How to Attract and Retain Great Employees

Today, successful high-performing businesses are developing creative programs to guide employees to focus on improving business performance and rewarding them for their contributions. The long-term winners will be companies that provide a flexible and challenging work environment, along with employee recognition and rewards. Organizations have to be willing to share their successes.

What Motivates Employees?

In our work as consultants we often discuss what owners and employees think are the key motivating factors. Most business owners initially think money is the key issue. However, many employees state that they are looking for challenges, recognition and empowerment.

The shortage of skilled insurance workers is still restraining growth for many businesses. Given this environment, what can a firm do to retain and attract the best and brightest employees, while challenging them to achieve the business’ goals?

First, recognize that money, by itself, will not do it. High performing employees are searching for something more than just a high salary. The typical employee compensation plan should include a total package of rewards, recognition and environment. Some of the elements are “satisfiers” that allow a firm to attract and retain employees such as benefits, flex-time and training. Other elements of compensation are “motivators” such as bonuses, incentives, challenge and opportunity. A well designed plan will have long-term and short-term compensation components.

The key to attracting and retaining the best people is the use of a “total compensation” approach. It is also a critical component in improving employee performance. A firm that takes the time to carefully customize a “total compensation” package will transform individual employees into high performing and committed employees.

There are three basic ingredients to the total compensation package that every agency must have:

Challenging Work: The old system of directing and monitoring every task that an employee performs is out. Employees with multiple skills and authority are in. For example, a major retailer has a one-paragraph employee handbook that states: “Rule No. 1: Use your judgment in all situations. There will be no additional rules.” To truly perform at this level requires enormous trust in employees. However, if a business is able to perform at this level it will reach incredible heights.

Provide additional opportunities for learning and skill development to spice work up. Encourage the staff to take classes to get an industry certification and for courses to earn CEUs. An expansion of training could provide more flexibility through a higher skilled workforce.

Work Environment: Today’s workforce is looking for flexibility on the job and balance in their life. Management needs to evaluate ways to realistically provide this sought after flexibility in work. For example, tradition has it that the employees work in an office with established work hours. Could the firm allow for variations, such as four-day work weeks, working at home two days a week or job sharing?

Recognitions: Non-cash recognition awards are a very effective way to reinforce the company’s values. They can be a low-cost, high-impact element of the total compensation package. For example, employees who provide outstanding or innovative customer service receive special awards.

Management needs to think about the types of awards that make sense for employees.

Here are some examples:

Once the basic ingredients are established, the firm can consider the following tools to recruit and retain:

Profit Sharing

Although money is not always king, it still has a lot of clout. Firms that establish a bonus plan based on the business’ profitability will have employees that strive to increase sales and cut expenses. Profit sharing can be based on the profitability of the overall business or by profit centers such as commercial lines versus personal lines versus life and health. The pool of bonus money can then be distributed to the staff based on management’s discretion.

A variation of profit sharing is to reduce the employees’ base compensation while providing quarterly bonuses based on a department’s performance. A plan that tracks employee performance will then allow them to see a direct correlation between their effort and compensation.

Deferred Comp

Deferred compensation is often used as a method for producers to build long-term value for their efforts directly related to the business they bring to the company. We recommend using deferred compensation instead of ownership in the producer’s accounts. The plan is often phased in over time until the producer is fully vested.

The company benefits by having a system that encourages the producers to build their accounts as well as remain with the firm. It must be noted that a deferred compensation plan creates a contingent liability for the firm, which does negatively affect business value. However, deferred comp is also “consideration,” which helps uphold the covenant not-to-compete in a producer contract. This is another good reason to include deferred compensation as part of a producer agreement.

The value of this compensation could be used as a discount toward purchasing stock in the agency. This should be with board approval and not given to every producer that earns deferred compensation. It is important to know that it is very difficult to ever get rid of a partner, so owners should be very careful who they allow the deferred comp to be turned into stock.

Stock Equity

Stock ownership usually conjures up visions of importance and respect. Producers and employees feel that having the word “owner” on their business card will improve sales and stature. Often the employees only understand the benefits of stock ownership and the drawbacks are ignored or not understood.

Business owners are often unclear themselves whether or not they should offer stock to an employee. They usually first think about it either when a current employee is about to walk out the door. Owners might feel that they are forced to offer stock in order to entice a new producer or to retain a current producer.

We recommend that owners think long and hard before offering stock to an employee. The decision whether or not to make an employee an owner needs to be based on a review of many factors. The right decision can propel the agency forward. The wrong decision can mire the firm in unimportant muck.

A Final Thought

If owners want outstanding results, they need to be prepared to pay outstanding rewards. Implementation of a great compensation plan will motivate employees to improve not only their own performance, but the performance of the firm as well.