Ask SmallBiz: Exit Packages

Small-business consultant Ken Gilbert explains what to do if a key employee asks for an exit package

August, 2012

Q: One of the key, long-term managers at our family-owned company – someone who is not a family member – is asking for an “exit package” in the event she is terminated or decides to leave the company on her own. We don’t know what to do. The company will really suffer if this employee leaves.

A: There are several things the family should consider as you decide how to handle this request.

First, talk with this employee to understand what is motivating her to ask for an exit package now. What are her needs? Some employees are motivated by equity opportunities, others are motivated by income they can earn now and when they retire. Some want more responsibility and others want more job security. You may not be willing to give her everything she wants, but first find out what she wants, then develop a clear strategy for dealing with her requests and giving her alternatives if you can’t meet her desires.

Make sure that you re-evaluate the compensation and benefits package for this employee. Research compensation packages for comparable positions; if her compensation is comparable to the market and, maybe, even higher, then you are in a stronger negotiating position. If not, you should consider adjusting her compensation. You should also add performance-based incentives to provide continuous motivation for this employee, as well as help keep her willing to stay.

If this employee is so valuable to the company that her departure could cause serious damage, you need to look at what her future in the company could look like. Since yours is a family-owned business with family members actively involved, you need to look at a succession plan for these family members.

Succession plans are also critical for key employees. As a part of the succession plan, you need to assess and train family and nonfamily employees alike who could possibly grow into senior positions that will be vacated someday by current family members. This individual is a key employee who needs to clearly understand her future in the company.

Ken Gilbert
President
Business Consulting Resources Inc.

ken@bcrhawaii.com
(808) 545-4111

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Author:

KEN GILBERT, PRESIDENT, BUSINESS CONSULTING RESOURCES