In a world of rapid change, instant gratification, and talent wars, contractors are challenged to maintain profits and retain key employees while incentivizing behaviors for long-term success. This becomes increasingly complex during uncertain economic conditions and is accelerated by a growing number of Millennials poised to enter upper management positions following the wave of Baby Boomer retirements.

Competing needs between current and next-generation leadership create expectation gaps that can be damaging if not properly addressed. Add family business complexities to the mix and the solution becomes even more daunting. In search for a solution, owners can be overwhelmed with countless compensation plans, incentive vehicles, and leadership programs.

How does one find balance? The first step is to have a clear and purposeful strategy that defines the company’s direction and values, and is understood by current and future stakeholders. A clear strategy is critical to successfully navigating employee retention options, particularly long-term incentives.

Strategy Alignment

Once a strategy is defined and clearly communicated, the next step is to align the overall compensation and incentive menu with the company’s strategy.

Although the focus of this article is on long-term incentives, base compensation and short-term incentives must first be considered. After all, if either base compensation or short-term incentives are not effectively designed, then any attempt to structure effective long-term incentive plans will be futile.

To better understand how a company’s total compensation package can be aligned with strategy, take a look at an excerpt of a public company’s most recent Form 10-K filing: “Our ability to deploy services to customers throughout the U.S., Canada, and Australia as a result of our broad geographic presence and significant scope and scale of services is particularly important to our customers.”