Follow Dallas Linkedin
Email Dallas Email
Financial
Mar 1, 2019

Incentivizing Your Best Employees to Stay

Sponsored Content provided by Dallas Romanowski - Managing Partner, Cornerstone Business Advisors

When thinking about business planning, one aspect you may be tempted to overlook is the contributions of your key employees.

Key employees are the lifeblood of well-run businesses, and they play an important role when owners begin to plan for their businesses’ futures, especially when owners begin to plan for their inevitable business exits. Many owners find that unless they have ways to incentivize key employees to stay with the business – rather than taking their talents elsewhere for more money or recognition – they cannot properly plan for their business’ futures.

Consider the story below of Jacqui Dickson, a key employee with Balthazar’s Ink Emporium.

Jacqui Dickson was a top performer at Balthazar’s Ink Emporium, a specialty ink supplier for large publishing companies. She always exceeded her sales goals and happily took on other responsibilities outside of her comfort zone. She helped manage marketing designs and public relations inquiries, and occasionally trained new hires.

Among all her responsibilities, Jacqui typically worked 55 hours a week and was responsible for about 35 percent of the company’s new sales year after year.

But Jacqui was getting restless. She felt as though she had hit a wall in her career development and was frustrated that she hadn’t received a substantial raise in over five years, despite constantly taking on more responsibilities. Ever the diligent worker, she kept her head down and continued to produce, confident that her work wouldn’t go unnoticed.

One day, the owner of the company, Balthazar Ek, requested a meeting with Jacqui. They had spoken a few times casually over the last 10 years, but Balthazar had asked for an hour of her time. For a man so rarely seen sitting still, an hourlong meeting was practically an eternity.

In the meeting, Balthazar revealed that he would be transferring his company to his two sons. He told her that because the company had well-tested and documented processes, they wouldn’t need to do very much to keep the company running. He intended to give each son 45 percent of the business, and because of all her hard work, he wanted to offer Jacqui the remaining 10 percent to make sure the business continued to run smoothly.

“This business is worth at least $10 million,” he told her. “That means $1 million for you.”

Jacqui was stunned and terrified. She had no idea how to run a business. More importantly, she had no desire for ownership.

“Sir, that is a generous offer, but I can’t. Owning a business isn’t for me.”

Balthazar was unaccustomed to hearing no from anyone. “How can you say no to $1 million?” he asked.

“Believe me, it’s not easy,” she replied. “I’ll gladly take a fraction of that as a pay increase, but I can’t accept ownership. It’s not what I want.”

“You’re a fool!” Balthazar exclaimed. “Sleep on it. I will offer you this opportunity one more time at the end of the month.”

Jacqui left the meeting startled and insulted. As nice as $1 million sounded, she knew that value wasn’t liquid. She couldn’t buy a new car with it or get a better apartment.

She knew she couldn’t sell her share without Balthazar’s sons’ approval. And even if they gave her that approval, she had no desire to work through that process. She’d be at the mercy of decisions made by the two sons, whom she hardly knew. And there must be other landmines that she didn’t even know about.

She immediately began a job search and quickly found a job that offered to double her salary. She accepted the position and, ever the diligent employee, decided to share her decision with Balthazar face to face.

“I assume you accept my offer?” Balthazar asked when they met.

“No, sir,” Jacqui said. “I’ve decided to resign. I do not want ownership, and I will not tolerate being called a fool for that.”

“I was only teasing!” Balthazar pleaded. “Who says no to $1 million?”

“I’m not saying no to $1 million. I’m saying no to your offer.”

Jacqui left Balthazar’s Ink Emporium and had immediate success at her new position. After she left, Balthazar learned a harsh lesson in how much Jacqui did for his company. Quarterly cash flow plummeted 30 percent. His sons – each of whom now owned 45 percent of the business – proved that Balthazar’s processes weren’t as foolproof as he had assumed. They made expensive mistakes.

As cash flow fell, so too did Balthazar’s income. He begged his sons to let him run the business for them, but they had decided to sell it to a third party for $2 million ($1 million for each of them, while they had paid nothing for their ownership when Balthazar gifted ownership to them) instead, after growing weary of hearing their father’s complaints about how they ran the business.

Balthazar incorrectly assumed that Jacqui would immediately agree to the incentive plan he had conceived because to him, it was $1 million. He failed to realize that “incentive” to him was nothing more than a reason to leave for Jacqui. He didn’t properly incentivize Jacqui and thus lost her. Losing her meant losing business value and cash flow, which eventually turned into net losses of $5 million.

If properly incentivizing your key employees is important to you, or if you’d like to discuss how you can blend key-employee planning into your overall planning for your business’ future, please contact us today.

© Copyright 2019 Business Enterprise Institute, Inc. All Rights Reserved

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420 or email [email protected].

Other Posts from Dallas Romanowski

Bizjournalblockad
Ico insights

INSIGHTS

SPONSORS' CONTENT
Aaeaaqaaaaaaaaidaaaajdhiztrkodm0lte2yjetngrkmy1hotrmltawmdvlmwqyztmymw

Selling Your Story: The Elevator Speech

Diane Durance - UNCW Center for Innovation and Entrepreneurship
Billhunter300x300 b&w

Color Me Impressed: Putting Color to Work for Your Brand  

Bill Hunter - Wilmington Design Company
Burrus rob headshot 300x300

Information Systems and Technology Professionals Continue to Be in High Demand

Robert Burrus - Cameron School of Business - UNC-Wilmington

Trending News

KFC On Market Street Update: More Than $1M For Less Than 1 Acre

Cece Nunn - Mar 25, 2019

Four Wilmington Startups Semi-finalists For NC IDEA SEED Grant

Johanna Cano - Mar 25, 2019

Coast Guard Bulkhead Repairs Scheduled, Park Improvements Follow

Jenny Callison - Mar 25, 2019

Downtown Fix

Cece Nunn - Mar 25, 2019

Affiliated Businesses Locate To Shared Office Space

Jenny Callison - Mar 25, 2019

In The Current Issue

Storm Repairs Boost Battleship

The more than 35-year-old visitors center, which greets thousands annually before they board the memorial warship, is getting a major makeov...


In The Business Of Brunswick

William Early, executive director of Brunswick Business & Industry Development, is charged with advancing economic growth within the county....


Tapping Hemp Fiber's Potential

Working from his garage in Wilmington, Kyle Trivisonno, a board-certified prosthetic technician, was able to create a prosthetic leg out of...

Book On Business

The 2019 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Transporting the Future - Power Breakfast 3.12.2019
Health Care Heroes 2018
2018 WilmingtonBiz Expo - Keynote Lunch with Eric Dinenberg, Rouse Properties