Employee Retention Through Corporate Stocks

BY LENORE D'ANZIERI

Having worked with ground transportation and travel companies all over the world, I’ve discovered that many of them experience the same challenges when it comes to hiring and retaining a motivated team that will adopt an owner’s mentality. The price of hiring new employees is significant if you think about it in terms of the hard-dollar cost of advertising and the soft-dollar costs of the interviewing, hiring, and training processes. To that end, it is definitely more cost effective to invest in creative ways to retain employees who take pride in coming to work every day, which is only one reason why it’s beneficial to instill an owner’s mentality in your employees.

A List Limousine Service President Avi Karpel (center) stands with two employees who display their corporate shares

Corporate America and the private sector experience those same challenges. The general perception is that the former has access to the financial resources and manpower to develop programs that are designed to retain great talent—but it’s all relative. The hiring process is still a lengthy one that includes the cost of recruiters, human resource departments, long interviews, and, for the most part, salaries and benefits that are much greater than those in the private and small to midsize sectors. The cost of hiring may appear to be different but the bottom line remains the same. How these companies differ is that the majority of large corporations develop strategies that focus on retention and keeping their employees happy: Health insurance, 401(k) benefits, life insurance, health savings accounts, and profit or corporate stock share programs are all benefits that contribute to the attraction and retention of top talent.

Avi Karpel of A List Limousine Service is a forward-thinker who has found a way to not only hold on to his best performers but also encourage them to take pride in their daily responsibilities. His epiphany happened as he was driving to work one day and noticed an Avis Rent-A-Car sign that featured the company’s slogan: “We work harder for you.”

Once reserved strictly for senior management, employee stock options have become an important thread in the fabric of the American workplace. Stock options are very much the subject of water cooler conversations and, increasingly, fair game in job interviews.” – Dr. Marci Rossell, Senior Economic Advisor for Delphin Investments

In that moment, Avi decided to embrace the concept for his clients and employees alike, realizing that if he wanted his employees to adopt the mindset of an owner, he needed to treat them as such. He decided to distribute corporate stock shares to everyone in the company—­dispatchers, reservationists, chauffeurs, salespeople, maintenance staff, and cleaners—in the hopes that it would have an immediate and direct impact on his employees and, as a result, his clients.
This concept was not unfamiliar to me. During my tenure in corporate America, one of my criteria for changing jobs was the quality of benefits, not just the salary. Benefits I looked for were stock options, profit sharing, or stock-sharing opportunities. It gave me a sense of pride to know that I “owned” a piece of that pie, that I was an integral part of making that company—and myself—a success.

When I saw Avi at the Chauffeur Driven Show in November, he started telling me about the changes that he had made to his company. He told me about his company’s stock-sharing program with infectious enthusiasm. I was so intrigued by his forward-thinking that I asked if I could interview him about this initiative and if he would be willing to tell his story to his peers. He said that he “would be thrilled to share [his] experience,” which is what follows.

Lenore D’Anzieri: Avi, what made you decide to make this change in your compensation package?
Avi Karpel: I have a very dedicated team at A List, and I felt that I had to go above and beyond to take care of them. They are great ambassadors to the company and have been with me for years. I treat my employees as though they are my extended family. That mentality trickles down to our clients and affiliates every day.

LD: Did you see a big change in your employees’ performance, dedication, or morale?
AK: While training my employees, the question I always ask is: “If I told you that the client you are about to pick up is a heavy tipper, would you do anything differently than you normally would?” Obviously, if the answer or even the thought is a “yes,” then they don’t have a place in my organization. That is not the level of commitment that our clients or our teams expect. Implementing the corporate stock-sharing program deepened the entire company’s commitments and gave them more ties and roots to the company.

Their mentality became “I am now a part owner: I will work harder, and I care that my coworkers are all up to standard because anyone who is not will hurt my business.” My employees all know that the program is a one-way street. If the company grows by 20 percent, their stock is worth 20 percent more; if sales go down, their stock does not—it will always maintain its face value. It’s like holding a stock that is always winning! And all of that does not take anything away from their regular pay. It is all in addition to what they already have.

LD: What were your challenges? How did you overcome them?
AK: Since I couldn’t find anything already existing in our industry to build on, I had to develop my own program. I had to figure out how to track the distribution of shares, account for those who cashed them in, and what to do with the new shareholders as far as accounting was concerned. I had to explore an accounting system that would handle the unique needs of my company. I spent a lot of time learning about the potential ramifications and legalities involved with this program, and consulted with my CPA. And I had to consider all kind of scenarios: What happens if an employee leaves the company while still owning shares? How would I handle the sale of the company or any other exit strategy?

LD: Do you still give performance based incentives (PBIs)?
AK: Our program calls for additional distribution of stocks for outstanding performance, during the holidays, whenever any employee recruits a new chauffeur (with the team’s approval), and after the probationary period. So long as goals and service levels are met, distribution of stocks is done automatically on a monthly basis. The amount of stock allocated is based on seniority: The longer an employee is with the company, the more monthly stock he or she will receive.

LD: Was there a fear factor for you in transitioning to this program?
AK: No. I believed in the program, and my goal was to make sure that I’m taking care of my employees.

LD: What were your employees’ reactions when you presented the program to them?
AK: At first, they were in disbelief. You could tell by the questions that they raised: “What do we have to give up in order to get that? Is my hourly rate going to be reduced?” Their faces said they thought it was almost too good to be true and that they were wondering what the catch was. I kept reassuring them that nothing would change, that this program was in addition to what they were already getting—on top of the 401(k) matching plan that A List Limousine offers to all its employees. You could feel the excitement after the meeting was over. They literally hugged me.

LD: As an owner, did you feel as though you had relinquished some control of the company?
AK: No. I actually feel as though there is more stability. There is no controlling stock in the company for the employees, and I remain the key decision-maker. This program is designed to give the team a vested interest in the company by acquiring stock shares according to policy. We have seen that some of our team will use their stock as a savings account from which they can obtain cash by selling their shares back to the company at any time. They take advantage of this option when they need to.

The program is included in the presentations we make during our sales process, and it’s a magnet for potential employees. I use it as a key tool when placing help-wanted ads as we grow. I certainly outline the fact that A List Limousine offers not only a 401(k) matching program but also corporate stocks starting after six months of continuous employment. We have omitted many of the standard accolades that you would find in most value propositions and have replaced them with “ALL of our employees have a vested interest in the company through corporate stocks they own. What this does for you as a client is that our entire team literally takes ownership for each and every ride we provide.” {end interview}

A List Limousine is willing to share the details of its program with owners who are interested. Please contact Avi Karpel at avi@alistlimo.com.

Walking into the A List Limousine office, you can sense the pride that permeates throughout the organization. This pride starts with Karpel, and rightfully so. He took a leap of faith into the unknown and succeeded in creating a stronger, more dedicated team comprising employees who trust him, admire him, and look at A List Limousine as a career, not just a job.

According to Oppenheimer Funds, 63 percent of people surveyed who currently do not own stock in their company said it would be a somewhat important consideration if they were to look for a new job. Twenty-eight percent said they would consider taking a lower base salary in exchange for corporate stock sharing or options. One of the reasons stated for this large percentage of those paying attention is that they are the ones who are planning for their futures and their careers. They are not the stone-steppers, but rather those who are serious about having stake in their companies and making them shine. There is no silver bullet to attain and retain employees, but you can rest assured that a great addition to your team will know what options are out there when it comes to their total compensation package. As owners, we, like Avi Karpel need to take that leap of faith and develop new and exciting ways to attract and (most importantly) retain our talent for a lifetime. [CD0415]