27/11/2013 07:52 GMT | Updated 27/01/2014 05:59 GMT

Are Golden Handcuffs Worth Their Weight?

Key employees upping sticks is a risk that every business faces, but is one that surprisingly few prepare for. Effective succession planning isn't exactly rocket science but despite its critical role it's often overlooked. Many businesses have to take a reactive approach, working hard to backfill the position or counter-offer when the resignation letter lands on their desk.

'Golden handcuffs' or counter-offers are common strategies to tie in vital staff. However, if an employee's head has been turned a monetary incentive to stay isn't a lasting solution. A high volume of people who accept counter-offers will still leave within the next 12 months.

One KPMG study suggested that the cost of replacing a senior manager in a business can equate to between 3.5 and four times their annual salary. In addition to this clear financial risk, the loss of morale and momentum from their direct reports and teams will, unless exceptionally well managed, directly impact productivity and profitability.

This effect calls for a proactive approach to mitigating the risk that senior resignations present. Every senior manager should have a highly capable second in command, a natural successor who understands the role. This support provides an additional benefit in that, with an effective right hand, the workload and stress of that manager is lessened. This typically equates to a better work-life balance, more time for strategic thinking, continual improvement and finding new ways to add value. All of these factors increase job satisfaction and, as a result, lessen the likelihood of key employees leaving in the first place.

Ultimately when looking at retaining and attracting talent, work should never be a purely financial transaction.

The highest levels of performance and productivity arise when people have an emotional investment in their work, in the company and enjoy what they do. The best way to retain senior management is to ensure they have the room and remit to genuinely enjoy what they do. Lots of tactics can be employed (sabbaticals, job swaps, training investment in 'personal interests' etc.) but what the majority of people I talk to really want is the opportunity to make a difference and be seen to succeed. Provide them with the support and autonomy to achieve success (and to realise their potential) and suddenly a 20 per cent increase on their basic salary to join an unknown environment becomes less attractive.

Businesses could focus on enabling senior managers to do their job in the way they believe it needs doing. Remove road-blocks for them, be an advocate and supporter and trust them by providing real autonomy in their roles. Accept some failure and allow them to explore hunches and theories, providing they don't take their eye off the ball. The only sure-fire way of retaining top talent is to provide an environment, culture and role where they can achieve success on their own terms. If they're genuinely top talent, this will also lead to profit and productivity for the business.