The Appeasement Trap

In response to the increasingly tight labor supply, a lot of companies are significantly redesigning the way they do business. Some are fine-tuning the way they compensate and motivate people. Others are revamping how they educate and communicate with staff. Some are starting from scratch and reinventing their entire corporate cultures.

Sure, but where should you start? How do you transform your company into the employer of choice? What follows is a sampling of transformative responses that growing companies have developed to address employee satisfaction. Bear in mind that none of these strategies stands alone. Rather each rests within a larger framework of building a long-term productive workplace. When it comes to designing a desirable place for people to work, you're not looking for short-term solutions. You're building a culture of retention.

Sharing the wealth
Sure, money isn't everything. And you certainly don't want to throw it around willy-nilly. But it's not as if money's irrelevant. For most companies, paying the industry average is a minimum, along with some combination of incentive pay, profit sharing, a retirement plan, and even stock options where applicable.

Some companies go even further. In the age of the dot-com, even traditional businesses are feeling the need to give employees a piece of the action. About four years ago Bob Schneider, the 57-year-old CEO of Patio Enclosures, a $73-million-plus company based in Macedonia, Ohio, that manufactures and installs sunrooms, started thinking about succession planning. He decided to share ownership with his employees with an employee stock ownership plan. But measures like that go only so far. "There's such a demand for people to do remodeling that they often just go into business for themselves," he says.

Even companies that are in a position to ply people with stock options have recently had to reformulate their compensation strategies, especially when the allure of an impending IPO is replaced by the reality of the post-IPO stock fluctuations. Since Gordon Brooks of Breakaway Solutions, a Boston-based consultancy, took his company public, in October 1999, its stock went from a stock-split high of 85 1/2 to a low of 16 7/8 before it started to recover. "The stock price is so low now compared to what it was, we tell people to look at all the upside," says Brooks. To reassure recruits, Brooks founded Breakaway Capital LLC, a venture fund through which Breakaway invests in its client companies. Half of the return goes to select employees, but only if they stay long enough to see the investment mature. "Clients like the fact that we have some skin in the game, but the real driver was to reap the benefits and share them with employees," says Brooks.

Participation in the fund is not title-dependent but is based on top performance in all job categories: the best performers in each department participate in that first fund, and Brooks plans to start more. He believes the promise of participation is almost as much of a motivator as actually being in the game. "We tell people that just because they're not part of this particular fund doesn't mean they won't get into one three months from now," he says.

Building a productive workplace
A job isn't just about what you do. It's also about whom you do it with and where you do it. And as in-demand employees have grown more discerning about the lifestyles they wish to lead, their employers have needed to reexamine the way they define the workplace.

When ManagedOps.com outgrew its 25,000-square-foot office in Bedford, N.H., CEO Dan Taylor decided to create for his nearly 100 employees their ideal office space. "We're basically an intellectual-capital factory," he says. "So when we lose someone, we lose an asset." Taylor surveyed workers and designed the new building around their wishes. First off, they wanted plenty of light, so the architect placed every work space within 20 feet of a window, with glare-reducing indirect lights instead of fluorescents. The windows actually open, and there are individual climate controls for each office and each work group. Taylor also installed the latest in technology infrastructure. "We have one of the largest Internet bandwidths of any building in the state," he boasts. "Technical folks just love that."

Entrepreneurs typically view geographic expansion from a customer perspective: you go where the work is. But recently, more CEOs have started making strategic decisions based on where their employees want to be. Tom Finegan, CEO of Clarkston Potomac, took a radical step, restructuring his information-technology consulting company into "solution centers" focusing on set geographic areas. That made it easier for consultants to live and work in the same city, reducing travel time. "We had to make a conscious decision not to do other things," says Finegan. "We're redrawing our map of the United States and not focusing on certain areas, because we can't practically do that now."

You might think that anyone would love the chance to move to Florida, but Brett Price of Cheetah Technologies recognizes that the Gulf of Mexico may not be everyone's idea of paradise. Late last year Price was pitching his company to three senior-level technology candidates from Colorado. They were sold on Cheetah but didn't want to leave the mountains. So Price established a satellite office in Denver, making it his center for work in the telecommunications industry. Price thinks the Denver office might help him with future recruits. "If somebody has to move to join us, now they have two options," he says. "And they're both pretty places to live."

Making the most of employee value
Job training has become an essential part of the employment equation. As skilled workers become more scarce, employers must provide more training to promising but raw recruits. Even highly trained workers require opportunities to enhance their skills and their résumés. (Think of it as recompense for their loss of long-term job security.) Of course, employees become more valuable as they become more skilled -- and not just to your company but also to people-poaching competitors.

"We're basically an intellectual-capital factory. When we lose someone, we lose an asset."

That's the double-edged sword of employee training. And that's just what Peterson is counting on. In addition to acquiring the aforementioned dot-com to give his staff fast-track opportunities, Peterson is also changing the way his company thinks about training and skills development, especially when it comes to entry-level workers. "The market has shifted to the point where they just want the exposure," he says. "They don't care about the long-term benefits. They just want all this career experience." Peterson even considered creating a separate growth track for newbies. "It would have been like the armed forces and boot camp," he says. "They wouldn't have earned our loyalty, so we'd be treating them as interchangeable parts. In the end, they'd say, 'Adios,' but we'd all have mutually benefited, and I'd say, 'Godspeed.' I wouldn't have to get caught up in how I just lost another employee." In the end Peterson never implemented the system.