Recruitment consultants: using share schemes
RM2 acts for companies in a wide variety of sectors. However, it is probably recruitment companies that come to us most commonly to look for ways to structure equity incentives for their employees. These include executive, specialist IT & technical, tax and company secretarial, graduate and cross-sector recruitment.
Recruitment companies have specific characteristics which make an equity based schemeparticularly attractive. Their business model is extremely people-focused and remuneration is traditionally commission heavy with potentially very lucrative returns for the best agents. Quick returns for excellent individual performance can be a positive driver in many ways but an over-reliance on this approach can sometimes result in a lack of focus on the long term performance of the company as a whole, and a tendency for individuals to work for themselves rather than as part of a team. Furthermore, in a fastmoving and highly competitive marketplace, top people can only too easily be lured away by the promise from a competitor of bigger bucks now, or by the attraction of setting up their own business in direct competition.
These can be real challenges for a recruitment company looking to build in the medium to longer term.
Our recruitment company clients have all recognised these challenges and have moved to implement a scheme to encourage long-term retention of key staff. Here are ten reasons why they choose a share scheme:
- Cash free motivation tool – granting share options or awarding shares keeps ready cash in the company
- Long-term rewards encourage retention of keen employees
- May help reduce poaching by competitors
- Broadens the focus on all divisions and teams within the company or group
- Broader focus may help promote cross referrals among teams
- Facilitates succession for owners seeking to exit in 3-5 years
- If key employees can share in profits and capital growth they have less incentive to set themselves up as a competitor
- Allows longer-term focus on corporate growth instead of short-term, unsustainable results
- Gives tax relief for employees, the company and shareholders
- Allows non-executive directors to be paid partly in shares instead of cash
If you think a share plan might help you meet the challenges in your recruitment business, call us on 020 8949 5522 or email us via firstname.lastname@example.org and arrange a free consultation!