This week, a look at menswear brand Buck Mason’s strategy of offering equity to full-time employees plus other employee retention strategies brewing across the industry. Scroll down to use Glossy+ Comments, giving the Glossy+ community the opportunity to join discussions around industry topics.
The labor market is fluctuating wildly, with headlines about major rounds of layoffs at high-profile companies like Spotify and Hasbro as the national unemployment rate remains low at 3.7%. In step, brand leaders are looking for more ways to keep employees invested and retain their loyalty over the long term.
For Erik Allen Ford, co-founder of the menswear brand Buck Mason, that’s taken the form of offering equity in the company to all full-time employees. It’s a tactic more common among tech companies than consumer goods or fashion companies, but according to Ford, it has been a good way to attract entrepreneurial talent who will stick with the company for the long term.
“Our very first employee, Bethany [Mallett, who is now a design director at Outerknown,] was with us for five years and really helped shape the direction of the brand,” Ford said. “When she got a great opportunity, which I told her she should take, she got to leave with a piece of equity, a bit of ownership. She was able to take the brand with her when she left.”
All full-time Buck Mason employees earn stock options over a five-year period, Ford said. It’s a small amount since it’s spread across every employee, but Ford said it’s enough to make people feel like they’re doing more than just punching a clock. Buck Mason declined to share specifics about employees’ shares.
That ethos extends to other ways the brand does business. All Buck Mason store managers at its more than 27 stores are brought into the company’s profits-and-losses meetings. That’s an uncommon strategy in the retail industry, but it helps everyone at the company feel like they have a stake in its performance.
Buck Mason declined to share its revenue and retention figures, but the company said offering equity has helped keep employees longer.
According to Gary Stonell, svp of sales and operations at the employee management company Opterus, the current labor market is complex. But, in short, it’s easy to fill roles but much harder to get people to stay, he said. The average employee tenure in the U.S. is four years, according to the Bureau of Labor Statistics.
The IRS is currently handing out 20,000 rejection letters to companies that it says wrongly filed for the pandemic-era Employee Retention Credit worth thousands of dollars meant to help them keep employees longer. Companies have turned to other efforts like offering equity or increasing investment in DEI initiatives. According to McKinsey, more than 47% of employees cite the latter as a good reason to stay at a company.
“[When an employee quits,] that’s when you get hit with the true cost of churn,” Stonell said. “You lose out on the training you’ve put into them. You could spend hundreds of thousands of dollars on acquiring customers and getting them into the store only to have them walk right out because you’ve got undertrained employees who aren’t ready. You lose the sale and they’re not representing the brand well because they don’t have experience.”
Stonell said Buck Mason’s equity strategy is a good one, though it does come with some downsides. A study in The Journal of Law, Economics and Organization from July found that employees tend to overestimate the value that a stock option will have for them upon accepting. The stock only does as well as the bottom line of the company, which means unprofitable companies operating at a loss won’t be worth much at all.
“I worked at a company once where I received a stock option and it ended up not making any money, so all the value I thought I had kind of dissolved away,” Stonell said.
Ford acknowledges this is a risk for employees but said he’s open with them about what a stock option means.
“Equity is great if the company is profitable,” he said. “What’s the point of receiving equity if you’re constantly having to raise more funding or you’re feeling misled about the financials of the company? We’re open about sharing that we’re a profitable company and we’ve been profitable for years. That’s what makes it worth it.”