How can I ‘lock in’ key members of staff?
Since setting up five years ago, I have become increasingly dependent on my finance, sales, marketing and creative directors. I don’t want to give up equity but I do want to lock them in as much as possible because I would hate to lose them. What strategy and methods would you suggest to ensure I keep hold of my key players?
A. Alysoun Stewart of Grant Thornton writes:
You are absolutely right to focus on the need to retain the most important members of your team – it is in them that a signifi cant part of the value of your business resides.
What is interesting is that you are so reluctant to relinquish any equity to achieve this. Think about the extent to which you are directly motivated by your ownership of the business and consider the impact that even a comparatively small share of the action could have upon their level of commitment. Many business owners in your position do recognise that there is no more powerful way of creating the loyalty that you seek than the sense of ownership that equity participation creates. Therefore, I would advise you to reconsider your position and at least look at introducing some form of share option scheme; the most commonly used tool is the Enterprise Management Incentive scheme.
Given that you have specifically said that you do not wish to consider this, I will outline some of the many alternative strategies. The key is to understand what elements of reward will represent real benefi t to these particular individuals. They are the core senior management team, so you can expect that they are not motivated solely by the size of their pay packets, but also by the level of job satisfaction they derive from the success of the business itself.
For your part of the deal, you will want to ensure they are incentivised to deliver performance in line with the strategic objectives of the business and are also encouraged to remain a part of it in the medium to long term. In terms of the monetary elements of the package, you could include the following elements:
? obviously, a competitive basic salary
? an annual bonus that is linked partly to the achievement of specific individual performance targets and partly to the overall profi t performance of the business
? an additional bonus element that would accrue over time (say, three years) dependent upon the achievement of specific strategic milestones. This has the merit of binding in the individuals as they would only receive this pot if they remain with the business for the whole period.
You have not mentioned whether or not you are planning an exit from the business. If so, you will undoubtedly have a target value in mind and should be incorporating incentives for the senior management team that ensure their delivery is aligned to your objectives and they are appropriately rewarded for success.
In the end, your team is more likely than not to stay with you provided they enjoy what they do, know they are valued and feel part of the action.
Alysoun Stewart is director of commercial and strategic services at Grant Thornton, the leading global accounting, tax and business advisory firm. www.grant-thornton.co.uk