As economy prepares to upswing, companies face a new dilemna.

With the leveling off of the current economic downturn, companies have cut costs as much as they can without going out of business. They have shed the poorest performers and even some of the mid to high performers. Inventory levels are at an all time low, so low that cutting inventories any further will seriously jeopardize companies operations.

The new concern now is to retain the employees and talent these companies still have. As the economy ticks up and competition heats up, such lean companies will be left behind the curve without their top employees.

The tricky situation for the companies now is to retain employees that have been getting salaries cut or frozen, and therefore disgruntled. For many of the companies, the year end process is around the corner. These companies will have to make a tough choice in if they want to give bad news again to their employees. Many corporations only rate, promote and reward their employees once a year, at year end. For many of the workers, going without a pay raise for 2-3 years is more than an excuse to jump ship.

Then there are those companies who managed to contain costs through tough measures and still stayed profitable in this economic climate. These companies face an even tougher decision at year end. If they give bad news to their employees citing bad economic climate, even while reporting profits, how likely will their top talent be to stay on board for the next 8-16 months as the economy races upwards.

Times like these are why executives are paid so handsomely. They are paid to make the tough but correct choices so that their company will come out on top compared to the competition. What we will see in the next 12 months is those corporations with the smart and competent management make gains and those with the mediocre ones take hit in market share.

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