How do you keep employee motivation high in a way that meaningfully supports business performance? It’s a challenge shared by manufacturers, law firms, service providers, and privately held companies of all sizes.
At a recent TAB (The Alternative Board) panel, three leaders shared practical models for aligning incentives with results through profit sharing, phantom equity, cultural practices, and long-term compensation strategies.
Panelists included:
- George Manson, President of PSI Urethanes
- Paul Skeith, Founding Partner at Richards Rodriguez & Skeith
- Matt Weinheimer, Partner in a merged wealth management firm
Their combined perspectives offer a roadmap for business owners seeking to motivate teams, retain talent, and grow sustainably.
Start With the Goal: What Are You Really Trying to Incentivize?
A recurring message across all speakers: incentives work only when they align with what employees can control.
Before choosing a compensation structure, businesses should define whether they want to reward:
- Long-term loyalty
- Profitability
- Retention
- Leadership development
- Preparing the business for a future sale
Paul Skeith emphasized that mismatched incentives could frustrate employees and derail their strategy. For example, tying bonuses to revenue for employees who don’t influence sales can leave them disengaged.
Instead, incentives should reflect measurable, role-appropriate outcomes. How can you best motivate your employees for their specific roles?
Profit Sharing in Practice: PSI Urethanes’ Transparent Model
George Manson has nearly 5 decades of experience running PSI Urethanes. Many of his employees have been with the company for more than 20 years. What is the key to PSI’s employee retention? A major driver of that loyalty is the company’s simple, transparent profit-sharing plan.
How it works:
- Hourly workers receive monthly bonuses based on the previous month’s profits.
- Salaried employees receive twice-yearly bonuses, often totaling 40–55% of their base salary.
- Everyone earns the same bonus percentage, creating team alignment.
The results speak for themselves. Employees clearly understand how their work impacts the company’s financial performance, and they hold one another accountable. Peer-driven “performance policing” has significantly improved quality—for example, scrap rates have dropped from 12–15% to 1.5–2.5%.
For PSI, culture and compensation reinforce each other. The company focuses on customized, high-margin manufacturing rather than commodity work, allowing it to share meaningful profits while maintaining consistent 40-hour workweeks.
Phantom Equity: A Practical Middle Ground for Ownership-Like Incentives
Many privately held businesses want to reward key contributors without handing out actual ownership. Phantom equity helps bridge that gap.
Matt Weinheimer’s Real-World Example
When acquiring firms or adding partners, Matt’s organization used phantom equity to provide upside without diluting ownership or creating legal complexity.
Phantom equity plans were structured with payout “triggers,” such as:
- A merger
- A sale
- Firm growth milestones
This model gave employees clear financial upside while avoiding issues such as valuation requirements, shareholder rights, and significant personal tax bills.
Why Paul Skeith Also Favors Phantom Equity
Having advised dozens of companies on stock plans, Paul emphasized that:
- Stock options are often overhyped — they require expensive valuations and rarely create long-term capital gains for later-stage employees.
- Actual equity can complicate sales, as buyers prefer simple ownership structures.
- Phantom equity is tax-deductible for the company, treated as ordinary income for the employee, and easy to pair with business goals.
For many closely held businesses, phantom equity offers the motivational power of ownership without the headaches of becoming a shareholder.
Culture Still Outperforms Cash
While financial incentives are powerful, all three panelists agreed: culture is the most sustainable motivator.
At PSI Urethanes, George has intentionally built an environment where employees feel supported:
- No mandatory overtime
- Encouragement to attend family events
- Freedom to try new ideas without fear of failure
- A “low-stress, high-performance” mentality
Matt and Paul echoed similar trends in their own firms with flexible work hours, trust-based environments, and intentional communication that promotes accountability without micromanagement.
In many cases, these non-monetary incentives keep employees engaged more effectively than complicated financial plans.
Simple Retention Bonuses: A Useful Middle Ground
Several audience questions focused on retention. Not every company is preparing for a sales or growth event, so more flexible structures may be appropriate.
The panel highlighted time-based bonuses (e.g., paid out after three or five years) as an increasingly popular option. They can stand alone or can fold into a phantom equity structure. These plans help retain key staff without tying incentives to circumstances outside their control.
Key Lessons for Business Owners
Start with clarity — not structure.
Ask: What behavior or outcome am I trying to incentivize? Let that answer inform the model, not the other way around.
Keep incentives tied to an employee’s influence.
Misalignment is one of the fastest ways to lose motivation.
Consider simple, transparent profit-sharing before complex equity plans.
Employees value fairness and predictability.
Phantom equity is increasingly common for a reason.
It delivers upside without complicating ownership or cash flow.
Culture is the ultimate retention tool.
Flexibility, trust, and a supportive environment will always outperform purely financial systems.
The TAB panel highlighted that successful incentive strategies blend compensation, transparency, culture, and long-term planning. Whether through profit sharing, phantom equity or retention bonuses, the goal is the same: align employee motivation with business success in a way that benefits everyone.
