How Can I Incentivize Key Employees in My Business?

You’ve built a business from scratch and hired the help you need to make it flourish. But how do you make sure your team is as committed to your company’s success as you are?  

Small business owners commonly underestimate the value of their employees, according to Ken Elbert, senior director, advanced planning, with Northwestern Mutual. “You might think they can be easily replaced,” Elbert says, “but every time there’s turnover, that costs money and time and headache.” 

So once you’ve invested in hiring and training valuable employees, you’ll want to make sure they have every reason to stick around for the long haul. Building on a base of traditional incentives — like competitive pay, paid time off, retirement savings plans, and health and disability plans — here are some additional steps you might want to consider to incentivize key employees. 

Find out what motivates them 

Of course, salaries are what may initially attract workers to your company, but you may be surprised to find out that many are motivated by perks beyond payroll. And when it comes to incentives, your employees know best. Observing what they need and value, while keeping in mind the goals of your business, should shape the incentives you offer.  

“It's helpful to ask your employees on a regular basis, ‘What's on your mind? What are you worried about? What's going on in your life, and how can we, as a business, help you?’ ” Elbert says. Having open lines of communication with staff can help you learn what benefits are worth investing in (or not). This may lead you to ideas you hadn’t considered before, like flexible work schedules, assistance with daycare, wellness perks, help paying off student loans or financial planning support. 

You might think your employees can be easily replaced, but every time there’s turnover, that costs money and time and headache.

Meld bonuses with business goals

If you don’t already offer bonuses as part of a deferred-compensation plan, you might want to consider it as an incentive for your high performers. Typically a bonus would enable them to earn an extra amount of money provided they stick around for a certain period of time or help reach specified company goals, such as a revenue target. 

For example, if revenue grows by a certain percentage in the next five years, your company could pay the employee a certain dollar amount or percentage of that growth in the future — say, in five years or at retirement, paid in a lump sum or in increments over time. “So you're tying the employee’s incentive to the growth of the company,” Elbert says.  

It’s a win-win. Just make sure the timeline for the payout is realistic enough to be motivating. “If it’s too long or the goals are too high, then the employee might think that's unattainable,” Elbert adds. 

Be flexible about responsibilities  

Keep an eye out for employees who have a growth mindset: a desire to learn and expand their skills, level up and take on more responsibility to prove their worth. This could be through landing new business, growing your revenue stream, expanding a product line or coming up with impactful ideas.  

“In time, you might find a few of these key employees that are really critical drivers to the business,” Elbert says. By observing their passions and what skills they bring to the table, map out a path to help them develop professionally and take on more ownership in the business so they stay actively engaged. This could involve expanding titles and responsibilities that are tailored to what they excel at, or giving them the flexibility to pursue projects and strategies that will have a long-term impact.  

Foster a happy, healthy environment   

A kind of magic can happen when the culture and physical space of a workplace is welcoming and nurturing. Employees gain a sense of belonging and a commitment to the vision of the company. A light-filled space, a well-conceived layout that encourages collaboration, a kitchen stocked with snacks, free meals and time carved out for social activities, like happy hours, parties or volunteering as a team are thoughtful touches that can have a big impact without draining your budget. These types of details can help foster a positive, productive, open atmosphere — the kind that keeps staff excited to return each morning.  

But to be effective, these workplace perks need to reflect the heart of the business. “It won’t really work unless the underlying values are there,” Elbert says. “Real culture comes from the values of the business. If you strive to do good in the world and in your community, then those are natural incentives that will resonate with good employees.” 

Whichever strategies you pick for encouraging the longevity and productivity of your staff, the payoff can ultimately result in a happy, motivated workforce that helps your business thrive.