If you've ever experienced losing a vital team member firsthand, or even just worried about it, then you understand the significant impact this can have on a business. The people form the business, so understanding what motivates and inspires your employees, especially your key employees, is naturally important.
THE PLATINUM RULE
We all know the Golden Rule: “Treat others the way you want to be treated.” This is a good rule that serves well.
However, throughout my experience, I have also discovered the Platinum Rule: “Treat others the way they want to be treated.” I've found the latter yield better results, since no two people are alike.
What motivates you, the business owner, will not necessarily motivate each one of your employees.
It’s ideal to create a retention strategy that your employees are each individually excited about. In contrast, it doesn’t serve much purpose to create a retention strategy that would make you excited, but not necessarily your employees.
Even when certain team members have similar company responsibilities, their personal motivators, desires, goals, aspirations, expectations, etc. can still be completely different. You can use this to everyone’s advantage and cultivate win-win scenarios for all parties involved – you (the owner), the employees, the business as a unit, and even employees’ families.
Some examples of motivators that vary in effectiveness from person to person include monetary compensation, bonuses, company stock/ownership, equity upside, responsibility, more freedom with their schedule, education payments, retirement plans, travel, fertility benefits, medical benefits, and more.
From family planning to professional goals to retirement benefits, and everything in between, there are a multitude of ways to provide custom retention structures for the people that help drive success and value in your business.
WHY IS THIS IMPORTANT?
Employee retention helps us avoid the negative impact and turbulence of losing a key player, while also promoting and improving company culture and morale. These tools apply as much or more when it comes to attracting new talent, as well.
Operating a business comes with many well-known challenges. Among the worst of them, turnover, and/or the inability to attract talent, can be the start of a plateau, or even worse, a downward spiral for a business. This substantial threat can be mitigated with proper planning and forward-thinking.
In my experience, I’ve come across a lot of research that attempts to quantify the impact of replacing an employee, and the numbers are astounding. It could be as costly as 100%-300% of that employee’s salary to get that role back to the state it was in, not to mention the time and energy necessary in conjunction.
It is crucial to have a company infrastructure that allows people to be rewarded and grow. Imagine losing one of your top performers and/or an executive or manager – depending on the person, it might take multiple people working together to replace that one employee. A band-aid amalgamation of wasted time, disorganization, and chaos ensues as you spend time and/or money to find their replacement (which will then take more time, money, and energy to train).
You are likely in one of two industries:
- One where these types of competitive benefits are the norm, and if you are not participating you are losing out, or
- An industry that is not currently utilizing these strategic approaches to business growth, in which case you can develop an edge over your competition.
In both scenarios, in the competitive landscape of business, you always want quality individuals to view your company as the most attractive place to work. That is what draws and retains the best talent.
The stakes are even higher for key employees. These are the individuals within your organization that wield the largest, often unbalanced, influence on your company’s financial performance. Losing them could be catastrophic. The time, energy, and money needed to collect yourself and get back to business as usual will be physically and emotionally draining, possibly for a long period of time.
Sometimes businesses never recover from such a loss. I am not trying to fearmonger; this is a key component that should be considered so you can plan before it’s a problem – proactiveness vs reactiveness. You want to get ahead of these potential headwinds and turn the vulnerable relationship between employer and employee, into a partnership with a shared vision.
We always say in our office, “you have to behave like a champion before you are a champion.” Retention solutions definitely fall into this category. It may seem to be a catch-22 - the chicken or the egg? Do you wait to establish creative incentives for team attraction and retention until you’ve already achieved a higher level of success in your organization? Or do you achieve organizational success by proactively prioritizing team incentive alignment.
To us, the answer is clear. If you want to get ahead of attracting and keeping the best talent, you need to create a championship atmosphere that draws them in and keeps them coming back. You do not wait until you become the champion, and then rollout these strategies.
You must “do” before you “become”, not wait until you “become” so that you can “do.” Most people wait for the latter, but being proactive and intentional is a hallmark of real sustained success.
In addition, it’s important to remember that depending on the state of the business, some retention plans take time to develop. Because of this, you can’t wait until you experience the problem to start formulating your solutions.
The good news is that when properly structured, these retention strategies have a way of pulling everyone together: business owners, employees, and results. Everyone is swimming in the same direction and focused on the same goals. All goals and motivating factors should be geared towards the company’s success. The more emotionally connected to the end results, the more determined and focused your team will be in achieving your business goals.
YOUR STARTER PACK
For a moment, let’s eliminate customization and any complexities. Of course, there are details to know. Some examples are grant dates, cliff periods, graded vesting, etc.
In this case, let’s keep it simple and straightforward to obtain a better understanding of the mechanics.
- How does this all work?
- In the beginning, what is the thought process?
- What should you focus on?
At this point, we understand the importance of this planning and the different types of employees for whom it may apply. Now that we identified the players, how should we think of the strategy?
Simply put, there are two overarching concepts working together: The vesting schedule and the compensation.
A vesting schedule is a specified duration of time which determines when an employee receives ownership of the legally binding asset and/or the terms of the agreement are implemented. This benefit can be received immediately, in a lump sum, only after hitting milestones, and/or in a staggered fashion. Whether a perk, or more commonly seen as varying types of compensation, this is the employee’s reward for achieving their side of the agreement during the allotted vesting timeframe. The vesting schedule determines the timeline/rules of the engagement, which should coincide with the amount(s) and/or item(s) of compensation.
HANDLE WITH CARE
When discussing retention plans with employees, just like everything else, this is custom planning with a variety of options. Every company is different and every relationship with each employee is unique. It’s important to think long and hard about your business (and your people) to determine what the best approach is for entering into these conversations.
You only have one first impression. You don’t want to offend others, and you don’t want to give too much away (something we see happen far too often).
As a business owner, you already know this to be true: once you say “yes” or give something away, it can be very difficult to take it back. Measure two or three times, but only cut once.
When approaching these custom benefits conversations (sometimes referred to as “Executive Benefits” or “Executive Bonus Plans”) you can either speak directly with your employee(s) and/or bring in a 3rd party firm. There are pros and cons to both approaches, but there are advantages to bringing in an unbiased party. In addition to asking the right questions and running assessments, sometimes employees may be more willing to open up and tell the truth to a hired professional/stranger than their employer.
You might be saying to yourself, “This is great, but is this realistic for me?”
It’s a valid concern, especially if you have no experience with this planning technique. It can feel complicated and expensive. However, with the right approach, it is often much more feasible than you may realize.
The key here is to set aside the necessary funds proactively. You allocate these funds gradually, essentially designating them as you go. Just like you plan for the rest of your finances, this would be a scheduled amount at a certain frequency. It should be structured in a controlled manner. Since these are legally binding agreements, you want to make certain the funds are readily available for when individuals become fully vested.
As mentioned in the first section of this article, whenever possible, it’s best to create win-win scenarios. It’s best to having everyone on the same team and pulling together as one. Retention planning is a large umbrella where a myriad of different win-win scenarios exists.
Imagine the culture you can create with happier employees, and executives who are hitting bigger goals. In addition to that, they are being compensated for the results and value they are adding, and they’re excited about it.
Replacing key employees is time-consuming and expensive (remember: up to 100% - 300%).
Now, imagine the opposite:
- Employees who want to stay.
- Inviting other talented people to join the great culture.
- Having your office become “recruiter-proof”.
- An uncomplacent workforce, striving to hit momentous goals together.
FOOD FOR THOUGHT
A lot of great work can be accomplished in the retention space. It is an investment in one’s own company – to grow, and to not lose. Building a culture that people believe in and want to stay in. Investing in your people to build an environment where team members and the company as a whole are pulling in the same direction to achieve their common goals.
This is a creative and innovative space. Having said that, there are many rules and laws to follow. If you can relate to any of the points in this article, I do recommend speaking with a professional to guide you through the formation of such strategies.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family.
Thank you for reading and we wish you all the success you deserve. Keep working hard, keep adding value, and always continue to learn.
To Your Success,