Fostering Loyal Employees

Fostering Loyal Employees

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Challenge

A local funeral manager looking to grow his company with the right staff is struggling to find employees who can carry his vision to the next level. Instead, he finds that employees in whom he has invested time and money are willing to leave his employ and take his ideas with them.

Solution

This entrepreneur has stated a problem that will be recognised by many business owners with businesses in the early stages of development. When he launches his company he becomes responsible for marketing, finance, customer service, technical expertise and many other roles. Eventually he sees the opportunity to grow out of the start-up phase and expand the business, but cannot do so because he is already working to his capacity – and has probably compromised his family life and learned to sleep a lot less while doing so. Some entrepreneurs never get out of this trap and stay in the start-up phase. Not a lot of fun.

In this case the entrepreneur runs a funeral parlour and has recruited potential managers to expand the business geographically. He trained them in the formula which had allowed his start-up to succeed, only to find that as soon as they believed they knew enough about the business to start their own parlours they resigned and attempted to go into competition with him. To compound this problem ex-managers opening their own businesses will frequently compete on price and try to lure customers from their former employer. By so doing they will reduce the price expectation among potential customers. Although many such offshoot businesses either do not get off the ground or fail early, the lower price perception remains.

Entrepreneurs in many fields, PR agencies, small parcel delivery services and IT specialists among them will immediately recognise this problem. Staff members leave to go into competition and then fail after causing turmoil in the market. Why do they fail? It is part of a fundamental problem of would-be entrepreneurs convincing themselves that technical expertise in the chosen field and a lower price than the current suppliers are all that are needed. Of course that is far from enough. Entrepreneurship requires quick thinking, ruthless financial management, excellent salesmanship, capital, attention to detail, the ability to compete other than on price and a host of other attributes. For an ambitious employee who wants a greater share of the action it may be better to talk to the business owner about setting up a subsidiary or franchised operation rather than going into competition.

Recruiting the right staff

To return to the question posed by the entrepreneur – how does he escape the trap of recruiting and training potential managers so that he can grow his business, only to see them leave and open competitive funeral parlours in his target growth areas? He has made a good start by recognising the problem and asking for advice on how to address it.

Next he should define the type of managerial assistance he needs. In this case he has assumed that the right way to go is by having branch managers to open and run satellite branches, but he should also consider other models. For instance, a business development director to supervise the growth and manage branch managers could be more effective. If he does go the route of branch managers he should recognise that they will become reasonably senior people. He must be sure of what responsibilities and authority they will have, and therefore what qualifications and personality types he needs before commencing recruitment.

Risk vs reward

The next steps could be both carrot and stick, to keep the potential manager on board and motivate him to help the business to grow.
The carrot part could consist of bonuses, incentives (travel, prizes, business training or others), profit share or even shareholding options or franchise ownership on achievement of key performance indicators. Clearly both short- and long-term objectives and incentives must apply to ensure extended employment.

The stick part should definitely be a restraint of trade agreement with all potential senior employees. He should not skimp on the preparation of this agreement; rather pay some legal fees now than argue through the courts later.Anyone planning to open their own business could reduce future stress levels by recognising the potential limitations brought about by being the only executive and having no more bandwidth. They should factor solutions to the risk of getting locked in to the start-up phase into their business plan.  And like this entrepreneur, never be afraid to ask for help if they need it.

Ed Hatton
Ed Hatton is the owner of The Marketing Director and has consulted to and mentored SMBs in strategy, marketing and sales for almost 20 years. He co-authored an entrepreneurship textbook and is passionate about helping entrepreneurs to succeed.