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Proactive Retention Of Employees; Bonuses And Golden Handcuffing As Retention Options

The most common of the proactive methods of increasing employee retention is bonuses. Bonuses are simply compensation above the standard level for employees. In relation to our discussion here, these would typically be in the form of retention bonuses. Retention bonuses provide a monetary, or sometimes non-monetary, benefit to the employee for having stayed with the company past a specified time period, often three months to 12 months. Within those time frames, these can be very effective tools of retention.

Unfortunately, once the bonuses quit coming the employee does not have the incentive to stay. In tight job markets or for positions that are difficult to fill, like sales, it’s to be expected that other dealerships will be also be providing similar bonuses. Employees who have stayed due to the bonuses will commonly move on to another dealership to reap the benefits of their bonuses. Therefore, while retention bonuses can succeed in the short term, they will likely lose their effectiveness over time.

More effective long-term retention tactics include helping employees develop a sense of ownership in their work and the company itself. When an employee feels the work they do is directly related to them and feel other give them credit for it, they are much more likely to continue employment with you. The simplest way to do this is to ask their opinion and take it into consideration.

If you are looking into buying new filing cabinets to organize titles and warranties, who better to ask than the warranty and title clerks? They will have the most first-hand knowledge of what needs to be done and if their opinions are valued, they feel pride for contributing. Another example could be if you are trying to determine a new setup for your lot to display your stock. Ask the lot attendants responsible for moving the cars how they would set it up. If their design makes sense, use it and the next time you decide to change it, ask a different attendant to increase the contribution base. By engaging employees in decision making processes you develop a strong sense of pride in their ideas.

Another very simple method of developing employee ownership is to allow the employees to “sign” their work. This is especially effective in detail and service departments where employees have little interaction with customers. Have a few hundred business cards printed up saying “Your Car Cleaned and Shined By ___” or “Quality Service Provided to You By ___,” and pass them out to your detailers and technicians. Allow them to sign the cards with their names and leave them on the dash of each car they work on. This again assigns a sense of pride to the work because your employee will no longer be an anonymous person to the customer. Employees are willing to stay with companies that value their opinions and provide them opportunities to spotlight their contributions.

The final retention method we will discuss is “golden handcuffing,” one of the most effective and the most controversial. Golden handcuffing is typically defined as providing financial rewards to an employee for staying with a company while providing equivalent financial penalties if the employee leaves. Golden handcuffing, as a retention strategy, started mostly with compensation packages for high-level executives. The executives were provided with generous stock options that yielded large sums of money in dividends while they were employed. If they left the company before their contract was up, they forfeited the stock and were required to pay the dividends back. Similar programs were designed around their retirement plans, personal expenses, residences and tuitions.

It’s obvious to see how these plans can cause an executive to want to stay because they are dealing with very large amounts of money, but you may wonder how this would be effective at much lower levels in an organization. The same processes apply though, because at lower pay levels proportionately lower penalties will create the same effects.

The most widely used form of golden handcuffing used in the automotive retail industry is providing a vehicle lease to employees. The standard practice is for the lease to be in the employee’s name with the employee having full financial responsibility for it but the company pays the monthly payment. If the employee were to leave the company, they would become fully responsible for the remainder of the lease and in some cases, if the amount the company has paid is significant, the employee may be required to pay the company back.

Another common method of golden handcuffing is to provide salary redistribution to salespeople. Automotive sales tend to cycle throughout the year with one or two low sales periods. During these time periods, sales wages tend to be lower than other parts of the year which can cause financial hardship. Using golden handcuffing in this situation would involve the company offering to provide a guaranteed wage level to the salesperson, “borrowed” against future sales which are repaid over time out of their earnings. If the employee were to leave before repayment obligations have been met they would be required to pay the full amount immediately. Often companies will allow the wages to “roll forward” allowing the employee to defer repayment to a future time.

As can be seen from these two examples, golden handcuffing can be very effective in keeping employees over long periods of time. There are, however, some problems with this method. Significant costs can develop from the organization and administration of these programs. Additionally, these methods can sometimes involve specific contracts that need to be developed between the dealership and the employee. If you feel that golden handcuffing may be an option for your dealership, consult with your accountant and attorney before implementing the plan because laws regarding these methods of compensation vary by state.

The fact is that using even one of these employee retention methods could significantly reduce your employee turnover. The subsequent decrease in turnover can have many noteworthy effects. Employee morale often improves when employees do not see friends and colleagues leaving regularly. Recruitment costs drop drastically. Low turnover translates to minimal need for recruiting. With retention, your customers can develop relationships with your employees and your dealership over time. Those mature relationships translate to improved customer service.

Each of these retention methods has their pros and cons and all should be weighed thoroughly before implementation. Find the method that best suits your organization and immediately implement it. At the very least, begin using exit interviews for all outgoing employees.

Remember that while recruitment often gets the most attention in the development of an astounding team of employees, retention is the key to making that team work its best.

Vol 2, Issue 12


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