In the ever-evolving landscape of business, one crucial element often stands as the most important aspect between your success and stagnation— your employees alignment with your business’ profitability.
Your employees are what make your business what it is.
And your key employees, those individuals whose roles significantly impact the overall functioning of an organization, play a pivotal role in steering the ship toward success. In this article, we’ll explore why alignment is indispensable for long-term growth as well as delve into the strategies for aligning key employees with your business’ profitability.
Why Is Alignment So Important To Your Business?
Alignment is somewhere between having the right people on your team and having a clear vision for your business and its goals. More importantly, it’s about adequately expressing this to your employees.
Far too often, businesses are made up of individuals with a day-to-day mindset. But, it is possible, with the right practices and strategies to find true alignment between your employees and the success of your business.
So, why is this important?
#1 Building Business Value
Since the value of your business is directly linked to the employees you have in place, your employees are building the value of your business in more ways than you realize. Without them steering the ship, there would in fact, be no ship. With an invaluable amount of expertise, your employees drive your business’:
- Processes
- Products
- Productivity
According to a study by FutureCFO, a positive employee experience helps drive business value, but only 37% of businesses are in this state.
With a focus on finding and retaining key employees you can begin to maximize your business’ value and grow that 37%.
You don’t want to be in the 30% that are experiencing a ‘value drag’ state, where employees are largely disengaged and looking to leave, thus creating a drag on business value.
#2 Retaining Employees
Alignment fosters a sense of engagement, where employees are actively involved in their work and feel a connection to the organization’s mission. (You have a mission, right?) Engaged employees are generally more committed and less likely to seek opportunities elsewhere, leading to better rates of employee retention.
True alignment encourages employee retention in a few ways:
- Shared values and goals
- Increased job satisfaction
- Higher productivity levels
- Employee development
Employee retention is CRUCIAL for the continuity within your business. Speaking of continuity…
#3 Paving The Path For Your Succession
Since every business owner will exit their business at some point, hopefully on their own terms, it’s important to be thinking about your path towards succession. Planning for your succession should ideally begin about 5 to 7 years before you’re planning to exit your business.
With that being said, part of preparing means making yourself irrelevant.
Irrelevant?
We know, as a business owner, that may seem confusing and can also be very hard to do. After all, this is your livelihood and your biggest asset. Making yourself irrelevant means you need key employees in place that are aligned with your business’ profitability in order to sell your business for its MAXIMUM value and for the continuity of your business after the sale.
Your employees can and will add irreplaceable value if you let them. But, how can you ensure that happens?
Strategies For Alignment Between Employees And Your Business
Individual employee recognition should not be overlooked here. Since each employee has different goals and motivators, true alignment can only happen when the recognition you’re providing matches up to their goals. Two strategies that can begin to promote this alignment are below.
#1 Retention Plans
Retention plans are really the bread and butter of alignment between employees and the success of your business. The goal of a retention strategy is to retain employees (well beyond 12 months) – reducing turnover, and increasing employee engagement and sustainability for your business. With the right retention strategy for your business, you can:
- Allow yourself to step out of the business more
- Ensure continuity and stability
- Retain and foster customer relationships
- Save on hiring costs
- Build a cohesive team
- Plan for your succession
Your retention plan should be designed as a long-term tool, to keep your key employee from willfully leaving the company during a set period of time. With the right cash flow in your business you can offer everything a good retention plan is made up of.
There are three factors your retention plan must include for TRUE alignment here:
- The right vesting period: aligned with a personal objective or major event coming up in their life (ex: sending their kids to college in 10 years might align with a benefit for a key employee that is fully vested in 10 years.) The longer the vesting period, the longer the key employee must stay to receive the full benefit. The employee wants a short vesting period while an employer wants a longer period.
- Bonuses that are significant over time: paying over bonuses over-time that are as impactful as their salary. These retention bonuses are often paid at the end of a successful vesting period as either a lump-sum or over a short period of years.
- Bonuses that are performance based and time based are best: What is important to you as an owner? Perhaps profit, or sales in a key area? If you’re going to sell your business in 5 years, make sure that the retention benefit lasts a few years after that time. Mixing the performance and time objectives that are important to you ensures alignment for your key employees.
With these three components part of your retention strategy, employees are likely to feel truly valued, rewarded, and financially recognized.
Those are powerful sentiments.
#2 Incentive Plans Designed as Short-Term Bonuses
Incentive plans are designed to motivate employees by linking their performance to tangible rewards, often within a few months or fiscal year. The goal with an incentive or short-term bonus program is to encourage employees to perform above and beyond their regular duties.
In order to establish a meaningful incentive plan, goal setting should be done collaboratively to most effectively tie goals with profitability that the employee understands. This ensures that employees are aware of expectations and understand the impact of their contributions.
Incentive plans usually reward for the short term, and are not meant to be retention tools that keep an employee engaged over a multi-year period.
Align Your Employees With Your Business’ Profitability
The success of your business is intimately linked to your employees and your ability to retain them. But alignment between your employees and your business’ profitability isn’t a one size fits all approach. Nor will it happen overnight.
The good news is, if you feel like you’ve failed to properly acknowledge and reward your employees, it’s not too late to get started.
With an experienced professional at Consolidated Planning, you can learn how retention and incentive plans can be funded in a way that makes it attainable for you and beneficial for your employees. The long-term growth of your business and your retirement depend on it.
2023-166154 Exp. 12/2025
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.
This material contains the current opinions of Mike Thompson and Consolidated Planning only. These are not the opinions of Park Avenue Securities, Guardian, or its subsidiaries.
