Key Employees vs. Important Employees


Retaining quality talent is a huge value driver for most companies. Every business has two different types of employees, “important employees” and “key employees”. It’s critical to know the difference between them and how to motivate them.

Key employee: An employee who has a talent or skill that is difficult to replace, whose absence would tangibly harm the business, and who can take the business to the next level.

Important employee: An employee who has institutional knowledge and an understanding of the business processes, but who isn’t willing or able to take the business to the next level.

Key employees often have leadership or ownership ambitions. Important employees may be happy in their roles and don’t necessarily have the skill or motivation for ownership.

This key difference means that owners should avoid treating these sets of employees the same. Create different comprehensive incentive plans to motivate, retain, and reward both types of employees. Often, having custom incentive plans moves key employees toward bigger responsibilities (and bigger rewards for fulfilling those responsibilities).

But important employees—who may not be able to fulfill or don’t want the responsibilities that come with comprehensive incentive planning—likely have different motivations. Here are a few ways to keep these important employees motivated.

Ask what motivates them.

A fatal mistake many owners make is assuming that employees view themselves the same way owners do. It’s surprisingly common for owners to assume that employees have bigger or smaller ambitions than they really do, which can cause owners to use ineffective motivational techniques.

Before you commit to any hard strategies to motivate any of your employees, it’s important to understand your employees first. You may want to work through a process to determine where your longer-term employees see themselves in the business in the future. You should know what aspects of their time with the company they’ve enjoyed most, and when they’ve felt most appreciated or valued. Make it a point to really build a relationship and connection with them.

Once you understand how your employees view their futures and pasts and combine that with the roles you want them to play in the company, you can more accurately decide whether each of them is a key employee or an important employee. From there, you can work with your advisor team to craft programs that more effectively motivate your employees.

Offer incentives that fulfill their needs.

Important employees, like key employees, want incentives. However, the kinds of incentives you provide important employees will likely be much different.
Whereas key employees often look for greater leadership opportunities and hefty monetary rewards for going above and beyond, important employees may not have interest in those kinds of rewards or responsibilities. They may find more value in some of the following:

  • More time off
  • Greater flexibility in where and how they work
  • Early access to important company announcements
  • Employment opportunities, such as internships, for qualified family members (e.g., kids and grandkids)
  • Synthetic equity in the company
  • Special recognition

Important employees may lean toward recognition and perks more than being a mover and shaker at the company.

Acknowledge their importance.

Just because an employee isn’t key doesn’t mean they aren’t valuable. As you implement motivational strategies, it’s crucial that you avoid underselling how essential your important employees are. Be aware of how you treat everyone so you don’t run into favoritism issues or any unwanted drama.

Doing so often requires careful communication and consideration. The goal is to make sure everyone knows they are valued. By acknowledging the importance of your employees and by implementing appropriate motivational strategies, you can have better control of employee retention leading to a more successful future for your business.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and gain insight into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Material discussed in this communication is provided by Business Enterprise Institute, Inc. Advisory services offered through Commonwealth Financial Network®, a Registered Investment Adviser. Financial and exit planning services offered through Alliance Private Wealth LLC are separate and unrelated to Commonwealth.