Attracting and Retaining Invested Employees

There is no question that great organizations are a sum of their human parts. Evidence-based research consistently concludes that when employees care about their company—when they feel invested in its long-term success—the company thrives. What is less widely recognized is that it is rarely possible to recruit employees who are already fully invested. Indeed, invested employees are made rather than found. But how does one accomplish the goal of creating a company staffed by employees who are as deeply invested as its owners? And is giving or selling stocks to employees the only way to accomplish this goal?

Attracting Talent

Despite the fact that one can’t easily recruit employees who are already invested, one can attract the type of talent who is likely to grow with an organization over time. First, there’s the option of searching for new talent. Traditionally, organizations have done this by recruiting graduates from top-ranked universities. Today, however, a growing number of companies are taking a new approach. Google, for example, has concluded that graduates from the nation’s top-ranked computer science and engineering programs do not necessarily represent a better return on investment over time than graduates—and even dropouts—from less prestigious universities and colleges. Whether you’re relying on a traditional on-campus recruitment fair or a complex hiring algorithm (as Google does), if you’re looking for new talent, it’s important to stay focused on the fact that hiring should be carried out with an eye to the future rather than the present. After all, young entry-level hires typically require more training and more support, which also means they come with built-in costs and risks. In short, if they pay off, it will be over years not months.

Fortunately, new graduates are not the only people on the job market today. Companies with strong compensation and benefit packages and/or great reputations as places to grow and learn can always attract talent from other companies too. Hiring employees with a few years of experience may cost more but compared to the high cost and associated risks of on boarding and training employees directly out of college (who may or may not work out in the long term), this can still be a cost-effective way to recruit talent. A final strategy that continues to gain ground, especially in the technology sector, is to acquire an entire company solely for its talent. The advantage of these so-called “acq-hires” is that one gets an entire pool of talent who already has an established history of working together.

Retaining Talent

Once you’ve found the talent for which you are looking, there is the much larger challenge of retaining outstanding talent over time. While some high-tech companies seek to do this by offering employees free food, flex time and/or quirky workplace policies (e.g., a pet friendly environment), keeping employees engaged for years generally requires more than organic muffins or the ability to bring one’s dog to work. In short, retention rests on creating a workplace culture that promotes employee buy in on a deep and sustained level.

Among other strategies, training programs that help employees move up through the ranks (e.g., by acquiring leadership skills) have been linked to employee retention. While promoting a positive and healthy workplace culture through wellness programs is rarely the sole reason that employees stay, such programs have been found to support retention when combined with other strategies. The most important factors in retaining talent, however, are communication and transparency. In order to feel invested, employees at all ranks want and need to be aware of their organization’s long-term vision. Indeed, this is precisely why many mergers and acquisitions fail. All to often, during a merger, employees are left in the dark about their company’s future plans. This causes key employees to seek opportunities elsewhere.

Motivating Talent

While attracting and retaining talent is important, without employing the right set of motivation tools, one’s efforts will ultimately go to waste. While motivation, like recruitment and retention, rests on many factors, above all else, motivation is promoted when employees feel that they have something to gain from their company’s success. In the 1950s, Haloid-Xerox, which later became simply known as Xerox, offered its employees stocks in its nearly formed and rapidly expanding company. As a result, for many years, the company retained some of the nation’s top engineers. Indeed, Xerox’s notoriously strong employee retention and early success as a technology company had much to do with the fact that its employees were also shareholders and thereby invested in the company’s future. Of course, not everyone is comfortable with employees becoming shareholders. There are, however, other ways to promote employee investment. Rather than giving or selling shares to employees, some companies employ cash-based plans (e.g., bonuses or profit-sharing models) that also ensure employees have something directly to gain from the company’s success.

The formula presented here is simple: attract, retain and motivate talent. After all, once you’ve invested time and money in attracting and training new talent, your return on investment for training will depend a great deal on whether or not your top talent grows with the company over time. Employee compensation programs, as suggested above, are a key part of this strategy.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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