Why change isn’t the problem, fear is…

There’s a revolution happening in the job market right now. Not the usual economic cycle bullshit, but something fundamental. The core requirement for staying relevant isn’t education or training anymore. It’s creativity, lateral thinking, and imagination, because now we have to outsmart Artificial Intelligence (AI). And to use AI effectively, you have to be really bloody literate, which means you have to know how to frame the question correctly to get the answer you need. But not everyone can do this well.

This creates a brutal reality where you’ve got a clear in-crowd and out-crowd. The people who can think creatively and work effectively with AI are suddenly incredibly valuable. As an employer, if you’ve been good at bringing together talented people like this, they’re going to be sought after and poached. You are now under perpetual risk of someone offering them 20%, 40%, or 100% more than they’re currently earning, and they’re gone.

Most businesses respond to this threat by trying to nail their people to the wall with employee share option plans (ESOPs). They’re using ESOPs as golden handcuffs, mostly motivated by fear of losing these people rather than a desire to share and reward. But when you run your business out of fear, your behaviours everywhere will show that. And if you display fear in any situation, the sharks circle. If there’s blood in the water, you get eaten.

The real problem: most share plans are not comparable with each other

ESOPs are just like foreign currency or cell phone pricing plans. If I offered to pay you in US dollars instead of New Zealand dollars, you could work out whether that’s a good deal because you know the exchange rate. But when you offer ESOP shares, you’re essentially offering payment in some exotic currency that nobody can value consistently across each employer’s offering. Deception, confusion, dishonesty, and lack of authenticity don’t instil trust and shared purpose.

ESOPs are just a tool for a reason. But if you’re using that tool to confuse your best people and compete in the marketplace, you’re proving that you don’t think that your most talented people are smart.

Most share schemes work as retention traps. You get your shares, but if you leave before the set period is up, you lose everything. In short, they act as prisons, and when the gloss and confusion clear, it doesn’t make for happy campers.

Confidence and trust, rather than fear and weakness

The rate of change in technology, markets, and work itself is so fast that employees need focus, agility, resilience, curiosity, and adaptability to stay relevant – in other words, super high-octane self-confidence bordering on arrogance.

What employers are demonstrating in their remuneration and employment tactics is the exact opposite. A lack of confidence in their soft values to hold talent. They’re admitting they don’t believe their culture or purpose is compelling enough to keep people around.

Yet there’s a whole plethora of things you can do for your people that are valuable to them and potentially priceless for retention. You can involve them in your leadership discussions. You can make them feel really important about driving major projects. You can recognise them in ways that make them feel good.

But when you operate from fear and weakness rather than confidence and trust, you end up implementing retention strategies that repel the very people you’re trying to keep.

And still, they bugger off!

There’s a basic hierarchy of needs at play here. At the bottom end, all that fluffy shit doesn’t work because if people haven’t got enough to buy a banana for lunch, they will go get more money to buy a banana. Assuming your best talent is beyond the hierarchy of needs, though, the soft benefits potentially have value that’s incomparable with other environments.

What people really want

At the core, people want to be recognised and valued. They want their voice heard. They want to contribute to something meaningful.

Most employers ignore this completely. Building leadership principles around these human needs is hard work because the message gets diluted as it flows through your organisation. You need to be disciplined about it. You tell your leaders, “This is what matters – we’re building a family that cares for each other.” I know family is a grossly overused term in business, but it captures what you’re trying to create. Every person needs to feel they belong to this group, feel safe within it, and feel they’re doing work that collectively matters to others because that purpose moulds their belonging.

Fairness, respect, and prostitution

All that said, culture and belonging aren’t a replacement for pay. If your employee’s market price is $150,000, don’t try to offer them $100,000 and say those lovely things about belonging should make up the difference. That’s not fair, and it’s not respectful.

Everyone has their price, though. Someone offering one of your key people $180,000 when they’re being paid $150,000 won’t be enough to make them leave. They won’t trade all those good things they feel for $30,000. But for double their salary? Well, that changes things. That much of a delta always sows the seed of doubt: “Am I only worth $150,000? “

Doing share plans right: start with your philosophy and values

Instead of using ESOPs to lock people in, use them as a signal of confidence, a desire to be inclusive and to share, a method of demonstrating trust, and an invitation to belong.

At Gilligan Sheppard, our team can buy shares if they want to, or not. It’s their choice. We pay cash incentives or short-term incentives; they can keep the cash or buy shares. That approach respects their intelligence and ability to make a rational choice. They can choose to invest, which isn’t about locking them in. It’s simply saying we believe that our team’s good, and we would love for you to be part of it as an owner, but it’s your call, and there’s no judgment.

Once they’ve bought shares, if they leave, they can sell them. Sure, the company can also buy them at fair value, which is clear and formulaic in some circumstances. We have one such team member who still owns her shares long after she left.

They own them outright and don’t lose them. It’s just an investment. They’re taught how to invest. It’s an educational exercise and a recognition exercise; it’s about providing choice and showing respect.

Giving trust and not responding to fear, being fair and paying people what they’re worth, sharing and teaching is what it’s about, not lock-in and retention.

The succession reality

Share plans matter for another reason. Most successful private companies are owned by older people – time and compounding have made them wealthy, and they’re inevitably going to die. They need to sell their business, but these days, finding buyers is hard. All the debt funding is in housing, and all the equity funding is in pension funds or chasing new fads. And your young people are…young, i.e. poor or at least cash-poor.

So why the hell wouldn’t you have a share plan to transfer ownership to your people? The business you created runs on because there are other people there with you. The only reason you wouldn’t do it is because you are fearful of your own well-being and retirement, or you need more money from the business.

Say that is your reality, and you have to live with it. If there are no buyers, isn’t it better to sell some of it to those who also have an emotional stake in the business and retain a passive income stream?

Also, guess what? Businesses without a succession plan create risk for both the owner and the employees.

The community factor

Whenever I ask new employees what they miss most from their last job, it’s their workmates. What does that tell you? If the community is strong enough and there’s nothing bad happening anywhere else, their workmates will keep them in the team.

Building a good culture means getting alignment around values. This drives culture, which informs belonging, which enables purpose. This creates bonded teams. Bonded teams will stick together, and the stronger these bonds are, the harder it becomes for competitors to poach your people.

What matters anyway?

You can have share plans that aim to confuse, and you can use confusion as a marketing tool. You can have share plans to duh…. SHARE, or to be clear about succession. They’re good tools, but focus on what matters. Talent wants to belong and be purposeful.

Respect the intelligent people you’ve got. Put opportunity in front of them and let them make their own choices. If they make their own choices, respect them for the choices they make.

The rest doesn’t matter; freedom is freedom, you will never have that for yourself if you seek to restrict the freedom of others.