why should someone quit a good job

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  • 8/6/2019 Why Should Someone Quit a Good Job

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    WIN-WIN COMPENSATION STRATEGIES

    Why should someone quit a good job, or decline another good offer, to come to work for you? If thevision is shared, a great career opportunity is presented (and sold), and a win-win financial structure isestablished and agreed to, you stand a great chance of attracting this great person to help build yourgreat organization. Then deliver what is promised.

    Peter Drucker said Of all the decisions an executive makes, none are as important as those

    about people because they determine the performance capacity of the organization. Jim

    Collins, in Good to GREAT, espouses that having the right people on the bus and in the right

    seats is a major key to success. Simple and easy, right?

    Sell the total package, not just the compensationsell the vision, the opportunity, the company, the

    longer term. Many times, the money is just about keeping score. emphasizes Mr. Heard. Reinforce and

    amplify the selling points your executive search partner has already conveyed. Certainly every potential

    total compensation upside scenario should be emphasized. However, where some fall short is in

    promoting the most important aspects of this important position: the culture, the management team, the

    career potentialthe future, longer term financial opportunities, the excitement, etc.

    Streamline the process. Excessive delays and/or indecision can be very discouraging and effectively

    kill a candidates emotional momentum and enthusiasm for your opportunity. Most executives

    appreciate and respect a crisp, clean process, and tend to equate a companys hiring process with its

    normal course of businessgood or bad. Competitive organizations may also be pushing for an

    acceptance. The old adage that time kills all deals certainly applies in recruiting. Ensure that the

    person knows s/he is wanted, move as quickly as possible, and always try to have suitable backups

    Make negotiations a win-win process. While most negotiations inevitably begin with current

    salary/compensation totals, a candidate should not be held hostage due to previous misfortunes or

    current employment status. Likewise, no candidate should try to gouge a potential employer. Flexibility

    and compromise is almost always necessary on both sides. Additional leverage points, such as

    accelerators, additional performance bonuses and/or commissions, perks, etc. can help to create a

    mutually acceptable agreement, says Mr.Gorman. However, our former EDSer points out that with the

    Sarbanes-Oxley legislation, stock options are more difficult to include in a compensation package these

    days

    Utilize the search process as a market study. Frequently a position upgrade or a slightrestructuring of an organization is in order to align the demands of the business with availablecapabilities. Accommodating a great athlete can frequently bring a much greater return on investment.The former EDSer, quoted above, states a good executive search firm can significantly enhance theprocess. The search itself will reveal competitive compensation data, and the recruiter, as anintermediary, can advise and sell both ways, helping to arrive at a better, financially reasonablesolution.

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    Identify and address any concerns or issues the candidate may have. Some issues are easy tosolve, some not. These issues can be personal, professional, or there may be a competitive suitor. Thehidden or unspoken objection is the most paralyzing. Ask the questions, look at his or her perspective,and try to solve the problem in a creative manner. Your credible recruiter can be invaluable in thisregard.

    WIN-WIN COMPENSATION PLANS. We develop comp plans that are right for you and that aremotivating to your staff. We provide you with a program that has the best mix of base salary, flexibleincentives, bonuses and perks, etc. We will enable you to retain your best producers over the long haulwith our "golden handcuff" plans seeMaking Your Staff Think Like an Owner article. We test our plansunder different scenarios to make sure they work under varied conditions. We typically add a healthylevel of competition to further motivate the staff, while still maintaining a team environment. "Weprovide you with a win-win" comp plan for your business and staff"

    Make Your Staff Think Like an Owner

    By Michael Neidle, Purple Squirrel, November 2000

    Did you ever feel that the organization was not on the same wavelength in trying to make the companysuccessful? Could it be helpful if the staff thought like an owner? The corporation and its employees havea very different relationship today from what existed five or 10 years ago. This is particularly true for ITand dot-com staffing companies, which are the leading edge of the industry in terms of growth andprofit, and have a large fraction of younger, Generation X and Y employees. These people tend to bedifferent from other generations and typically want more immediate rewards, and value flexibility morethen security.

    The role of the company is no longer to provide long-term employment. It is to perform a given job for aslong as it is advantageous for both parties and, at best, to try to keep the employee marketable.

    A sensible owner wants to maximize the value of his company. Everything that he does in one way oranother is to accomplish this goal. Profit sharing, company-sponsored events, contributing to charities, orthrowing a holiday party are all aimed at this goal, even if indirectly or unconsciously. This also meansmaking profits today and making a greater profit tomorrow. The higher the profit and the faster thatprofit builds, the more the company is worth. Thus, one should reward the staff accordingly.

    There is, of course, more than cash to make the staff think like owners. There is pride in the company,participation in management, ego satisfaction, job flexibility, and work environment, just to name a few.The best-managed companies recognize this and cater to their staff in these areas and dont have tocompete for their talent on dollars alone. But economics come first. Without cash there are few choices to

    make.

    What is the difference between the mindsets of an owner and an employee? A sensible owner does notdistribute all of the profits, but retains a cash reserve. He has a game plan as to where he intends to bein several years. A smart owner does not take too many risks, as he understands the laws of probability.A committed owner worries about legal and financial liabilities and will have sleepless nights if he pledgedhis house as collateral. An employee tends not to worry much about these things. So how can weencourage him to do so, at least in part?

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    The answer is to reward performance, not just effort. Most compensation programs have a base salaryand commission tied to margin. To this, a deferred component is added to make the staff think like anowner. This is based on profit and/or equity. A typical program for a manager may include 40 percent ofones total annual compensation in base salary, 20 percent in commission, and 40 percent in profits. Fora staff person this might be 25 percent in salary (sometimes even a draw against commission instead ofsalary), 50 percent in commission and 25 percent in profit. The numbers provided here are only

    illustrative. Many companies have in fact eliminated the base and instead have a very rich incentiveschedule, with a draw against commission.

    A manager should have more of the compensation tied to the bottom line, as he or she has control offixed costs (selling, general, and administrative costs) and does not direc-ly generate business, as doesthe individual staff member. He should have most of his compensation tied to production, as this is hismain function. Ownership may be reluc- tant to disclose true profit because of confidentiality or privacyissues. How-ever, there are ways to provide sufficient information about profits without getting into areasthat are uncomfortable.

    The equity portion of compensation can either be in terms of real stock or quasi equityRSQE. Quasiequity has all of the financial rewards of stock, but doesnt have the legal rights of a shareholder. If thissounds "risky," it is, but all rewards do involve risk. When done properly, however, RSQE both maximizesprofit and works as "golden handcuffs" retaining the services of key employees. The question is howmuch RSQE should be awarded. One should ap-proach this from the standpoint of balancing how muchwould be meaningful in motivating the employee versus being affordable to the company.

    The value of a company is typically determined as a multiple of its adjusted annual price to earning ratio(P/E). The P/E value is in turn a function of many factors, including the quality of the company, its line ofbusiness, and its growth rate. Realizing this value is achieved either by selling the company, by launchingan IPO, or by the companys cashing out its RSQE participants. The annual price to earning rate tends tobe higher with IT and dot-com companies than with traditional staffing companies. A $10 million IT ordot-com company with typical results may have a P/E of 5 or 6 (vs. 4 for traditional staffing). If thatcompany had a 10 percent adjusted profit rate and a P/E of 5, it might be worth $5 million. Thus, each 1percent RSQE share would be worth $50,000. For a person earning $125,000, a 5 percent RSQE would

    yield $250,000, or two years worth of compensation. Many owners would be willing to provide 10 to 30percent of RSQE to participating staff, if results warranted. In this example, that would allow for two tosix staff members.

    In practice, these calculations are more involved, as other factors come into play, including running outvarious scenarios, but this example provides the basics. In structuring a program to encourageemployees to act as owners, the company should limit eligibility lest it dilute everyones value. Financialrewards and a desirable work environment should push Generation X and Y employees to maximizeprofits and stay around for the long haul. Economics can be blended with lifestyle choices. It does nothave to be an "either/or" situation.