While the Australian economy is in the midst of a tightened labour market, inflation and a skills shortage, the emergence of ‘quiet quitting’ as a trend is not surprising.
There are various opinions on whether this is in fact a trend employers need to seriously consider or simply an observation of disengagement gone viral – what is clear in our experience is that companies that are genuinely interested in building an engaging culture are often those that achieve value at exit.
It is also extremely important to maintain the performance of a business and retain employees while a business sale campaign is underway. Whether quiet quitting is a problem for you or not – as an employer, you may wish to look at some key strategies you can use to focus on retention and performance.
Employee Share Schemes – Providing a way for key staff to hold equity in the business can be an extremely successful retention strategy. It provides skin in the game (critical during a growth phase), it lets employees truly engage with the business, and encourages loyalty. When considering a share scheme, there are a huge range of questions to consider – some of the most important being whether shares will be paid for (ie sold or given), clearly defining who retains control, shareholder rights and what happens in an exit scenario (a shareholders agreement is critical).
Performance Base Bonus – While some organisations offer bonuses annually, others shy away from this entirely. Long or Short-term bonuses are a great way to make business performance relevant to employees. It’s also much easier to implement than an employee shareholding program (some staff may actually prefer this to equity as well). Long-term incentives involve deferring a portion of a bonus earned in one year to one, two, or three years later. This can be a particularly good way of disincentivising staff from leaving – which may be more likely to happen with short-term bonus programs (eg they hand in their resignation after they receive their annual bonus).
Phantom Equity – A less known but increasingly popular strategy is to use “phantom equity”, where a bonus program effectively shadows the performance of the company. Effectively the employee/s involved receive a benefit based on increasing the value of the business and the owners retain equity and control. Caution – if using this strategy, you must choose your payment triggers and timing wisely. If the sale of the business is the trigger for payment of a bonus, you may have difficulties finding a buyer that wants to take on this commitment.
Why not? Many practical issues come with financial retention strategies like those listed above – the timing of payments, payroll, and tax implications and “key person risk” (which arises when your business relies too heavily on one or a small handful of individuals) are all considerations you should make when embarking on any of these.
Any retention strategy should be considered in the context of “protecting” the value of the business – that means also considering company policies and/or codes of conduct, how you deal with employee-related concerns and issues, and documenting systems and processes so your business captures key knowledge and can transfer it to other team members if need.
An Observation
Working with a huge range of businesses and their owners has shown us that team engagement is not only important for business performance now, but also at exit. That said, there has never been a client where we have seen strategies that focus on employee engagement employed purely to drive business value. Rather, owners that use these strategies successfully are genuinely interested in building employee engagement into their culture – better multiples and a successful deal, are beautiful side effects of this.
“It is far more powerful and effective to have staff who are staying by choice.” – Joanna Oakey
Other relevant articles:
Relevant Podcast Episode:
- [EP 112] Return to Work : The guidelines you should have in place for staff returning to work post COVID
- [EP 114] Remote and Offshore Teams – the opportunities, risks, tips and traps
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