Looking for turnover up by 30%? Wanting profits up by 20%? You need driven leadership. Aberdeen’s recruitment crisis is not news. Announcing your training academy or re-launched apprenticeship scheme is news. But barely newsworthy.
Don’t get me wrong, training academies and training generally is a good thing. My point is that it’s not going to deliver your new commercial director by Christmas. It’s not going to deliver your sales targets by April. Many readers will share a familiar story, a key executive was poached last year by a multinational and you are still struggling to fill the vacancy.
All credit to those enlightened training schemes that expose apprentices to the boardroom- a good investment for 2030. But your ambitions require a new commercial director now! What’s the solution? Throw money at them? That’s what you did last time. They left. Again.
How often do we read of salary wars to attract the best talent? This time you’re juggling it with the pressing need for more working capital to meet the market’s demands.
As industry costs continue to rise, smarter SMEs, in my view, should increasingly look beyond competing on cash. Multinationals are always going to have deeper pockets if the comparison is cash. The word you are looking for is “equity”. Is it still a taboo subject in your organisation? It shouldn’t be. Modern share schemes could take your company from good to great.
From great to outstanding. Experience shows that it doesn’t make managers complacent- it makes them hungrier for success. Shared success. If they can significantly grow the business everyone’s a winner. If they don’t, you buy their shares back at nominal value as they clear their desk. I’ll say it again- you buy them back at nominal value. Where is your risk?
This is all about profits, not paternalism. To truly incentivise you need to be fair (equitable even) but giving managers meaningful equity is certainly no philanthropic exercise. The employer rightly aims to get his pound of flesh and more in terms of performance. If you don’t like the idea of risking even nominal value, look at share options- with shares only issued when agreed ambitious targets are achieved, or even on the founder’s exit from the business.
This is one area of reward where small companies can have a huge advantage over their multinational competitors. Break the taboo. Ambitious SME’s should be engaging with their lawyers and accountants to get a handle on this. Not only can share deals effectively attract and lock-in top talent on a “work now pay later” basis, they can even be very tax efficient for everyone. What are you waiting for?
Peter Murray is a partner at Scottish law firm Ledingham Chalmers where he specialises in UK corporate law and international projects.
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