I am a big believer that your business is only as good as the people you have working for you. When it comes to attracting and recruiting high quality, team-minded individuals, some companies do a better job than others.  Over time these individuals distinguish themselves within your organization through their positive attitude, commitment to your core values and performance. You know who these individuals are and at times you wonder how successful your business could be if only you could replicate these impact players. Alternatively, you may be thinking that this individual is so important to your business that you could least afford to lose him or her. So how do you acknowledge, affirm, motivate and retain them?

First, it is important to realize that: All managers are not created equal!

There are basically three types of key managers: Key Managers, Special Key Managers and Very Special Key Managers. It is imperative that you understand each manager classification since each of them is motivated very differently. While each of them share a common thread (they want to be respected), motivating and retaining a key manager must be done with a great deal of consideration and care, otherwise the very objective you are attempting to accomplish could crash and burn right in front of your eyes.

Below are a few hints you may find helpful as you evaluate managers in your company and also consider possible mechanisms to motivate and retain them for the long term:

Key Manager (KM)

A Key Manager (KM) is a loyal, dependable, trustworthy manger who is security oriented. Key Managers tend to do a very good job managing their respective department and are often times overachievers.

An example of an incentive that would motivate a Key Manager would be a Supplemental Executive Retirement Plan (SERP) which is a non-qualified deferred compensation plan. For example, let’s assume you have a Key Manager who makes $80,000/year. The plan could state that each year the Key Manager worked for the company 10% of their annual compensation ($8,000) would be set aside for their benefit and accrue interest each year. Typically this kind of plan would include a customized vesting schedule, non-compete language, non-recruitment of employees and customers etc. Remember, these individuals are generally conservative and are not risk takers thus they generally take comfort that the incentive is a fixed percentage of their compensation. 

Special Key Manager (SKM)

A Special Key Manager (SKM) is an individual who is dedicated, loyal and dependable but also is a team builder. Special Key Managers are entrepreneurial, self-confident and are typically performance driven individuals.

An example of an incentive for a Special Key Manager would be a non-qualified deferred compensation plan comprised of two components: one component could be a flat percentage (10%) of annual compensation as described above. The second component could be sharing in a percentage (10%) of company profits above a minimum threshold. For example, let’s assume you have a Special Key Manager who makes $100,000. Let’s further assume that the profitability of the company last year was $500,000 and this year it is $750,000. In this example you would receive $10,000 for the first component and $25,000 for the second component for a total of $35,000. The money set aside each year would accrue interest. This kind of plan would also include a customized vesting schedule, non-compete language, non-recruitment of employees and customers etc.  A Phantom Stock plan is another alternative that a Special Key Manager could perceive as very attractive. In simplistic terms, a Phantom Stock plan provides a Special Key Manager an opportunity to share in the increased value of the company each year without having the downside associated with true stock ownership.

Very Special Key Manager (VSKM)

A Very Special Key Manager (VSKM) is an entrepreneur and also a rainmaker who if he or she left the business would significantly impact profitability and could impact the strategic mission of the business. Indeed a VSKM would be very difficult to replace. These individuals are typically looking for respect. And I am not talking simply about “show me the money”.

One of the ways to respect a Very Special Key Manager is by offering he/she an opportunity to become your partner or an owner in the company. Caution: there are several ways to acknowledge and respect a Very Special Key Manager other than giving him/her actual stock in the company such as becoming a partner in a management company. However, there are some Very Special Key Managers who warrant actual stock ownership. 

Remember… aligning the incentive with the proper classification of manager you are dealing with can have a profound impact on your ability to motivate and retain them for the long haul. The retention and incentive program examples such as those listed above serve as effective tools in attracting and recruiting external talent. Please feel free to send me an email if you are interested in receiving a Key Manager Assessment to help you better understand the managers in your organization.

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