Retention Bonus/Plan for key employees - Looking for input and ideas

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February 16, 2024

by a searcher from University of Victoria in Vancouver, BC, Canada

Hi folks,

I'm scheduled to close on my first acquisition at the end of the month, and I'm looking for any experienced recommendations around retention bonuses for key employees on the senior leadership team. There are two roles, President and VP Sales, with a lot of key person risk, and I want to retain them for at least a year after closing and to incentivize them to perform during that period.

My thoughts generally are a lump sum at the end of the 12 months as consideration and general bonus while also extending their mandatory notice period to 3 months, so that I could scramble to find replacements if they chose to leave.

I gather that these really are generally just to show up and stick around, not tied to performance, but again, I'd welcome any thoughts and input around elements to include, not include and quantum of bonus relative to total comp.

Thanks!

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Reply by a searcher
from Western University in Calgary, AB, Canada
I'd also be interested in hearing others' perspectives on this. I'd guess that a retention bonus is probably the best way to do this - money talks, but it's especially tricky when there's only two people that you NEED to retain because each could just decide to pick up and leave for no apparent reason.

Extending their notice period might help you, although I don't think it's legally enforceable. I'd make it a priority to try and institutionalize their knowledge as soon as possible so that the damage is mitigated if they do leave, or if knowledge is not the problem, identify what about these two is so important and assess whether it can be spread the across the organization, rather than concentrated in two people.

Also - the human factor is also important. If these are empathetic individuals, they'll probably understand the importance of why you need them to stay on. I'd level with them and they'll presumably be willing to work with you, especially if you're offering them fair retention bonuses. Granted, they do have some power over you and could use that against you, but you probably wouldn't want these people on your team anyways if that's what they'd do.
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Reply by a searcher
from University of Maryland in Tampa, FL, USA
Looking for more info on this as well.
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