Effective Strategies For Small Businesses To Retain Employees

By Mark Taylor | Small Business

The economic recovery is challenging small business owners in ways they haven’t seen in seven years: greater job opportunities for their top-performing employees, making employee retention strategies even more vital, employment experts said.

More Employees Are Quitting

Job quits-----an employment term referring to voluntary employee departures ---have risen, according to the U.S. Bureau of Labor Statistics.

“The quit rate now is 2% of private sector employees, up from 1.9% one year ago and 1.8% two years ago,” said economist and consultant Bill Conerly, Ph.D., of Lake Oswego, Ore.-based Conerly Consulting. “I expect it to jump because we’ve just had a big bump in the number of job openings, which will lead to even more quits.”

That’s why tracking retention is vital, not only for large employers, but even for smaller businesses with 50 or more employees. He said that once employees have options, they start bailing on poor managers. And training whoever supervises employees is critical, even if that manager is the business owner.

Poor Management

“Most people who leave their jobs don’t do it for the money,” he said. “Most quits are about management: the employee doesn’t feel respected. A lot of retention problems can be solved if the managers respect the staff and are nice to employees. ‘Don’t be a jerk’ is probably the single best piece of advice, and it’s advice that many managers haven never heard.”

Conerly also said small employers need to look at pay and benefits.

“During a recession you can get away with paying employees a little under market price,” he said. “But when things are going well again you have to look at market prices.”

Richard Strauss, president of the Washington, D.C.-based radio and TV public relations firm, Strauss Media Strategies, said even if small business owners have done all they can to retain employees, they still need to be prepared.

“They should keep an eye to recruiting new people, continually meeting new talent and networking to develop that farm system player ready to step in in case somebody does leave,” said Strauss, a former White House director of radio whose 19-year-old company employs 12.

Fully staffing is another way to keep top employees. Strauss said some firms mistakenly staff to the barest minimum to save money, but in the process overwork and burn out their employees. He said small firms should staff appropriate to their business needs and consider adding a half-time employee trained and prepared to step in for vacations, maternity leaves and employee departures.

He also suggested that one of the best ways to retain good employees is to terminate bad ones.

Slow to Hire, Quick to Fire

“Most people are slow to fire and quick to hire, but for their company’s good, they should be the opposite: quick to fire and slow to hire,” he said. “Keeping bad employees causes good employees to lose motivation and their desire to stay. Sometimes getting rid of the bad will help you keep the good.”

Paul McDonald, executive director of the executive recruitment firm, Robert Half Associates, said with an improving economy, human capital has grown in value.

“Particularly for small businesses, it’s crucial to hang onto valued employees,” McDonald said. “It’s much easier and far less expensive to retain people than to replace them.”

He said small businesses should strive to develop a solid corporate culture that offers work schedule flexibility, opportunities to grow and creates a sense of camaraderie and teamwork that allows people in a small business to thrive.

He also recommends jointly creating a career road map for employees hoping to advance.

“If they can learn from others within the organization, it creates an atmosphere that includes new techniques, tactics and projects that enable them to grow. Many like to be jacks-of-all-trades and not get pigeonholed in a corner unable to acquire new skills. Creating this environment also shows your commitment to helping them achieve their career goals.”

He said his Silicon Valley office is seeing a shortage of highly skilled workers, particularly in technology, marketing and design. “It makes it even more critical to retain those marketable employees.”

He said happy, productive long-term employees are a business’s best advertisement.

“It’s the best way to attract new top-notch employees and they’re your best recruiting tool.”

Smart Benefits

Parry Bedi, the CEO and Co-Founder of SocialGlimpz, an 18-month-old San Francisco social marketing and technology start up, said the tech industry is undergoing another boom and big firms boast massive financial resources he can’t match.

“Facebook and Google can offer a lot more money and bigger benefits,” Bedi admitted. “So I must find other ways to attract and retain good employees. The people I hire are highly sought after software developers and product designers.”

While SocialGlimpz only employs six now, it plans to nearly double staffing by year’s end.

He said his firm, like many Silicon Valley counterparts, offers ownership stakes to encourage employees to remain. Employees are fully vested after four years and are offered flexible work and vacation schedules.

“People come in and leave anytime and nobody asks. They can work from home if they like. We offer an unlimited vacation policy and encourage people to take vacations. When people are engaged and excited and are working very hard, we want them to take time off.

Dick Finnegan, founder of Longwood, Fla.-based C –Suite Analytics, is a big proponent of hiring the right person in the first place. Finnegan, the author of “The Power of Stay Interviews for Engagement and Retention,” said that’s the best way of reducing turnover and retaining quality employees.

“When interviewing someone, demonstrate for them the absolute least popular parts of the job, whether it’s the schedule, working in rough weather or getting dirty on the job. Don’t sugarcoat a thing. Then tell them the main reasons people have quit. I call that a realistic job preview,” he explained. “You want them to know exactly what they’re getting themselves into.”

Then he suggested telling job applicants only to accept this job if they can see themselves staying in it for at least two years.

“If they’re going back to school or relocating, we tell them not to take it,” Finnegan said. “You’re not asking them to commit to two years, but if they can’t visualize themselves in the job for two years, they shouldn’t accept it. Then tell them to think about it overnight and ask what time you should call them the next day. It might scare them, but it’s the right thing to do and it will cut down on the number of people who would have quit soon after hiring.”

The 'Stay' Interview

Finnegan also is credited with popularizing the concept of the “stay interview” --- a scheduled annual or semi-annual interview between management and employees as a structured way to talk about what lies ahead.

“After hiring new employees, meet with them after 30 days to ask what’s different about the job from what they thought and what can you do to make it better,” Finnegan said.

Danny Nelms, managing director of the Brentwood, Tenn.-based Work Institute, a workforce intelligence and research firm, said it’s important for employers to understand why people are leaving.

Nelms said the Work Institute conducts stay and exit interviews for large and medium-size firms to collect evidence in developing effective retention strategies, something that he said until recently was not cost effective for small businesses, but can be valuable.

Nelms said managers and employees need to talk about career goals and aspirations.

“There is so much pent up turnover from the recession. People’s careers stalled. There were no promotions, no new jobs out there. Now the economy is coming to life and we’re seeing people quitting to advance their careers. Most are leaving for development and career opportunities, not money.”

Jim Blasingame, a small business advisor with a nationally syndicated radio show based in Florence, Ala., said owners whose business is improving should adjust to the new recovering economy. “If you are experiencing growth that is measurable and sustainable and you’ve been practicing survival mode strategies, it’s probably time to be a little less dour and thank and reward employees for sticking with you during the hard times,” Blasingame said.

“Employees are tired of being in that survival mode and if the company is doing better---is out of debt with a better cash and profit position--- it’s probably time to start sharing that with employees. Owners should not let their guard down, but start to move from defense to offense and let staff know that it’s going to be more fun to do business and they’ll benefit now that things have improved.”

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