If there is one universal problem facing agencies today, it’s talent recruitment and retention. Agencies of all sizes are experiencing more employee churn than they’ve seen in a long time. In fact, agencies report an average 20% turnover per year. Agencies want to retain key employees, and great employees want reasons to stay. So why are so many agencies still seeing their best employees walk?
Many agency owners are offering their key employees cars, vacations and hefty bonuses, yet people are still leaving. Unfortunately, many agencies, clients and corporations are offering employees the same perks, so someone can easily leave their current agency and get the same benefits somewhere else. Fortunately, with a little creativity and some honest conversations, agency owners can avoid this inevitable talent drain.
How Agencies Keep Stars
Unfortunately, money talks and most employees don’t take the time to do their homework. They don’t calculate the value of all of the perks, flexibility and benefits their current employer offers. Instead, in today’s competitive hiring environment, great employees get poached by companies that offer the most money. As a defensive strategy, some agency owners offer equity to retain key employees, hoping it entices them to stay and contribute to long-term growth. Sometimes that works, but when it doesn’t, the backlash hurts.
Giving an employee equity doesn’t cost anything at first. However, if that person decides to leave, the equity leaves, too. When that happens, the agency loses control of both a star employee and a chunk of its ownership. The agency could always buy out the departed employee, but no one wants to send a big check to a person who just left the building — especially if the company gave the equity away for free. Agencies that decide to go the equity route should offer star employees an opportunity to buy in. This strengthens the connection between the employee and company without sacrificing something for nothing.
If an employee is bringing in revenue and wants to be compensated differently, you can put structures together that reward her for continuing to do what she does best. Although it might sound unusual, another great tool to retain employees is cash-value life insurance. Wouldn’t you pay an employee more if you knew you could recoup something if he left? Cash-value life insurance can do just that.
Say an employee makes $150,000. The agency can’t afford to lose him, but it also can’t afford to bump his salary much higher. Rather than strain the books, the owner could provide an additional $50,000 in an insurance policy that builds value over time. It’s more of a loan than a pay bump, so if the employee leaves before becoming eligible to withdraw the accrued cash, the company keeps the money. If he stays, that policy becomes quite valuable — especially if the agency offers a buyout down the road. Plus, by putting the policy in the employee’s name, it becomes tax deductible to the agency.
To demonstrate the value of a policy like this to a star employee, frame the offer as a long-term bonus. This generation of workers values purpose over money, and most don’t stay in one job for long. However, if employees feel like they’re working toward something for their family — and have the option to convert the policy into equity or cash down the line — they’re more likely to see the value of the bonus. It’s a compensation package with extra features, and if both sides hold up their end of the bargain, it’s a cost-effective method to make star employees feel appreciated.
Ultimately, agencies should look to offer benefits that are both valuable and flexible. The cash-value life insurance policy is a perfect example: Neither side can back out without a bit of self-harm, but both sides reap the rewards if the partnership continues.
How To Retain Key Employees For The Long Haul
This life insurance vehicle is just one example, and it works for many employees but not all. I’ve discovered a few best practices to help find and implement policies that will make the best workers stick around:
1. Don’t make empty promises.
Employees hear promises from their employers all the time. If the company doesn’t follow through, it deteriorates trust. Instead of leading employees on with promises of benefits sometime in the future, discern what makes them feel valued and take concrete steps in that direction, even if they’re small steps.
2. Listen to their requests.
Don’t assume your employees all want the same thing. Sometimes, I go into a career track meeting expecting my employee to ask for the moon when all he really wants is to get rid of his school debt. (Student loan repayment is a hot, new benefit for a reason.) By listening instead of assuming, I can focus on what matters to him and outline a plan to help him achieve that goal.
3. Share your intentions.
Many owners keep their long-term plans for an employee close to the vest in negotiations. Don’t do that. Disclose your intentions and talk about the future. It’ll prove to employees they can trust you down the line.
Not all “golden handcuffs” work on all employees. I’ve worked with people who wanted to retire after 15 years to become farmers. Trying to squeeze more value out of people like that will ultimately make them less productive in their time with your agency than encouraging them in their long-term goals.
When a star employee wants more, don’t offer a cookie-cutter bonus and expect to retain her for long. Listen to what she wants. Then, work with financial advisors, CPAs and other professionals to design a unique benefits package that ensures both the employee and agency enjoy a healthy, productive relationship for years to come.
This article originally appeared on Forbes.