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Building loyalty amid uncertain times

Fostering employee loyalty helps companies thrive in uncertain times.
By: | December 1, 2020

Tough times can shake up even the strongest organizations, and flexibility has become an essential virtue as we reevaluate goals and performance metrics in a disruptive 2020. In fact, a recent Equilar survey found that nearly half of companies have made or plan to make changes to their executive compensation.1 Yet this may not always be the best course of action.

With so much going on, employee loyalty may not seem like the highest order of business these days—but there are many reasons companies should keep an eye on this often overlooked and undervalued “asset.” Retention is an oft-cited metric, but loyalty goes deeper, inspiring engagement among high-performance talent and fostering a sense of connection and ownership within your firm.

And equity compensation can play a key role in driving loyalty with top employees, but it’s worth examining the flip side of the coin, too: What does loyalty mean for plan administrators?

Employee loyalty can’t be bought or sold—but it may be earned

Whiplash-inducing headlines can make it seem like the sky is falling, but there are patches of light. According to the Bureau of Labor Statistics (BLS), the US unemployment rate rose to an April peak of 14.7% before declining to 7.9% in September. Some sectors struggle while others flourish, and it’s not necessarily an employer’s hiring market.2 Unlike past recessions, talent supply and demand during the pandemic is non-linear and volatile: Both unemployment numbers and job openings are setting records, simultaneously.3

Company balance sheets ride a razor’s edge between profit and loss, and it doesn’t take much to tip the wrong way. With about 70% of costs going toward wages and salaries, some organizations sacrifice their equity comp to try to find space in the budget.4 According to the Equilar survey, of those companies that made cuts this year:

  • 1% reduced or eliminated executive salaries
  • 7% froze salaries
  • 0% reduced or modified executive annual bonus payouts

Yet cutting equity compensation doesn’t always translate directly to greater budget buoyancy because it can wear on employee loyalty. A recent E*TRADE Corporate Services survey found that stock plans play an increasingly important role both in employee satisfaction and in a decision to keep—or leave—a job.5 And loyalty helps companies avoid turnover, where replacing an employee can cost 30–150% of their salary.6

Yet this is only part of the reason Harvard Business Review argues that one way to keep a company thriving amid uncertain times is the simple act of fostering loyalty.3 Loyalty is powerful amid disruption: Loyal employees roll up their sleeves and stick with the firm through thick and thin. Loyalty can be fostered in many ways, but truly none may be as simple and effective as equity compensation.

Loyalty comes from your employee base feeling like they have skin in the game—that they are a real part of the team—and a good way to create that dynamic is through the incentive of a stock plan. Equity compensation and the experience it creates for employees can go a long way in generating a culture of collaboration, innovation, and resilience—essential qualities that help companies overcome challenges and bounce back stronger than before.

What about loyalty behind the scenes?

But if the stock plan experience fails to engage your employees, then all this time and effort may be for naught—not simply in the dollar amounts, but in the loyalty lost from employees who may feel they aren’t receiving the full value of the benefit. That’s where your business-to-business collaborations can help drive improvements and innovations that not only simplify administration, but also give loyalty a meaningful boost.

According to Group Five’s recent 2020 Stock Plan Administration Benchmark Study of 1,117 public companies, many stock plan administrators are facing unprecedented challenges: Top worries shifted from reporting and participant education to simply managing plan design.

The flexibility to manage changing needs through innovative technology and service is a key differentiator both for companies and their plan providers, but it’s important to get it right. In fact, Group Five found that bread-and-butter issues like the administration platform functionality, participant websites, and service were the top reasons administrators switch providers.7 A cutting-edge technology and service experience can score significant wins for participants and further company goals, but this depends on a provider’s agility in supporting both critical functions and creative solutions.

For example, a seamless user experience like the redesigned participant site on etrade.com empowers employees with the flexibility to find answers to their own questions and direct themselves on a comprehensive, personalized journey. New strategic tools like SMS texting updates—which have a read rate of 98%8—help free up administrators to focus on other priorities and make it simpler for participants to engage with their plans. And E*TRADE Corporate Services’ industry-first API Developer Platform helps streamline the administration process, moving data with greater ease and customization while automating workflows, streamlining tasks, and integrating with key internal company systems.

Building employee loyalty, lowering administrator blood pressure

Equity compensation continues to pack a serious punch in the human capital market, strengthening the bond between a company and its employees. This bond is even more valuable today as a way to rally the troops in our recovering economy.  

 Loyalty is created each day by the pursuit of excellence, never settling for the status quo, and always recognizing value with value.

When plan providers deliver a truly powerful experience both for administrators and participants, it opens the gate for greater innovation, engagement, and creativity—turning disruption into a positive as companies grow a culture of loyalty and build a stronger, more resilient path forward.

1. Equilar, “COVID-19 Executive Pay Adjustments Survey Results,” October 2020, https://info.equilar.com/e/82992/pay-adjustments-survey-results/5p7hcs/621275485?h=gIUUe0wxoqqQ-__XbBsYgsFYgc2mc2NZJ-Q4zpXGIBM
2. Bureau of Labor Statistics, Employment Situation News Release, Oct. 2, 2020 and May 8, 2020, https://www.bls.gov/news.release/archives/empsit_10022020.htm, and https://www.bls.gov/news.release/archives/empsit_05082020.htm
3. Harvard Business Review, “Why Hiring During Covid Is Different Than in Previous Downturns,” Oct. 22, 2020, https://hbr.org/2020/10/why-hiring-during-covid-is-different-than-in-previous-downturns?utm_medium=email&utm_source=newsletter_monthly&utm_campaign=finance_not_activesubs&deliveryName=DM102915
4. Bureau of Labor Statistics, “Employer Costs for Employee Compensation – June 2020,” Sept. 17, 2020, https://www.bls.gov/news.release/pdf/ecec.pdf
5. E*TRADE Corporate Services 2020 Stock Plan Participant Survey, Total of 53,512 Stock Plan Participants survey conducted 9/8 – 9/18.
6. G&A Partners, “Calculating The Cost Of Employee Turnover,” June 3, 2016, https://www.gnapartners.com/resources/articles/how-much-does-employee-turnover-really-cost-your-business
7. Group Five Stock Plan Administration Benchmarking Study and Financial Reporting Benchmarking Study. As of June 19, 2020, Group Five Stock Plan Administration Benchmarking Study and Financial Reporting Benchmarking Study rated Equity Edge Online® highest in Loyalty and Overall Satisfaction for the ninth consecutive year (2012-2020) among all plan sponsors who use a commercial system to manage the recordkeeping of their stock plans in-house. E*TRADE Financial Corporate Services, Inc. was also rated highest among in continuous delivery of technology improvements, overall satisfaction of an administration platform, customizable participant communications and alerts, and ability to automate workflows in the same study. Group Five, Inc. is not affiliated with E*TRADE Financial Corporate Services, Inc. or the E*TRADE Financial family of companies.
8. Mobilemarketingwatch.com, April 28, 2020

This commentary contains current opinions from E*TRADE Financial, LLC and its affiliates which are subject to change without notice. E*TRADE is not affiliated with Human Resource Executive® and all commentary is owned solely by E*TRADE.

In connection with stock plan solutions offered by E*TRADE Financial Corporate Services, Inc., E*TRADE Securities LLC provides brokerage services to stock plan participants.

E*TRADE Financial Corporate Services, Inc. and E*TRADE Securities LLC are separate but affiliated subsidiaries of E*TRADE Financial, LLC, a Morgan Stanley business.