Quick Links: Return To Entrepreneur’s Resource Center

‘Something Other Than Money’ Keeps Every Employee Driving Hard at Arcnet

Tired of watching his highly talented, highly trained employees being lured away after an average of just 18 months, Al Galdi took extreme measures last June. (One of his clients has hired 10 of Galdi’s employees — so far.)

Recently, Galdi, owner of telecommunications architectural firm Arcnet, presented 28 employees with keys to their own leased BMWs. From administrative assistants to architects, the employees picked the color and model. Galdi picked up the tab.

The deal: If an employee stays for one year, Galdi pays for a three-year lease, which runs $7,000 per year, plus insurance, which averages $2,000 per year. The annual cost: $252,000, or $154,000 after gift-tax deductions.

At the end of the lease, an employee can buy the car and receive another new BMW. In addition to a year of employment, a worker must have a good driving record and pay taxes on the $7,000 income, which the company will deduct from payroll.

Despite the cost, Galdi believes the unusual incentive program is a smart move for the $15 million company. Training and recruitment, for example, cost $1 million each year. But it’s not as if Arcnet isn’t trying other approaches.

A commissioned compensation study revealed that Arcnet salaries are actually 20% higher than the regional average.

"[But] when you are dealing with large, growing communications companies or large contractors that deal on a different profit structure, they can certainly entice them with better salaries," says Galdi.

Key point: "We needed something that appealed to people other than money. Money is forgotten in two weeks," explains CFO Tony Vitullo. "We wanted something that was really going to grab them and remind them of what Arcnet has done for them every time they turn the key."

A luxury car served this purpose especially well, points out Galdi, because most employees wouldn’t treat themselves if given the equivalent amount in cash. Now, employees not only receive personal enjoyment, but they also have a great sense of pride in the company as they gaze across a parking lot filled with shiny new BMWs.

"It gives them a feel-good incentive that penetrates to their performance and how well we provide service," Galdi says. "It improves retention, it isn’t extremely costly to me, and it may save me money in the long run. It’s a win-win situation on many levels."

Additionally, the caliber of job applicants has risen dramatically. "Before, we were just getting people that read the want ads, had been out of work a long time and didn’t have the skill sets we needed," says Galdi. "Now, we are getting people that are successful at their jobs but are just looking for a change."

The publicity has also generated calls from other CEOs asking Galdi about the program’s feasibility. But Galdi isn’t concerned about copycats.

"I’m sure some of that will happen, but so what?" he says. "My greatest assets are my staff. If I can give them something that makes them happy and keeps them here, then why not?"

Writer: Julie Cook

Related Articles...
A Graceful — and Profitable — Exit

ESOP allows Dave Hill to retire with peace of mind.

Read More ...
Working Well Together: Promoting Health in the Workplace

A workplace wellness program can help to keep your employees happy and healthy, causing a "ripple effect" throughout your company.

Read More ...
Rein in Health Insurance Rates

Digital Library > Human Resources Management > Health care “Rein in Health Insurance Rates” Entrepreneurs who provide health insurance to their workers faced soaring premiums last year. Small-business owners with less than 10 employees paid 9.2% more for group health insurance in 1999, compared with an average of 4.8% for all businesses, according to a survey by the Kaiser Family

Read More ...
Using Personality Tests as a Hiring Tool

Screen job applicants without going overboard.

Read More ...