When unwanted attrition happens, the usual reaction is, “Why? Where are they going?” Most organizations use the exit interview to answer these questions. An HR professional meets with the departing person and attempts to learn the good, bad and ugly about why they are leaving. Unfulfilled promises and hopes are revealed as the interviewer shrinks in chagrin, wishing this critical information had been discovered sooner.
If the departing talent is senior in the firm, or in a key role, the departure interview will be shared with the company’s top executives and board of directors. Here the “why” questions intensify. The board will pepper the CEO and chief human resource officer with questions such as, “What were the warning signs? Why weren’t they heeded? What have we learned from this terrible loss? Are we at risk with others? How do we prevent this from happening again?”
These are precisely the right questions to ask. But why wait for the loss to happen, or even the threat of loss to appear, to know the answers?
We know that the millennial generation will be employed by an average of six different companies during their working lives. We also know that they are extremely connected. LinkedIn and Facebook constantly push information on new/available opportunities to subscribers, so one doesn’t even have to seek new opportunities or wait for a recruiter’s call. These vehicles also enable departing employees to stay in touch with their former colleagues, independent of communication vehicles that touch the employer. Alumni networks of former employers, colleges and professional associations are powerful magnets pulling on the brightest and best talent, all the time.
So how do company leaders stay in tune with what’s really happening with their brightest and best? How can they really know what their star talent is feeling or what might cause them to leave?
It’s easier than you think. Engagement surveys are not the answer, although they can be barometers of company culture and leadership. The best way to know how your employees are feeling is to simply ask them in a one-on-one conversation. Ask the same questions you’d use in an exit interview — but don’t wait until they leave to do so!
One of the many gifts of the millennial generation is their comfort level with directness and transparency. They are straight shooters with one another and value when they receive it from others. Just ask them the questions you want to know. And tell them directly how much you and the company value them.
And don’t assume they know what growth potential exists for them in your organization. For most millennials, advancement within companies happens too slowly, in contrast to their expectations.
This is all the more reason why executives and senior HR leaders need to budget time by having direct, crucial conversations that yield immediate understanding of what matters most to these key employees — and that conveys clearly how much they are valued/appreciated, and what their future can be within the current company.
What are the most effective tools for preventing the unwanted loss of our brightest and best talent? They lie in our leadership behaviors. Don’t wait for an exit interview to know why your top talent is leaving.
Instead, have those crucial conversations early enough to discover how to prevent the departures from ever happening.
Leslie W. Braksick, Ph.D., MPH is co-founder of CLG Inc., co-author of “Preparing CEOs for Success: What I Wish I Knew” and author of “Unlock Behavior, Unleash Profits.” Braksick and her colleagues help executives motivate and inspire sustained levels of high performance from their people. You can reach her at (412) 269-7240 or email@example.com.
For more information, visit www.clg.com.
The cost of providing health benefits to employees continues to be a burden for many employers that are already struggling with tight finances. Now, more than ever, offering competitive benefits is an important tool for companies seeking to recruit and retain employees, but it is becoming more difficult, as health benefits often account for one of the top three expenses for a business.
As a result, balancing value for employees with cost management can be a challenge, says Joanne Tegethoff, account executive with JRG Advisors, the management company of ChamberChoice.
“As the cost of benefits continue to rise, employers are looking for ways to manage those costs while still remaining an attractive employer of choice,” says Tegethoff.
Smart Business spoke with Tegethoff about some strategies that businesses can employ to offer competitive benefits without causing an undue burden.
What strategies should employers consider?
Voluntary benefits provide a venue for businesses to offer value to employees without increasing their costs for providing benefits. Voluntary benefits allow a company’s employees to purchase insurance and benefit products based on their own personal needs, through the convenience of payroll deductions. And most of these benefits are available on a pre-tax basis to employees.
Employers should consider offering a High Deductible Health Plan (HDHP), in conjunction with a medical savings account such as a Health Savings Account (HSA), as their primary health plan, or as an alternative option. HDHP options include up-front deductibles that must be satisfied before services are covered — minimum HDHP deductibles for 2012 are $1,200 for individual coverage and $2,400 for family coverage. The large deductible results in lower premiums than a traditional health plan, encouraging employees to become more educated consumers by better understanding how health care works.
The reasoning is that if health care consumers — your employees — are spending their own money for care, then they are more likely to question that care and not blindly accept procedures such as unnecessary tests. The system encourages them to do so because, until they reach the higher annual deductible, the cost is coming directly out of their pockets.
Can dependent eligibility audits help curb costs?
It is crucial to conduct dependent eligibility audits to ensure that everyone receiving benefits through your plan is eligible to do so. Most employers have policies and procedures in place that outline plan eligibility for their employees and dependents. If someone is on the plan who is not eligible for benefits, the employer is losing money by paying for their care. By conducting eligibility audits and enforcing policies, employers can ensure that everyone who is on the plan should be.
How can employers make employees better consumers of health care?
Provide education that encourages employees to become smarter health care consumers and take responsibility for their health care costs. Structure your policy in such a way that employees are paying more for more expensive services. For example, show them the costs of visiting the emergency room versus a visit to a doctor’s office or to an urgent care center. Also encourage them to purchase generic drugs rather than brand name when available, and show them the cost benefits of doing so.
Finally, educate them about using mail order prescription refill services, and questioning physicians about treatment options and costs.
What other steps can employers take?
Develop and implement a wellness program. Focus on healthy, sustainable lifestyle changes that employees can make. Emphasize that you are concerned for their health and well-being, and show them how being healthier can both improve their lives and help lower their health care costs, as a healthier work force will ultimately lead to lower health care costs for all.
Offering financial incentives for participation, such as gift cards and reduced health care premiums, can encourage employees to participate. In addition, support from upper management for wellness and employee education is critical. Employee health affects productivity and overall financial performance, so it is in your company’s best interest to encourage employee health and wellness. And a little prevention can go a long way.
How can employers address chronic illnesses?
Implement a disease management program for employees with chronic illness, such as diabetes and high blood pressure. These programs typically include health screenings, blood tests and more frequent check-ups, and many insurers offer these services free of charge or for a minimal fee to encourage healthier behaviors.
Also encourage employees to receive routine preventive examinations, including screenings and check-ups. The goal is to keep healthy employees healthy and ensure that those who are at risk or who have medical conditions are receiving the appropriate care. And many employers host onsite health fairs and conduct onsite screenings or health clinics in conjunction with the insurer, which provides the company-sponsored health benefits.
Finally, offering customized benefit statements that show employees how much you pay for health care costs can be eye-opening. Cost transparency can lead to employees making more economical decisions about their health, along with an increased appreciation of benefits provided by their employer.
Talk with your adviser to learn how to begin making these cost containment strategies part of your long-term employee benefits strategy.
Joanne Tegethoff is an account executive with JRG Advisors, the management company of ChamberChoice. Reach her at (412) 456-7233 or firstname.lastname@example.org.
?Every company has key managers that they depend on to keep the business running smoothly. But if those key managers decided to leave, would your business be able to survive?
To help attract and retain these key executives, many businesses offer bonuses as an incentive, on top of their salary. But that just may be the starting point, says Tony Brant, a financial planner with Skylight Financial Group.
“Typically, that bonus will be paid in cash, but maybe it should be paid differently,” says Brant.
Smart Business spoke with Brant about how to creatively structure an executive bonus plan to benefit both the employee and the company.
Where do you begin to structure a plan?
The objective is to use a compensation-based award to retain key management, and to do so in the most tax-efficient way. So how do you do that using a variation on the traditional bonus? You need to design an executive bonus plan that fits within the guidelines of Section 162 of the Internal Revenue Code, which allows a deduction by the business for ordinary and necessary expenses paid or incurred during the firm’s tax year in the course of conducting business. An employer can deduct bonuses as long as they are reasonable payment for services.
What options exist for executive bonuses beyond a lump sum?
You can grant employees bonuses but limit access to them. Under Section 162, the bonus is paid to the employee as ordinary compensation, taxable as W-2 wages and fully deductible by the business as an ordinary expense. But instead of paying the bonus directly to the employee, funds are used to fund life insurance or an annuity contract.
The policy is in the employee’s name, and the employee is the owner, but access to the cash is limited by the bonus agreement.
Under this plan, the business enters into an agreement with an executive to pay (via a bonus) all or part of the premiums for a life insurance policy or annuity contract owned by the executive. This bonus is tax deductible to the employer and taxable to the employee. The benefits to this option are that the employee has a contractual agreement to receive a set amount of money each year for a period of years and has access to that asset after a period of time per the agreement. In addition, it enables the employer to take a deduction each year, and the employee has no out-of-pocket expense as this asset builds over the term of employment.
This type of plan is particularly useful for small, closely held businesses that choose not to offer equity or ownership stakes in the company and for family businesses interested in attracting and retaining the next generation of management.
The complicating factor with these plans is that taxes are due on the compensation even though the employee hasn’t yet received it.
How does the employee pay these taxes?
One way is for the employer to loan the employee money for the taxes due. This loan agreement, in addition to the bonus agreement, binds the employee to a repayment obligation if he or she leaves the company prior to an agreed-upon date.
The loan, which must include interest, can then be repaid at retirement or departure from the company from the funds that have accumulated in the executive’s policy, or the loan can be forgiven by the employer. However, forgiveness of the loan cannot be implied or contractually agreed to; otherwise, it may constitute a deferred compensation arrangement. If the loan is forgiven, the employee must still pay taxes due on the forgiven amount.
Is there any benefit to the employee during his or her employment?
Because the employee owns the policy, he or she can access the cash before retirement, tax free, by borrowing or surrendering cash value from the insurance policy in the event that money is needed.
And if the employee dies prematurely, his or her family has a substantial life insurance benefit to make up for lost career earnings.
What are the challenges of this type of executive bonus plan?
The challenge is the employer’s commitment to fund this obligation. However, the plan can be designed with the flexibility to allow the company to suspend or partially fund the policy in lean years.
Some companies may be nervous about making that kind of cash flow commitment, but it can be viewed as a business decision to pay base salary plus bonuses. Employees often want adequate life insurance protection and tax-free cash accumulation with some guarantee above and beyond the company retirement plan. With the tax benefits to the company, there is a mutual advantage.
Attracting and retaining the best people is a challenge for many businesses. The success of a business can often be attributed to the abilities of a select group of key employees or executives. That is why it is essential for businesses to hire and retain talented, hard-working individuals who can help them prosper and grow. Executive bonus plans are simple, cost-effective and flexible benefit programs that are relatively easy to implement and administer. Talk to your financial planner about the several plan design options available that can help you to tailor the plan to meet the specific objectives that the business is trying to achieve.
The information provided herein is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. Entities or persons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek specific advice from their personal tax or legal counsel.
Tony Brant is a financial planner with Skylight Financial Group. Reach him at (216) 592-7352 or email@example.com. Anthony M. Brant is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. OSJ: 1660 W. 2nd St., Ste. 850, Cleveland, OH 44113, (216) 621-5680. CRN201309-152734
Susan Johnson is clearly a cut above her workplace peers. Her ability to combine technical expertise and product knowledge with an innate gift for connecting with colleagues and clients is exceptional. What’s more is that as talented as Susan is, she is always asking people what they need and what they think, and she is hungry to listen and learn. Unfortunately, Susan is leaving her company. Why? It has been more than two years since a single executive has asked her what she needs.
A crucial part of navigating the turbulent waters of these economic times is to be sure you keep the right crew aboard to keep your ship afloat. Organizations tend to focus on those they can part ways with to cut overhead. However, this can often come at the expense of retaining the talented individuals most vital to future success. Here are five tips to be sure your high flyers are flying with you:
Determine the motivations of top talent
How do you do this? Ask. It is important to be specific and be sure that questions like the following are being answered by your top brass: Are you happy with where your career is headed? What would you like the next step in you career to be? How can I/we help you get there?
Exit interviews are not the time to determine these motivations. Find out what your future leaders need now and feed those who feed your machine. A pivotal point here is to follow through to confirm that what your future leaders say is being heard. You are better off not asking than not following up. Both are high risk.
Make individual meetings a standard
Another common fumble by companies is that they don’t make individual updates a cultural consistency. They do back flips for their clients, yet they don’t look inward and pay special attention to those who drive business and pump oxygen into their organization. Meeting with your folks individually recognizes their importance and provides a wonderful forum for discovering what they may not disclose in a group meeting. An added benefit is that trust, the baseline for all business opportunities, is much easier to build through one-on-one connections.
Delegate and give responsibility
One of the biggest challenges for executives is to let go. It’s tough because everything that happens under their jurisdiction is their responsibility. Remember that your emerging leaders want to be challenged and be given assignments that utilize their talent. This is how they learn. So let go. Prove that you can trust young talent and you will be surrounded with a higher-performing team that develops confidence while increasing performance results.
Become a teaching executive
Even the brightest executives have never been taught the fundamental rule of adult learning: Teaching hasn’t occurred until learning is confirmed. Telling isn’t teaching. Execs must know that even the brightest talent may process information differently than you do. Be sure you are patient and aligned as you develop and confirm that this understanding has happened. Most organizations that claim to be learning and teaching organizations do not live this as a core value. Teaching young talent must be a designated initiative, not a drive-by occurrence.
In the absence of feedback, people create their own, and it’s typically negative. Executives must keep their folks abreast of what’s going on, regularly. Provide knowledge, which is different from data. Data is merely “the what.” Knowledge is “the what, the why and the how they play a vital role to change and growth.” Keep your top talent informed and you will keep morale high and these key players passionate about sticking around.
Mit Shah was enjoying the fruits of his labor.
As Shah, founder, senior managing principal and CEO of Noble Investment Group, a company that invests in and manages hotels, he had successfully gotten the business past the struggles that followed the Sept. 11 attacks when travel and tourism dollars fell. Everything was back on track, and the company had been growing, earning spots on the Inc. 5,000 list through the years, and in 2008, it recorded $325 million in revenue.
But things have slowed from the pace Shah and his team are used to.
“We’ve built this model over 17 years — great people, great human characteristics — but clearly the last two and a half years have created a real pause of how we approach our business,” Shah says.
One of his challenges is having extremely talented people, which most wouldn’t think is a problem, but in tough times, it proves to be.
“How do you keep a group of highly successful, highly talented, highly motivated, passionate leaders engaged and focused on the ability to manage what we have when you’re an organization that’s truly built for continuous investment and continuous growth, and that’s how you’re structured?” Shah says.
He’s also been challenged by looking for opportunities to grow the business and figuring out how the market will shake out.
“That has been a big part of my responsibility to continue to surround myself with people who internally and externally will give me good insight as it relates to how do we see opportunities going forward,” he says.
And then it’s been just hunkering down on the business basics.
“Continue to do what the books say you’re supposed to do — stick to your core values during times of great opportunity and during times of crisis, take care of people, make sure that you continue to commit to things that are part of who you are and who you espouse to be,” Shah says.
Over the past three years, by building a solid group of peers to rely on, focusing on his people and looking for opportunities, Shah was able to successfully move Noble forward — earning $346 million in revenue in 2009 — and prepare it for future growth.
Build your peer group
One of the aspects of business that Shah says has been particularly critical the past few years has been forecasting out where the market would go and how things could change, but he can’t do this alone. He’s come to rely on a core group of people that he’s built over the years to help him better make decisions about his company.
For example, he may have dinner with the CEO of Hilton Hotels one day and the president of Wake Forest University on another, and they both play a critical role in his life.
“I always stayed very close to a group of people that I viewed could help me on a broader basis,” Shah says. “It goes back to this peer group — never being the smartest person in the room, always having the smartest room, and always finding people who I could befriend and I could build a relationship with and build a partnership with, who, in essence, I could learn from and build a base of knowledge that I wouldn’t get in just running my company.”
Having a group of people to get feedback and ideas from has also helped him bring in the best people when those openings arise. To build his group, he got out on the road and met with people continuously, and this went back as far as 18 years ago. Over the years, his group has also evolved and today includes top executives of the world’s major hotel chains, basketball coaches, people in service businesses and manufacturing as well as investment bankers.
“That’s really helped me think about things, both then and now, in a way that helps me lead more effectively,” he says. “I have the power of and the benefit of a broad range of thinking, and then I can take those thoughts, and I can incorporate them into my own and lead through that manner.”
To create a group for yourself, Shah suggests getting out more to build those relationships with people.
“Go to meetings, go to conferences, find out the best industry events,” he says. “Walk around, shake people’s hands, get to know people, and take every opportunity that you have to understand those in whatever business and industry are at the tip of being visionary, of being organizations that have had sustainable track records, that are respected among a group of people that you respect, and find opportunities to establish relationships.”
Sometimes that means you have to make the tougher decision in the here and now. You may want to go do something fun, but instead, you need to choose to do what will be most beneficial in the long term.
“There’s been times all across my entire career where it’s an opportunity to either go have a dinner or to be in the same room or to go to a meeting or a conference, and you have no idea what you’re going to get out of it,” Shah says. “But spend those times as opposed to saying, ‘Let’s go find the best place to watch the game tonight,’ and really go and find an opportunity to establish a friendship.”
When you meet people and get to know them, it’s important to remember that they’re people just like you, so use that as a base to build that friendship.
“It doesn’t matter if someone is the CEO of a big Fortune 100 company or if they’re just your golfing buddy,” he says. “At the end of the day, when you peel back everything, people are just, if you find good human beings, decent people. They’d much rather go have a barbecue sandwich than have something fancy. They’d much rather have a beer together and talk about your families than always be talking about how you’re going to win market share here and how you’re going to do that. That all comes, but break it down to just finding quality human beings and building friendships with them.”
Focus on your people
During the downturn, Shah didn’t cut his 401(k) match, community service programs or the company Christmas party. Instead, he doubled the budget for his employee engagement committee so it could plan things like bowling outings and have a really nice holiday party.
“Let’s be honest, this is a tough labor market,” he says. “People aren’t jumping jobs right now, so we get that. You can’t use that as a crutch, because as soon as the market comes back, they’ll leave for a better opportunity once available.”
Despite the challenging times, it’s crucial to make sure you continue to focus on your people and how you can support them. Look at the people that aren’t your senior managers — just your everyday, salaried employees — and reflect on what their intentions are.
“Do they have the character and confidence, and then do they care about the company’s best interest?” Shah asks. “If they do, then making that decision is very easy.”
If you have employees that would leave to go across the street for 5 percent more, then Shah understands not wanting to put the resources out to support them, but at the same time, he also questions why that is.
“What does that mean?” he says. “That means that if you haven’t brought in that person who has that character and if you haven’t done the things to promote that loyalty, whose fault is it? Is it the team member’s fault or the employer’s fault that they’re not loyal?”
When you face yourself with this kind of a situation, that’s when it becomes difficult to decide whether to put money toward your people or to keep it for the company.
“If employers are in that situation, then it’s hard for them to part with their dollars because — they’ll never admit it and they’ll never sit in front of a town hall and say, ‘All of you employees are commodities,’ — they would never say that, and if they feel that, they’ll make a decision and say, ‘We’ll just hoard the cash,’” Shah says. “But if you really believe in your team members, and if you really believe they have the organization’s best interest and they’re going to be there for the long haul, then you take care of them. You always take care of them.”
In fact, as 2009 came to an end, Shah was anticipating a surplus in the budget and predicted that they would be creating a supplementary bonus program with it in addition to putting some of that back into the company as a buffer for this year.
“You always go to the denominator of what’s the right thing to do,” he says.
The economy has changed business the past few years, so you can’t just rest on your laurels and expect clients to come your way.
“You’ve got to look through a number of different avenues,” Shah says. “It’s far different than it ever was. Generating business in general is different than what it was before — in any industry.”
Over the past couple of years, Shah has been diligent about looking for new opportunities, and that starts with knowing your market.
“It’s really about having a very good understanding of your marketplace so you don’t have to be a big national organization or global organization,” he says. “We could be just the best hotel group in Atlanta, but we need to know Atlanta like the back of our hand.”
Knowing your market also goes back to your peer group and having people you can talk to about how the market is going so you can better predict how things may shift. On top of that, it’s important to have a niche.
“You have to find a niche in the business,” Shah says. “I think that companies of the future that are going to be very successful will have a niche. They aren’t broad-based companies that do a lot of things. They’ll find a couple things they do really well, and they focus on those things, and they outperform the competition there. It’s way too difficult to be good at many different things.”
For example, Shah knows that his company is good at hotels, but he also recognizes that it isn’t cut out to go into, say, grocery stores or office buildings.
“You can’t just, all of a sudden, wake up one day and say, ‘I think we’re going to be grocery-anchored retail,’” he says. “There’s some smart leaders in our organization, but we don’t know anything about grocery-anchored retail, and I can’t just go hire someone who knows about grocery-anchored retail and pretend we can be a great company overnight.”
Instead, you have to look at what your company already does and what expertise you already have within the organization.
“You have to say, ‘What are you built to go do that’s as good as or better than the best people that do it in your business?’” Shah says. “Based on that, how do you build that if you have not already? If you think you have it already, how do you go and execute around that area?”
If you see that the opportunities aren’t in that area and you do think you have to explore a different area, you need to do it in a smart way.
“If we don’t know how to do something, we always go get the talent first and go and build a model around it, and then start with one and continue to grow,” he says. “That’s what we’ve historically always done.”
The key is you have to be able to live with whatever consequences come as a result of the direction you head.
“Understand what your downside is,” Shah says. “Know what you can live with. It’s hard. How do you be visionary, be aggressive, be strategic and also manage risks without just being completely paralyzed by it?”
How to reach: Noble Investment Group, (404) 262-9660 or www.nobleinvestment.com
The Shah file
Founder, Senior Managing Principal and CEO
Noble Investment Group
Born: Morristown, N.J.
Education: Bachelor’s degree, economics, Wake Forest University
As a kid, what did you want to be when you grew up?
I wanted to be a basketball coach. If I can’t be a coach, I want to be an announcer.
I’m first generation American. My parents are both immigrants. I’m the eldest child of immigrants. They think about education and stability, and you’re like, ‘Hey! I’m going to be a basketball coach or announcer.’ They’re like, ‘What are you talking about? You’re going to be a doctor.’ I was like, ‘All right, I guess I’m going to be a doctor,’ — until I got to college and took bio and chem and physics and hated all three with a passion.
Did you get the chance to coach at all?
I used to coach kids basketball when I was in college. One of the first things that really helped me think about what I wanted to do with my life was when a friend of mine was going to be the head coach, and he asked me to be the assistant, and he transferred schools, so I ended up becoming the head coach before the first game, and it was the most thrilling thing to me.
I was coaching these 11- and 12-year-old kids, but these kids were just wide open. They listened, they cared, they were good enough where you could teach them things. I was like, ‘This is really great.’ They’re 12, so they’re going to listen to you, and they don’t care that you’re 18 — they’re 11, so they look at you as a leader. I was like, ‘Wow. This is the first time anyone’s listened to me.’ It got me really excited about the opportunity to lead and the opportunity to be somewhere where I could teach and help people maximize their potential.
What’s the best book you’ve read?
I’ve got a number — Jim Collins’ ‘Good to Great.’ It’s kind of a pat answer. It was the first book I ever read that gave real tangible evidence of what companies did over time to help them not only survive but thrive through multiple periods of economic volatility. It helped me think about my business in ways I never had thought about it before.
If you’re looking for something less business-oriented, ‘The Last Lecture’ by Randy Pausch was a great book because it really touched on things that, to me as a human being, we should always think about.