I am always fascinated by the differences between “producing” and “rewarding” loyalty.
In a great many financial services businesses, particularly in post merger integration or when members of a leadership team walk out, there is a huge confusion between the two. You cannot motivate an individual to stay. Motivation comes from within the individual.
He or she makes a determination that their self-interest is best served by being loyal to their direct report and the firm’s strategic direction. In return for their contribution to the firm’s future health and well-being, the employee has expectations (pay, incentives, affiliation, career development and so on) that must be met or exceeded.
This is not Alcatraz. Legal “lock up” remedies that demand “compliance” are largely ineffectual. Equally, peer pressure, for example, midway through the sale process, “we are best served by sticking together”, only works where there is hard evidence or strong anecdotal information to support it (peer pressure).
To understand how you produce loyalty, turn the question upside down, “what would most likely cause the individual to walk away?” Write down a list of 10 probable reasons. Highlight the five most probable reasons. Delete the other four most probable reasons and work on the top reason. Once addressed, move on to addressing the next most probable reason.
Ask yourself, “what alternative exists or we could quickly create to meet this objective?” and then, “How easy is this to implement?” (timing, approval, flexibility)
Of course, your accuracy and probability of success is dramatically enhanced by having this conversation with each individual in-person on neutral territory.
If you think that by hiding from having the conversation you are safer, you are deluding yourself. Silence is not golden, it is merely a retreat into a higher risk and more obscure position.
The default position for many owners of newly acquired businesses or businesses responding to a mass departure of executives is to throw money at it. A belief that a one time retention bonus alone will “secure” the businesses prized assets (people, clients, intellectual property and so on). I am sorry that is crap. You are dealing with human behaviours.
Financial incentives in the form of carrots need to be frequent to impact human behaviour. One off payments do very little to engender loyalty other than to negatively impact the firm’s expense growth and cash resources. You are making disillusioned key employees richer but not more committed to the firm’s future.
Indeed, retention bonuses in isolation are often counter effective. People believe what they see happening not what they hear or read in the organisation.
You immediately create the “have’s” and the “have not’s” in the acquired or ongoing business (divisive behaviour). The “have not’s” lose trust and respect for the “have’s” (a belief, often correct, that their loyalty has been bought). You are encouraging leaders to protect THEIR nest egg (short-term thinking) ahead of furthering your interests (future growth and expansion).
Money alone is rarely the reason someone leaves a financial services business with the exception possibly of a heavily commission-orientated trader, broker or relationship manager. In 75% of cases I observe it is about the relationship with their direct boss. Therein lies the biggest clue to producing loyalty, develop great bosses who engender high levels of trust and respect from their subordinates (an honest-to-god belief that they will do the right thing for their subordinates).
In the acquiring company, make it a risk management priority in the due diligence phase to go through middle managers’ past performance in making smart people decisions and managing crises. Does the business have middle managers who command high, moderate or low levels of respect from key subordinates? Find the “glue” (answers) and you will be on the fast track to making smart decisions about securing the firm’s prized assets.
© James Berkeley 2015. All Rights Reserved.