The Challenge
How can a successful family-owned business reward and retain key employees who drive company value – without giving up ownership or control? This was the challenge facing a thriving power generation company as ownership transitioned to its third generation.
With years of exceptional performance and healthy growth projections, the company needed a solution that would:
- Reward two distinct groups of key employees.
- Maintain family ownership and control.
- Create meaningful long-term incentives.
- Link rewards to individual and company performance.
The EBS Solution: Two-Pronged Approach
Recognizing the nuance between the two groups of employees, EBS tackled the challenge for the first cohort (i.e., non-owning, key employees) by designing and implementing a Performance Units Plan (PUP) that mirrors long-term incentive plans used by public companies, tailored for private business needs. The innovative plan:
- Aligns leadership team interests with shareholder interests
- Enables key employees to share in the business growth they help create
- Uses rolling three-year adjusted EBITDA to determine unit values
- Provides both “Full Value” and “Appreciation” units for balanced incentives
- Includes custom funding solutions to manage company liability
Key Features & Benefits
The PUP solution delivers multiple advantages:
- Performance-based rewards tied to rolling three-year EBITDA
- Flexible unit calculations using adaptable, logical models
- Vesting periods chosen by company ownership
- Regular account statements for transparency
- Protection from market volatility
- Strong retention incentives through deferred compensation
- Funded approach to manage company liability
Results That Matter
This case study demonstrates how a properly structured Performance Units Plan can solve complex compensation challenges while protecting company interests.
Our next case study will feature the solution created for the second cohort (i.e., third generation family owners-to-be). Be sure to check back for Part II, as we’ll also dive deeper into the funding for our two-pronged approach.
Unlock the Details
Download the complete case study to learn more about how EBS can help your company design and implement effective executive benefit solutions.