Companies often pay salaries and then give employees stock options that take a long time to gain access to. If someone chooses to leave after 10 years, they're walking away from a large sum in stock options. They helped create the value that employees and shareholders are enjoying, so why should they be forced to walk away from their reward?
The alternative isn't much better: underperforming in the hope of being dismissed and getting paid out--demoralizing for everyone involved. And even worse, senior employees can work their last years just trying not to make mistakes, avoiding risk, avoiding going the extra mile while waiting for retirement.
One effect is that the best people, the ones the company wants to attract, may not come in the first place, because they'll feel "locked in," and employees close to retirement may coast, to keep their access to their stock options. Compensation has to serve a dual purpose: to attract the best and brightest, and to stimulate and reward those already in the fold.
There's also the more open, fluid nature of modern business to consider. The cold fact is that I'm not certain I want to work with any large company for the rest of my life. I've only really been with one company most of my career but I've done lots of jobs that are completely different. That's what matters, the freedom, diversity. I'm not the exception: Generations X and Y and the Millennials are not staying in one place for 25 years--certainly not to wait for options to mature. Businesses today need to adjust to get the best.
You know what they say about people: Give them the key to the door and they'll stay. Lock them up and the first thing they'll do is escape.
That old model of compensation is counterintuitive to the new generation of employees and the new climate in business. People don't want to be tied down a decade down the road; they want the freedom to move. Tangerine has a good shot at hiring these people because they can move and change right inside our company.
If they're the right fit and they believe in what we believe in, if they say, "I want a new job every four years," I can promise them a new job every four years if they're good enough--a new job here, with us. It is different, particularly for these people who see change as something good.
I feel that I have to do something special to keep talented people in my fold. Interestingly, they probably feel they have to impress me, but I have to impress them just as much because I need them to stay. I don't want to use a financial ball and chain like stock options to force them to stay. It's got to be exciting and mutual.
-----
An excerpt from Weology: How Everybody Wins When We Comes Before Me -- a Globe and Mail bestseller. For more information, visit www.tangerine.ca/weology.
Ask Peter a question on Twitter at www.twitter.com/peteraceto.