The
Best Way to "Pay to Stay."
You
can't hang on to key staff simply by throwing money around--even if you have
it. Here are four rules to keep in mind as you negotiate your way through the
Great Resignation.
BY HOWARD
TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH
INVESTORS@TULLMAN
As we approach the end of another crazy year
and businesses continue to bounce from week to week between gunning the gas and
hitting the brakes in their hiring, there's been a lot of talk about
compensation levels. The discussion ranges from looking backwards -- hazardous
duty pay and "thanks" for sticking around payments -- to addressing
current hiring needs. That includes offering bribes to workers to come back.
Which is stupid. And then on to the future
questions about what kinds of post-pandemic salaries are going to be required
-- especially given the competitive demands for top talent -- for the
leadership teams that have not only successfully survived but in some cases
already started to quickly bring their businesses back from the brink.
My sense is that the company execs -
especially in pre-profitability mode - are going to be very surprised at how
reluctant and slow their boards and comp committees are going to be to approve
any significant bumps in six-figure salaries regardless of the circumstances,
including competing offers, until the dust really settles. They're going to
wait to see what the whole budget packages are going to look like for next
year. And anyone who thinks we have a clue about what the next 16 months will
look like in terms of the economy needs far better glasses and a reality check.
No one knows, which, unfortunately, gives the reticence of the ultimate funders
more support and justification than they probably deserve.
Needless to say, it's a lot easier and less
stressful to make these kinds of do-nothing calls sitting safely in a board
room or on a Zoom call with your fellow board members than when you're the
person sitting across the table from a key employee (and a definite keeper)
who's just explained why he or she thinks they need to accept a better outside
offer. Everything is easy for the people who don't have to run things
themselves. But it's the folks on the front lines who have to worry every day
about rebuilding their businesses, keeping their people in the boat and content
(or at least not actively unhappy), and working all this magic with the least
amount of dollars and going-forward commitments possible.
And, in case anyone has wondered recently, the
gig on modest, multi-year, slowly vesting options for the troops is pretty much
up and over as well. You can't pay your over-priced rent or feed your family
with futures. If you don't necessarily believe that, just ask your peers and
friends what they think about such offers. They'll most likely tell you that
you need more out-of-the-money options like a fish needs a bicycle.
So, if stock options are not likely to be very
effective, and long-term salary adjustments aren't going to fly, but the board
still wants to see your plan as soon as possible to: (a) stem the ongoing
attrition, (b) attract new talent to fill the holes and support new growth, and
(c) keep rebuilding the business to where things were before COVID-19, what
exactly can you propose to respond? My own preference, in addition to limited
and very strategic salary changes, is to use retention bonuses. Obviously,
every business is going to have some different concerns, various prospects and
their own reactions to the problem, but there are a couple of approaches that
make a lot of sense even if you need to adapt them substantially to your own
situation.
(1) Limit your action horizons to
realistic timeframes.
While sooner is better than later in terms of
taking action, shorter is better than longer in terms of the kind of
forward-looking expenditures that your board and team are going to be
comfortable with. Making a plan through year end makes a lot more sense now
than signing up for 12-months or longer obligations when you can't even accurately
estimate your expected demand or required headcount or even the direction that
either may be headed. Band-Aid payments, like brief bumps or one-time bonuses,
are a better bet right now than budget-busting salary adjustments, which you'll
be stuck with for a much longer time if you can even get them approved.
(2) Target the People Who Give You
the Biggest Bang for the Buck.
While every business believes that they could
use more skilled employees, few folks would argue that in tech-centric firms the
overwhelming pressure to hang on to key players is highly concentrated in two
main areas - engineers at every level and high-level operations personnel. As
you plan to attract and retain your most important players, keep in mind that
talent and contribution are two different things. You need to focus on the
players who make the greatest contribution to the team's efforts and success,
both in terms of their individual actions and in terms of their leadership of
others. As some football coach used to say, "I play my best 11, not my 11
best." That's even truer when you're talking about software development
and support, which is 100% a team sport.
Another key part of the calculation is
influence. When you're talking about someone walking out the door, many young
managers don't understand that it's often not just one person who goes, it's his or her little group of friends,
peers and followers that leaves as well. This can be unbelievably devastating
in cases where that mini team may be responsible for an entire part of the code
base, operation or other function like sales support. Even if you just focus on
the current keepers, how you treat them isn't lost for a moment on their
followers who may grow to be important parts of the future team that's really
central to your success. If they don't like how their own career path
looks going forward or believe that the company cares about it and them as well,
they're likely to bolt at the first opportunity.
(3) Decide How Much to Offer and
Stick to Your Guns.
The hardest decision at the moment, assuming
that targeted salary bumps will only get you part of the way, is whether
concrete and specific retention bonuses - payable at year end, based partly on
company performance through that period - make sense. Even more critically, how
big do those payments need to be to make a real difference? I'd suggest that,
as long as everyone acts in good faith and believes that these are real
promises, it makes a lot of sense to commit a finite, one-time, substantial sum
of dollars to the goal of keeping the key members of the team together. Handle
this process carefully. Don't turn it into individual negotiations; it's got to
be an announcement relating to various specific groups of employees, not a
one-off reaction or a response to any one person's threat to leave. The amounts
in question, especially relating to relatively short periods of time, don't
have to be breathtaking or life-changing, but they do have to demonstrate a
serious effort to reward each person's efforts, loyalty and commitment to the
firm.
(4) Don't Try to Do Cheaply What
You Shouldn't Do at all.
You will not make everyone happy; that's not
possible. Likewise, it's also not worth making a half-assed gesture to a bunch
of your employees that won't be impactful and is more likely to offend than
placate them. Treat everyone within a given group fairly and equitably, but
don't try to spread your largesse so broadly that it loses value. If you handle
the plan and the communication reasonably well, even the people who didn't
benefit will grudgingly acknowledge that it makes sense for the business to take
care of those who did. Human nature being what it is, they may not say this out
loud, but they'll know it in their hearts.
In the end, for the best people, staying put
or leaving won't ultimately be decided by the amount of money involved. Just
like any other business deal, where you end up in dollars and feelings isn't
anywhere near as important as the time and care and attention you put into the
process of getting there which is what is really likely at the end of the day
to make folks stick around.
SEP 28, 2021
The
opinions expressed here by Inc.com columnists are their own, not those of
Inc.com.