This article covers insights pertaining to the unique traits key employees possess, and how to spot them immediately when hiring or looking to delegate more responsibility. It depicts key attributes and moreover what those individuals look for in their careers and employers.
Key employee incentive planning and management team development are important issues to business owners at all stages of the business life cycle. Employees, through the training they receive, the processes they follow and the skills they bring to the table, often represent a critical (and sometimes the only) defining factor in the transferable value of the business. Whether you intend to stay in your business until age 100, or exit as soon as possible and never look back, your employees can be essential to the success of those plans for the future.
The term “key employee” can mean different things to different people. Before you head down the path of identifying key employees in your business and creating plans for the future that include them, either directly or indirectly, you may want to take stock of the entire employee group and spend some time thinking about which of those employees are truly “key” to your future. A true key employee has three critical qualities.
- He or she has a direct and significant impact on the value of the business. The employee’s role in the company, responsibilities and decisions impact sales, profitability, growth, product development or another critical value driver in the business.
- His or her combination of skills and experience would be very difficult to replace. The employee has a unique capability that increases the value that he/she brings to your organization – something your competitors wish they had. It wouldn’t just be inconvenient or uncomfortable if you lost this employee. It would damage your business.
- He or she will participate in a meaningful way in the strategic future of the company. The employee has a vision for the future, brings ideas to the table, and solves problems creatively.
As a result of these characteristics, the loss of a key employee will result in financial loss to the company and will delay the owner’s exit from the business. True key employees realize their own value and are willing to contribute that value to your business in order to help it grow and succeed.
What do they want in exchange? Well, that depends. As an owner, it is your job to recruit, motivate, reward and retain these key employees. Opportunities for advancement, formalized incentive planning and retention measures may play a role in how successfully you leverage a key employee’s value. And if an employee is important to you but is not actually “key,” you may still want to include that employee in a meaningful way in the future of your business, but the tools you use will change.
One of the biggest misconceptions that business owners have is that the value of their business is directly tied to their personal involvement in managing all aspects of their operations. One of the most important value drivers in a business is the management team and motivating key employees. If you’d like more education on our entire range of business valuation services and how we contribute to our clients’ efforts to retaining employees, Contact Quist.
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being] qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need. This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm. We appreciate your interest. Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
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