When you’re a small business owner, your people are key. But how do you keep your key people happy and keep them from going after a better offer from your competitor?
We recently came across a case where the business owner needed to retain his key employee. He came to us and he said, Hey guys, if I lose this guy, my business is going to fail because I could only go so far. I only have so much bandwidth. And so we need to come up with a way to make him want to stay. How do we incentivize this guy?
The loss of a key employee is devastating to any business, but for a small or medium sized business, it could literally mean life or death because that employee might be the only person in your geographical area who has the required skills and expertise to perform that duty.
For example, we recently had a business owner client whose key person, the plant manager, retired. His skill set was so wide and so vast and accumulated over many years, that it took three people to replace just that one employee.
On average, it could cost about 200% just to replace one key employee. Not to mention the lost time and the lost sales. So what’s the solution? How do we overcome people headhunting our key employees or them going off and looking for a better offer?
Good employees are hard to come across these days, and they’re even harder to keep in many cases. According to the U.S. Bureau of Economic Analysis, 48%, that’s almost one out of two of our employees, are either actively searching or open to the conversation of a new opportunity. That is troublesome if you’re a small business owner.
There are a few solutions that small business owners could take advantage of to incentivize key employees, but more importantly, recapture the cost of that incentivizing in the long run so that they’re not out a ton of money and they could take care of the key employee, their business, and their family.
We have seen several situations where the business put in incentivized campaigns to keep their key employees. The problem is, the employee didn’t recognize it as something that had teeth or something that would keep him from shopping his job.
So the first step when incentivizing key employees is to draw up documents that are going to protect you, as the business owner, and the employee, as the person who’s being incentivized. But also making sure that whatever plan you’re putting together is valued by the key employee. If it’s not, there’s no sense going down that path.
We recently worked with a business in Long Island, New York, and they had a key person that they wanted desperately to keep around. His job was in high demand, not only in their industry, but across the board. So the question became how can we design a plan that has such high value for this individual that he would never consider leaving that employer?
Well, we sat down with the employee and asked him what his biggest financial challenges were, and he indicated to us that he had two children that he needed to send to college. One was eight. The other one was six. He needed to make sure that he can provide them with the best education possible in his eyes, a private school, so that it would not have a significant impact on his overall finances.
So we worked with the employer to design a plan that would provide the employee with bonuses when his children were ready to go to college. And by doing that, that literally tied the employee in. But here’s the kicker. When we presented the plan to the employee, he was in tears with joy, knowing that his employer cared enough for him that he would take care of his children and send them to college.
However, when we met with the employer, we made sure that they knew that they’d be able to recapture the cost of that plan in the long run so that the business wasn’t suffering just from keeping that key employee happy.
If you’re looking to get started with this type of planning, the first step as the employer is to come to us, identify your key employees and say, “Hey, I have this guy or gal and they’re great. I want to make sure they’re taken care of and they don’t leave me.”
The second step is to sit down with the key employee and find out what is most concerning, or what is most valued by that key employee. And then, it’s just putting together the resources that the employer is going to provide and the value or what’s valued by the key employee. But for the key employee, nothing changes. They continue to come to work, excel and provide and build your business.
And by the way, if that key employee chooses to leave before they receive the benefits, they don’t get the benefits. That’s all written into the plan. This planning could seem daunting or maybe complex. However, it’s important to keep it simple. Make sure the employer is happy and the key employee is incentivized.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.