AMERICAS NEWS: Employee retention secrets

Emerging managers face what can either be a unique challenge or an advantage in staff hiring and retention.

Such was one topic of discussion at the Real Estate Emerging Managers Summit in Austin, Texas last month. As delegates at the event noted, smaller budgets often leave less room for some of the glamorous perks and compensation packages that keep executives in place at established firms. But this difference can be an opportunity for emerging managers, giving new players a chance to build a staff engaged through workplace culture, not a paycheck.

“As a smaller firm, you can’t just throw money at these problems – you have to be more creative,” said an executive who heads an advisory firm.

Buy-in from non-executives occurs financially when junior employees have a stake in the company, such as sharing in the firm’s carried interest. This benefits both internal dynamics and external investor evaluation.

“Co-investment is a way to make people stay,” an investor said.

One GP who founded his firm said 25 percent of his shop’s promote is shared with non-partners. “It’s really important for them to tell their friends they own a part of the fund,” he said.

But another LP cautioned that managers should not force junior staff to take part in the co-investment pool. One such firm with the practice did not receive a commitment from the LP.

Executives must also sensitively discern how to split carried interest as firms add staff and employees move up. At the REEM conference, an LP shared the admonitory tale of one growing firm that did not heed repeated warnings from the investor to start splitting carried interest among non-founders. When the firm did not divide payouts, two executives left.

In addition to compensation, managers at the conference noted the intangibles of workplace dynamics – also known as “culture” – contribute to engagement and retention.

One founder of a firm touted the ability of an emerging manager to give employees more access to senior executives and more varied roles than they might have in established firms. The GP also noted he teaches a networking class to his staff and pays dues for his employees’ industry group memberships to foster personal growth.

“You have to build someone’s career inside and outside the company,” he said.