Every successful business has one thing in common: key people who support critical business processes or maintain key relationships that make money for the business. Technology may ultimately overtake many mundane tasks, but it can never replace the human element that will always be critical to successful businesses.
While CEOs and founders reap significant rewards and have vested interests in the success of their own businesses, and startups and venture-funded companies can issue options and warrants, most companies remain vulnerable to the loss of their all-star players. While a host of tools is available to Fortune 500 and 1000 companies, retention tools for smaller companies are limited. How do companies wrap up top performers? How do you create an environment where money is not the focus?
Traditional employee benefits (like health insurance, 401(k)s, and workplace conveniences), while essential, have also become largely seen as entitlements. Traditional deferred compensation (a promise to pay a future amount to an employee) requires significant costs to administer, carries some accounting challenges that may conflict with banking and owner compensation, and can create significant legal fees. This is because promises to pay future compensation are generally regulated by ERISA and, of course, the IRS.
If you are a business leader in the real world, not much matters besides results. Those who produce more get rewarded more. This may not be fair, but it is not meant to be fair; agreement or acceptance is not required or necessary to understand the philosophy.
Tom Peters, best-selling author of many books on management, says, “some employees are worth a lot of money … some employees are worth a hell of a lot more money.”
Don’t think for a minute that your competitors don’t know who your best people are. They do. They also, by default, know who the “not-so-good” employees are. Every business remains vulnerable.
In a thriving economy, the best employees become highly sought after. They often pay no attention to how the economy is doing in general, but in a great economy, they know that they will have more opportunities. These are opportunities they do not have to seek out. What does it take to keep the best? Recognition, rewards, strategy, and commitment.
IT’S AN EMPLOYEE’S MARKET
The lowest unemployment rate in U.S. history was achieved in 2019. Those employed are valuable assets; those unemployed may be functionally unemployable, or simply not skilled and/or not trainable for various reasons. You have to retain to be successful.
Recruiters are on the prowl, and sites such as LinkedIn, ZipRecruiter, and CareerBuilder make the process of benchmarking and reviewing “better” opportunities easy. Glassdoor.com allows candidates to see the ways that you compensate and reward and provides insight into the culture of your business. (Call it Yelp meets transparent payroll ledgers.)
Today, peers are more willing to share personal information about compensation and experiences, sometimes leading to adverse HR issues, such as time and labor disputes or even worse, lawsuits for harassments of all types, or class-action suits.
It’s a dangerous time for employers. Employees dictate much of the workplace experience. One bad episode, confrontation, or disciplinary action can disrupt momentum, undermine confidence, or encourage job change.
As a leader, you must be proactive. If you hesitate or delay implementing or improving the size, shape, and value of any “golden handcuffs” you offer, your better employees won’t wait while you figure it out.
Here are some things you can do to keep your best employees, the ones who make a difference:
- Start by identifying who is critical to the success and growth of the company. Make a list of the “must retain” employees in your company.
- Do a salary survey to find out what your competitors are paying. Identify the gaps in salary and benefits you have to close. Put a dollar amount on it by position.
- Reinforce the relationships with those you wish to retain.
- Consider giving your “must keep” employees more paid vacation time off, an car allowance, health insurance incentives, phone, travel, or any other potential hard-dollar, tax-deductible items.
- If you do not already have a bonus incentive plan, consider creating one that will strengthen the bond of your employees to the results they help generate for the company.
GOLDEN HANDCUFFS – WRAP THEM UP
“Take away my factories, my plants; take away my railroads, my ships, my transportation; take away my money; strip me of all of these but leave me my men and in two or three years, I will have them all again.” –Andrew Carnegie
“Golden handcuffs” is a way to describe a specific plan that addresses an annually funded tool to retain and reward a key or class of key employees—but restricts their access over time.
In general, golden handcuffs are a selective executive accumulation plan customized to selected corporate executives. It’s a benefit over and above those provided to all employees by a qualified retirement plan or any other employee benefit plan.
This is typically a nonqualified arrangement (non-ERISA) between a corporation/entity and selected set of key executives in which the entity promises to pay the executive a specified benefit at a specified period of time, generally annually, with a restriction on the employees’ access to or vested interest in the accumulated asset. Most plans also have a survivor benefit to the executive’s family.
The employee receives an annual statement showing their accumulated/vested account balances, and generally has some “skin in the game” by virtue of paying either a nominal tax on some of the contributions that are funded or some level or economic benefit they may receive presently, while waiting for their vested account to mature.
Employers may retain these assets on their ledgers or may restrict access to an employee-owned instrument via a lien (or assignment) that vests control to the employer over a specified period, and then releases interest to the executive.
Get to work retaining and rewarding your top performers—before your competition does
Finally, because the receipt of benefits depends on the executive’s continued employment with the entity, golden handcuffs can serve as a long-term incentive plan designed to encourage the loyalty of your most valued key executives.
Get to work retaining and rewarding your top performers—before your competition does. Have the conversation about the people you most care about.