Whether it’s a well-known global brand, a fast-track organization or an established conglomerate, companies face the challenge of keeping their best performers and brightest employees.
There’s a shakeup at the top echelons of business as executive turnover continues to increase. Everything from banking to the energy sector is experiencing the pressure of this uptick.
Challenger Gray & Christmas Inc. cite a 19 percent increase in CEO departures in January of this year. Why are so many executives leaving the boardrooms and hitting the bricks?
From bureaucracy to shifting priorities, lack of accountability to limited career development─all of these factors drive employees out the door. Top talent isn’t driven by money alone, but rather by the opportunity to contribute significant achievements and be part of something meaningful that expresses its passion.
Move Over Boomers?
A recent study by Deloitte reveals the primary incentives preferred by executives as of 2012: Generation X executives (ages 32 to 47) rank additional bonuses or incentives as number one while strong leadership from top management and compensation round out their top three incentives. Baby Boomer executives (ages 48 to 65) find additional benefits play a more significant role than financial incentives.
Additionally, 10,000 Baby Boomers turn 65 years old every day until 2030. Baby Boomers are the most experienced workforce, and make up most of the executive talent in the U.S. today.
The next youngest group in the workforce, Generation X, does not have nearly the human capital numbers to fill the vacuum created by the Baby Boomers’ eventual workplace exit.
The Millennial generation, the youngest sector of the workforce, is as large as the Baby Boomers, and will be increasingly driving the economy with its consumer spending over the next 20 years.
The lackluster economy of the last few years and its eﬀect on retirement account balances has caused Baby Boomers to work longer than imagined. While we can’t control these population trends, they are critical to consider when creating your retention strategies.
Know Your People, Know Their Issues
The first step in retaining key people is simply to talk to them. Learn their key issues and priorities. Consider the demographics and address their needs appropriately. Make these three main points the cornerstone of your retention strategy:
- 1. Review your compensation and benefits philosophy. Review your salary structure and benefits programs to ensure they’re competitive and attractive enough to retain key employees and future talent.
- 2. Follow the leaders. Fortune 1000 companies use best practice, creative executive benefits strategies that include non-qualified deferred compensation plans and supplemental executive retirement plans.
- 3. Consider opportunity costs. Retention strategies require an investment of your time and resources. What if you invest in your talent, and they leave? Worse yet, what if you don’t invest in your talent, and they stay?
Retaining Talent Requires a Solid Succession Plan
Design and execute a succession plan, as part of your core retention strategies. It’s a relatively simple process that requires you to:
- 1. Create a written succession plan and stick to it
- 2. Determine the capabilities required in each executive or key position
- 3. Compare the list of capabilities against the firm’s senior talent
- 4. Conduct regular, in-depth reviews
- 5. Assess candidates for promotion or development
- 6. Implement and periodically review your succession plan
- 7. Ensure your executive benefit programs align with your goals and industry peers
Your succession plan is the framework for improved communication between the board and senior management. The plan will better align leadership with overall strategic direction and provide the executive team with the opportunity to adjust their role to best meet changing business conditions.
While we cannot control current population and demographic trends, we can apply industry-leading best practices to our companies to address the talent gap.
Non-qualified deferred compensation (NQDC) plans are a cost-eﬀective and best-practice strategy to implement to attract, retain, reward, and motivate key talent. In fact, approximately 91 percent of Fortune 1000 organizations have NQDC plans in place. NQDC plans oﬀer a unique opportunity for executive participants to voluntarily defer (pre-tax) otherwise currently taxable compensation.
Additionally, dollars deferred grow tax-free until a future specified date─retirement, termination, scheduled distribution, death or disability─when payouts are then subject to the participant’s tax rate at that time. NQDC plans provide key talent with a significant savings opportunity to eﬀectively plan for their financial future.
Don’t find yourself in the familiar situation where a rising senior executive suddenly walks out the door to accept a job at a competitor. Rather than chalking it up as the old “an oﬀer he/ she couldn’t refuse,” employ new strategies that will keep your employees happily placed at your organization.
To Your Success,
Trevor Lattin, Managing Director