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How To Retain Employees When Cash Is Tight

Startups commonly face the dilemma of retaining top talent while being tight on cash. To compensate employees competitively while simultaneously being conscious of the bottom line, leaders should strategically use compensation components (other than base salary) to maintain a driven and productive workforce. Similar to how each company's compensation philosophy is unique, employees have distinctive desires and goals that keep them invested with their employer instead of jumping ship or quiet-quitting. 

2 approaches companies can leverage to retain employees are:

  1. Refresh equity grants
  2. Internal job mobility

Refresh Grants

Equity compensation is a strategic tool that startups can leverage to keep great talent when they are tight on cash with the potential value that grows over time. Refresh grants (typically, 25% of the new hire grant guideline with a four-year vesting period) are given to employees as part of a retention equity program, and companies can link performance and/or tenure when granting them. 

If company and employee values align, employees stay motivated, knowing they have part ownership of the company as it grows. Employees' understanding that their performance is directly linked to the company's value will help drive performance and enhance company culture. 

Internal mobility

Companies have much to gain by carving out career paths for their current and future employees. Having clear career paths and communicating growth opportunities for every job family at your company is essential to retaining employees, so their career progression keeps them looking forward. Offering promotion grants with each step in the career progression is also a great retainment tool to leverage. 

Aligning each role to a compensation range and periodically including market adjustments in your compensation reviews will also help save employees from jumping ship to get a more significant raise elsewhere. 

The Outcome

Granting equity grants and providing potential career growth opportunities within the company is a driving force for employee performance. When dedicated employees have a stake in the company and are aware of their possible career paths, they'll naturally be more motivated to buy into company initiatives, and increase their efforts to support the company's goals, which results in a return for the organization and the employee. 

Periodically conducting performance reviews and factoring in performance within compensation review budgets will quantifiably differentiate pay for top performers compared to lower performers.

About Kamsa

Kamsa’s compensation review tool equips companies to make informed pay decisions. Our consultative approach, in combination with our technology, equips leaders with expert advice when making tough decisions. Kamsa’s market cash and equity compensation data help companies stay within budget while attracting and retaining their valuable employees.

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