo¬nitatibus declined to comment. Stefanie Mullin, a spokeswoman for the FHFA, didn’t respond to e-mail requests for comment by press time.
Fannie Mae and Freddie Mac need to tell employees about the opportunities the transition presents, says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School of Business.
“These businesses aren’t going to fail,” he says. “The restructuring is going to create some likely opportunities for advancement for many employees, and it’s up to the companies to get those messages across.”
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