An entrepreneurs view of employee retention

Retention of employees (especially key employees) is paramount to success and I recently got an email from an entrepreneur friend who I think summarized the entrepreneurial dilemma when it comes to employees. He writes-
"First, my theory on employees.  In an ideal world I want three things;
  1. pay people less than they are worth,
  2. get people to be extremely committed and passionate about their job, and
  3. have them work lots and lots of hours. 
The reality is that you can have 2 of the 3.  Since we clearly want 2 and 3, we have to give on #1.  In other words, if we are going to expect great things from our people (and we do) then we have to compensate them accordingly.  This isn't to say that we are changing the company way which is that your compensation will always trail your value (usually by 3 to 6 months), but it does mean that for those folks that have proven their value - we better be compensating them."
I think he's spot on -- there are two things he didn't mention enough when it comes to employee retention:
  • i) quality work -- people are drawn by responsibility and the opportunity to undertake important tasks that impact a company
  • ii) A culture of appreciation -- appreciating people's contributions and saying thank you is so often lost at larger enterprises that it's the no brainer thing to do.