This article originally appeared in the April 2014 issue of Smart Business Philadelphia magazine.
As the economy moves away from recession, many privately held companies are finding themselves with available cash and are deciding how it can be best utilized.
“They’re calling and asking, ‘Do I acquire a business, or start a new product line? Or do we further incentivize our top performers?’” says Tyler A. Ridgeway, director of Human Capital Resources at Kreischer Miller.
Many companies are aggressively looking for top talent, and you need to act quickly to attract ‘A’ players and ensure your best performers don’t leave. Top executives are landing jobs more quickly than ever, Ridgeway says.
Smart Business spoke with Ridgeway about retention methods that will motivate key employees.
How can an owner identify which employees are indispensable?
If you went to the office on Monday and someone gave notice, whose departure would make you feel irreparably harmed? Think about the key people you need to take your company to the next level of growth. Also, consider who you consult with when making a critical or strategic decision. These are the employees who need to be the focus of your retention efforts.
What financial rewards are being used to retain employees?
Total compensation is important, but it’s not always about base pay. Companies are using phantom stock plans, stock appreciation rights or a pool of money tied into company growth. For instance, if a $10 million company grows to $15 million, a portion of that $5 million difference can be divided among key performers and put into a pool that can act as a retirement benefit or, if the business is sold, would vest immediately. These types of programs can be used to attract top talent to your company or reinforce the desire of your existing team to stay and contribute at a high level.
You can also set bonuses on a team or individual basis. For individuals, percentages can be tied to specific goals you expect your executives to accomplish, such as qualitative metrics or projects to be completed.
It’s also advisable to add subjective items so the team is rewarded if the company has a really profitable year. Executives are willing to share risks, and they want additional cash if they put forth the effort and the company grows. A situation in which someone can contribute strategically, and reports to the ownership, is very attractive when you offer some type of upside if the company grows.
What are some other retention strategies?
Health care and flex time are still important. Health care negotiations are all over the map, and how a company addresses this key employee benefit can act as a strong motivator for top performers to stay.
Vacation time and flex time are also important because businesses are operating in a 24/7 environment; an executive may not be in the office all the time, but he or she is almost always plugged in. Organizations that take into account their employees’ personal lives and offer flexible work arrangements will be viewed as the best companies to work for.
Employee engagement also is important. If you can create an environment where employees at all levels understand their importance and role within the organization, and how they contribute to the growth of the business, it will be easier to retain them. When that breaks down and someone doesn’t feel they’re contributing or engaged, you risk losing that person.
Employee retention is not like a best practice environment; you have to know your organization and what motivates your employees. Most organizations now have four generations in their workforce and they’re all motivated differently. Figure out what motivates your employees and be flexible in creating policies that encourage them to stay and operate as cohesive, engaged teams. ●