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Putting the Freeze on Holiday Celebrations

by Stephany Schings, Communications Specialist 

How Employers Are Practicing Frugality During the Economic Downturn—and Why Some Employees Are Thanking Them for It

As employees may have already found out, the current economic troubles have turned many employers into grinches this year when it comes to the annual office holiday party.

The number of expected corporate holiday parties this year reached a 20-year low, according to the Annual Survey on Corporate Holiday Celebrations, an annual survey of 108 American businesses by New York-based Battalia Winston Amrop, one of the largest executive search firms in the United States.

Only 81% of businesses said in the survey that they would be conducting some type of holiday celebration this year, the lowest percentage of companies conducting parties in the 2-decade history of the survey.  Thirty seven percent of companies said their party plans were impacted by the economy (either cancelled or more modest), nearly double the 19% who stated they were affected last year.

MarketWatch.com reported similar statistics from Chicago-based outplacement firm Challenger, Gray and Christmas. Their annual holiday survey found that 23% of companies said there is “little reason to celebrate” and that they will not have a party this year compared with only 10% who said the same last year.

This year’s Battalia Winston survey also shows cutbacks on holiday trimmings outside of the office party.  Year-end bonuses are down this year, according to the survey. Of the companies that typically give year-end bonuses, 62% said bonuses will be the same or smaller than last year. Only 6% expected year-end bonuses to go up, and a few companies are getting rid of them altogether.

SIOP member Ben Dattner, an organizational effectiveness consultant and founder of Dattner Consulting in New York City, said he has observed the pinch firsthand. Dattner, also a professor at New York University, said he has noticed that many of his clients are freezing end-of-the-year bonuses and scaling back on holiday parties this year.

However, despite the popularity of holiday parties amongst employees, Dattner said many of the cutbacks have been made with employees in mind.

“In a situation where there has been a lot of economic turmoil, there’s skepticism on the part of employees who ask, ‘why are we spending this money on parties when others have been laid off or lost their jobs?’” he said.

Dattner said companies want to send a consistent message of frugality during hard economic times, even if it means cutting back on holiday festivities.

“In a situation where workers and employees have had to personally pay a price, the idea is that it sends a mixed message to employees to celebrate,” he said. “It’s inconsistent with what is going on.”

SIOP Fellow Kathryn M. Bartol, a professor of Management in Robert H. Smith School of Business at the University of Maryland who conducts research on compensation and employment relationships, said some employees agree with the holiday cutbacks for personal reasons.

“In this type of economic situation, employees are worried about their job security and don't want to see their employers spending money for things that are discretionary and easy to forgo,” Bartol said. “Everyone is reading about organizations that typically do well but are running into trouble due to the economic downturn. They do not want to see their organization get into trouble.”

Dattner said company leaders don’t want to see their companies in trouble either, as the frugal spirit has been common amongst companies during hard economic times.

 “We have definitely seen this before,” he said.  “After 9/11, companies became substantially more frugal, partly because the country was in mourning, but partly because the economy was bad. Those things do happen. It’s a cycle.”

This year’s low surpasses the post-9/11 holiday party crunch, though, according to the Battalia Winston survey. In 2001, 83% of companies held holiday parties.  This season even surpasses previous recessions, as 82% of companies stated they would hold holiday parties during the recession of 1991.

Add this to the other pressures the economy puts on employees and, Bartol said, not many are in the holiday spirit.

“Many employees also are being indirectly affected because of family members or friends losing their jobs or in danger of losing them. Another factor is that the value of 401K plans are being adversely affected by stock market performance,” she said. “These are other reasons that many are not feeling like doing celebrating.”

Bartol said cancelling holiday parties and other seasonal cost-cutting measures may actually boost employee’s moods.

“Cancelling and downsizing holiday parties will help the morale of employees,” Bartol said. “Even if employees feel their jobs are secure, they do not want to see others in the organization lose theirs if the economic situation worsens. Employees do not like to see others lose their jobs. Employees understand that ‘this just is not a time to celebrate.’ Hence motivation and morale will be aided by the cancelling and downsizings because employees generally will view such moves as wise under the circumstances.”

This may then translate to success for the company. Through her research, Bartol has found that employees will engage in more discretionary behaviors, such as knowledge sharing, when they perceive that the organization is supportive of them and perceive that they have high job security. In the current situation, she said, efforts by employers to protect job security are likely to be met by employees not only keeping up regular required performance but also "going the extra mile" to help the company through difficult times.

Despite the cutbacks, the holiday season isn’t void of giving this year. Forty two percent of businesses said employees planned giving gifts to each other or having a gift exchange (i.e., grab bags, etc.) amongst one another this year, according to the Battalia Winston survey, and 74% of companies still planned to scrape enough money together to participate in charity efforts.