Published Articles

November 8th, 2006

Consider “Phantom Stock”

Smaller PR firms usually don't offer stock to employees because this raises complicated tax issues and minority ownership protection issues. It can also be costly to set up such a program. Also, PR firms may have to repurchase their own equity at a later date and take a financial hit. An alternative is "phantom stock" which lets employees share in the growth of a firm but eliminates the complications of actual stock.

"Phantom" shares are distributed to key employees as a material part of their overall compensation packages. In fact, a firm may be able to show salary increases and bonus increases (and thereby increasing current profits) because of the Phantom Equity grant. The key to such an arrangement is that the employee earns the right to a cut of the proceeds should the firm be sold sometime in the future. This can be a relatively painless way to hold onto talent which might otherwise be lured away by entities of publicly-held firms that can offer options and restricted stock. Phantom equity can help to keep or lure key talent to a firm; increase current profits, and obtain specific restrictions from employees that block them from leaving with the firm's clients (if such restrictions are not already in place). Owners of small and medium-sized firms should take up this concept with their legal and tax advisers to see whether it would benefit the firm and help to retain valued employees.

Bonuses Help to Retain Staff

Another device to help firms get through difficult economic periods is a bonus plan that rewards employees when firm income is high but which can be cut back or eliminated when business declines.

Bonuses that are paid late in the year or in the following year encourage employees to stay longer than they might have.

Employees with bonus incentives feel they have "skin in the game," further motivating performance and aligning the interests of management and the staff.

Introduce 'Stars' to Prospective Employees

Firms should considering bringing their "star employees" into the hiring process. They can articulate the long-term vision of the company to prospective employees and therefore help to attract the right talent.

Employees are interested not only in initial salary but also in the long-term goals. Our clients hired employees without paying premium rates because they have convinced them of the firm's vision and prospects.

Small and medium-sized firms should emphasize their particular cultures, pointing out the benefits of being independent. Candidates today want a good working environment.

A concise job description that spells out duties as well as opportunities will result in an increase in the percentage of good hires.

As a law firm that handles employee issues for the marketing industry, we see many common recruiting errors and missed opportunities.

We see an increased interest in PR careers these days because PR pros are becoming involved in a wide range of communications techniques up to and including advertising.

Such books at The Fall of Advertising and the Rise of PR, which was written by Al Ries, are making PR a more attractive career path.

Author: Gavin McElroy

This article was first published in O'Dwyer's PR newsletter on November 8, 2006.