Staff turnover is extremely disruptive for any business. When a team member leaves the momentum built up, shudders to a halt. Time and resources have to be spent finding and integrating their replacement into the team, re-building relationships amongst the team and clients. This all distracts from the core purpose; producing excellent work for clients. As Campaign recently highlighted research from the IPA Adaptathon estimated, the cost of replacing senior management is between 200-400 percent of their salary and for middle managers at 150 percent.
So what tools are in the box to get talent committed for the long term? Well one tool is putting in place an Enterprise Management Incentives (EMI) share scheme. The concept is simple by giving employees share options, which are typically exercised in 3-5 years or in the event of sale, this should lead to greater loyalty. As this encourages your star performers to give their best and be committed to the business, in the knowledge they will share in its future success. As an added bonus this is an extremely tax efficient method of remuneration for both the business and the employee.
Although, the current owners have to accept this will result in a dilution of their current shareholding, so they need to be sure EMI options are awarded to individuals who bring added value to the business. Equally, this incentive only reduces churn if it incentivises the star performers. So you need to make sure this something your key players really want before undertaking the cost of implementing. Otherwise, you are worse off than in the first place.
While an EMI scheme works for your star performers, it is probably not suitable for everyone within the team. It goes without saying that to keep talent on board they will want to be involved in exciting projects and be rewarded with market rate salaries. Although, there are always little tweaks to individual remuneration packages that could be made, which help differentiate from the rest and are relatively inexpensive to implement. So it might be worth looking at a menu of options with employees – for instance a cycle scheme, private medical insurance, the opportunity to acquire additional holiday and flexible bonus schemes. As with the EMI scheme though they will only help reduce churn if employees value the items on the menu too.
At the end of the day the reducing talent churn, allows businesses to focus on what they good at: servicing the needs of clients. Having an EMI scheme for star players or a flexible remuneration package can help achieve this goal. Although, they will only work if they are what your talent wants. Additionally, on their own EMI schemes and flexible remuneration packages are not magic bullets and are only part of the equation in generating long term commitment from employees. Other factors such as the team environment, training opportunities and participating on exciting projects are all part of the jigsaw in reducing talent churn.