EMPLOYEE RETENTION

For insight into employee retention, OPE + Landscape recently interviewed Chris Buttenham, co-founder and CEO of Reins and author of“ Alternative Equity.” Buttenham works with contractors and service-based business owners on challenges including employee retention, succession planning and developing the next generation of leaders. Through Reins, he helps privately owned businesses create long-term incentives that give key employees a greater stake in the company’ s success without requiring owners to give up equity.

Chris Buttenham

OPE + Landscape: Why do so many landscape companies struggle to retain their best foremen, account managers and production leaders, even when they ' re competitive on pay? Chris Buttenham: Because pay is table stakes. Once someone is making a good living, more money stops being the thing that moves them. What they start asking is whether the next 10 years look any different than the last 10. In most landscape companies the honest answer is no. The org chart is the owner and then everybody else. There ' s no visible path from running crews to owning a piece of the outcome, so people find that path somewhere else.

The other issue is that a raise is easy to beat. It ' s just a number. Any competitor can add five grand to it.

OPE + Landscape: When a key employee comes to an owner with a better offer, what ' s the biggest mistake you see business owners make? Buttenham: Treating that moment as the moment. By the time someone is standing in your office with an offer in hand, they ' ve already left mentally. They went looking. The decision that mattered got made months ago and this conversation is just the paperwork.

From there, most owners panic and match the number that afternoon. That teaches the whole company that the way to get paid is to go interview somewhere else and it fixes nothing because the offer usually wasn ' t about money. The opposite mistake is just as common: taking it personally and letting a great person walk over pride.

Either way, you ' re playing defense. Ask why they went looking, take the answer seriously, then have that same conversation with the four people who haven ' t gone looking yet.

OPE + Landscape: What does losing a key employee really cost a landscape company beyond the expense of hiring a replacement? Buttenham: The recruiting fee is the smallest number on the list. Start with the direct cost. Gallup puts the cost of replacing an employee at one-half to two times their annual salary, and for leaders and managers it sits at the top of that range, right around 200 %. So a $ 95,000 production manager is a $ 95,000 to $ 190,000 event before you count anything else. That covers recruiting, training and the six to 12 months before the new person is producing like the one who left.

Then customers. In this industry the relationship often lives with the account manager, not the company. Some accounts leave when they leave.

And the one almost nobody prices: enterprise value. If you ever sell, a buyer is going to look hard at how much of the business runs through people who could quit tomorrow, starting with the owner. Heavy owner or key-person dependency typically costs 10 to 25 percent of the valuation, and more than that when nothing happens without the owner ' s approval. It shows up as a lower multiple, or as money parked in an earnout you have to stick around three more years to collect. Losing your best operator two years before a sale is a balance sheet event, not an HR event.

OPE + Landscape: What are some practical ways landscape business owners can create long-term loyalty before competitors come calling? Buttenham: There are four ways that don ' t cost much:

1) Show people the scoreboard. Most crew leaders have no idea what the margin was on the job they just finished. People who can see the number start managing to it, and they stop feeling like labor.

2) Give them something to actually run. Real responsibility for a branch, a division, a service line with the P & L attached.

3) Be specific about the future. " You ' ve got a big future here " is worthless. Write down the role, the timeline and what it pays. Vague promises don ' t retain anybody.

4) Tie some portion of compensation to something longer than 12 months. An annual bonus resets January 1 and has zero retention value by February.

OPE + Landscape: You ' ve written extensively about alternative equity. How can programs like phantom stock help landscape companies reward and retain key employees without giving up ownership? Buttenham: Phantom stock is a contract, not a stock certificate. You grant units that track the value of the company, and when there ' s a sale or an agreed-upon date, the employee gets paid the appreciation in cash. They never become a shareholder. No voting, no rights to the books, no seat at the table and no buying anybody out if it doesn ' t work.

That ' s why it fits this industry. Most landscape owners want to reward the four or five people who genuinely drive value, but they don ' t want a partner they can ' t get rid of, and they don ' t want their brother-in-law ' s estate showing up on the cap table in 15 years.

Two things determine whether it works. First, the vesting has to be long enough to actually be a retention tool— three to five years or tied to a liquidity event. Anything shorter is just a bonus with extra paperwork. Second, you need a valuation people believe. If the employee doesn ' t trust the number the units are tracking, the whole thing is theater.

OPE + Landscape: What ' s one thing every landscape business owner could do this year to improve retention and build a stronger leadership team? Buttenham: Pick your top five people. For each one, write a single page: what their next five years look like, what they ' d have to hit and what it would be worth to them. Then sit down and walk them through it.

Most owners already have a version of this in their head and assume it ' s been communicated. It hasn ' t. You ' ll learn a lot in those five conversations, and a good chunk of the retention problem is simply that nobody has ever had them.