“The recession has demoralised my staff. How do I incentivise them?”

Q: "My staff seem de-motivated. What’s the best way to try and incentivise them?"

A: At the moment, with redundancies happening on a weekly basis, it is easy for remaining staff to become de-motivated and worry about their own positions.

First of all, I would say: talk to your staff. If you think you can get through this recession without making further employees redundant, then tell them that. It will help to lift a lot of the uncertainty and they will appreciate it.

There are other ways to restore employee confidence. When staff are finding it tough financially (if their partner has been made redundant and they’re struggling to meet their bills, for example), consider offering them small loans from the business. Such loans, which can be repaid to the business through their salaries over a period of say 12 months, may help them through a very difficult patch and will hopefully build loyalty for the future.

Although bonuses are a dirty word at the moment, rewarding staff for great performance is essential to a successful business. Bonuses are a fundamental way of achieving this. The key thing is that the bonuses must be based on measurable achievements and on actual performance against targets to reflect the contribution of each employee in the organisation.

Share options are another traditional way of incentivising key employees. There are two types of options, approved and unapproved. I believe that share options are a fantastic way of helping key people feel ownership of the business, rather than just seeing themselves as employees. You can set very specific performance targets for them in order to get the shares – this means that they really do earn that equity.

Whilst there can be some expense in setting up approved option schemes, the tax-savings that result will significantly outweigh this cost. This area is one of the first things that I talk to all of my entrepreneurial clients about.

Of course, there are many other, simpler ways of keeping staff motivated. Simply making work fun and enjoyable, giving your employees a degree of freedom and responsibility (for example, allowing them to work from home or giving them flexible hours), can make a world of difference to them.

Martin Dunne is a partner at Sayers Butterworth LLP. He previously worked in the entrepreneurial services division of Ernst & Young, and has over 15 years of experience working with fast-growing, entrepreneurial businesses. He provides practical and commercial advice to clients ranging from start-up stage to AIM-listers in a variety of sectors including retail, property, manufacturing, technology and media.

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