“As senior executives review their companies’ results for the year, they are facing an ugly reality,” writes Reed Abelson in today’s New York Times.

“Given the economic downturn and the poor performance of the stock market, many employees, particularly managers, will probably receive drastically lower bonuses at the end of the year or early 2002.”

“Companies are now deciding whether to tell employees and their shareholders months ahead of when they would normally find out, according to compensation consultants. Already, Ford Motor, Sun Microsystems and Media General have warned some employees not to expect bonuses.”

” ‘I think there are a lot of companies that will get out in front,’ said Scott Olsen, a practice leader at Towers Perrin, a human resources consulting firm. He said that in addition to making sure employees know what to expect, a company can signal its commitment to keeping costs in line.”

“In recent years, bonuses based on a company’s performance have become a growing part of employee compensation. On Wall Street, which has long been associated with large bonuses, there are already rumblings about deep cuts in an effort to control expenses. Charles Schwab has said its employees are unlikely to see anything in the way of cash bonuses this year. Media and technology companies also rely heavily on bonuses.”

“Because of the strength of the economy and the stock market in recent years, employees have come to rely on the extra income and have adjusted their lifestyles, said Edward E. Lawler III, a business professor at the University of Southern California.”

“What companies may not have done, Mr. Lawler said, is help employees manage their expectations and plan for the time when they would take home far less.”

“But some companies are choosing to retain bonuses to motivate workers, and few companies will probably reduce all bonus pay, consultants said. Many plans are designed so that individual performance, aside from how the company might be doing, is still rewarded.”

” ‘We’re just trying to find a balance,’ said Lee D. Roberts, the chairman of FileNet Corporation (news/quote), a software company in Costa Mesa, Calif. When a change in its bonus plan meant that employees would not get bonuses this summer, FileNet chose to go ahead and pay them under the original plan so they would have time to adjust. Mr. Roberts is concerned that abolishing bonuses will hurt morale and his ability to keep talented employees. ‘We’re not about fixed assets,’ he said. ‘We’re about people.’ “

“The announcement that there will be nothing extra will probably not come as a surprise to those affected, consultants say, given the current round of layoffs at various companies. Many are aware of how poorly their companies have been performing. ‘People understand and expect this even before it’s announced,’ said Dale Klamfoth, a workplace consultant with Drake Beam Morin in New York.”

“With four months left in the year, many companies are still in the middle of deciding about bonuses. ‘We’re talking about 2001 performance,’ said Ed Freher, a senior executive compensation consultant at William M. Mercer, a human resources consulting firm. ‘Most companies have not made up their minds.’ “