Employee Retention strategies for small to mid-size businesses….what works!

I recently engaged in an in-depth dialog with several heavy weight recruiters throughout the US regarding the subject of employee retention. Specifically, What retention strategies can a small to mid-sized companies use when they can’t compete against larger companies on salary alone?

You may find this topic very interesting, especially coming from a headhunter perspective. “Why would a headhunter’s opinion matter to me? ” you may ask. Because headhunters are on the front lines. They are the ones who can penetrate and recruit away your best talent. By showing an employee that the grass is greener at a clients company, they may just leave yours. IF, you are not utilizing the best retention strategies available.

Remember back around 1999? It was the height of the technology boom, the latest gold rush to hit America. Companies couldn’t hire people fast enough. As long as they were breathing and had some semblance of knowledge, they were hired. But then the competition started poaching your best people – making outlandish offers to steal them away. The poachers started offering salaries twice and even three times the going rates causing over-inflated salaries throughout the country. Then, when the lures of high salaries no longer worked to convince people that the grass was greener at one company vs. their competitor, they turned to more materialistic endeavors; 10,000 shares of company stock and extravagant stock options, BMW’s and Corvettes as sign-on bonuses and in some cases, brand new houses. It was truly a candidates market, where even the average skilled employee could demand outrageous money and benefits. As you know, when the market came back to its senses and readjusted – like it does in every boom throughout history; salaries dropped, companies failed, stock options became worthless, cars were repossessed, and unemployment rose as high as 6% in the U.S.

Since that time, the economy has steadily rebuilt itself. In 2007, we are enjoying a steady resurgence of economic growth with unemployment around 4%.

The new problem in this economic growth is that the baby boomers are beginning to retire and the population is not growing in numbers we’ve seen in the boomer and post boomer years.

The US government as well as economists and business leaders agree that we are heading for severe talent shortages requiring skilled labor. In 2007, companies are already experiencing the pinch of the “Candidates Market”. There are fewer skilled candidates than positions needing filled and we are going to see more and more of this in the years to come. We’re seeing this in product development, healthcare, nursing, financial, IT, high technology, biotechnology, research, engineering and other fields. It’s another supply/demand issue, except this time; so far, salaries are not going through the roof. Candidates are being more selective in new companies. They are still very recruitable, they are looking or at least keeping their eyes out for better situations, especially if you didn’t treat them well during the recent recession. They have good memories.

Why people leave companies:

• People don’t leave jobs just because of the money; they leave because they are frustrated by micromanagement, poor communications and bad management decisions.
• Lack of respect for the person or their position in the company by management
• Unpleasant working conditions,
• Irrational and belligerent bosses or coworkers,
• Corporate failure to truly assess work loads and expectations, by ignoring competence and screaming at mistakes,
• Taking employees for granted
• Assuming that the company is perfect the way it is.
• Red tape often slows things down & gets too many people involved in decisions.

These are just a few of the reasons, but darn good ones, that headhunters look for when talking with potential candidates. If you as a manager or executive can remedy these causes, you can bring your retention upwards to 97-98%.

If a company is basing its employee retention on salary or compensation alone it will always have excess turnover.

Employees choose to work for companies for a number of reasons. Salary is generally not the first compelling reason a candidate works at a small to mid-size company. Regarding compensation, small and mid-size companies need to be competitive with companies of similar size in their industry. Companies do not have to pay the highest compensation in the industry to retain their employees. They just need to be competitive. Therefore, it is important to note that companies do not have to spend a lot of money to attract or retain high caliber people. They just need to take the time and make sure they have a positive corporate culture that offers a future for individuals.

Small to mid-size companies should take a look at their internal culture and workplace. Fostering an atmosphere of a positive nature is important.

Do people receive recognition for what they accomplish?

Is it a fun place to work?

Good employees (those you want to retain) need to feel their efforts and work contribute to the company’s plans.

Employees understand that larger companies have their pros and cons. The plus is a higher salary.

For you, it is really a marketing question. How do I differentiate my product or brand, in this case, my company from the competition?

Companies can preach all they want about how people are their number 1 asset.

The key is their actions!

Although larger companies typically offer a wider range of titles and promotion opportunities, smaller companies might offer a shorter waiting list for a promotion. Another advantage of a smaller company is that some higher-level executives will interview a candidate where it would not have been possible in a larger company.

What successful management is doing now to retain employees:

• Provide a workplace where people feel respected and valued,
• Provide a workplace where employee ideas and efforts are noticed and considered important, where talent is promoted and celebrated.
• Provide less bureaucracy, less red tape to make decisions.
• Adopt a management style that is inclusive and recognizes the value that the individual brings to the shared success. People have to be motivated by something, if it isn’t money – which is a short term motivation, a feeling of belonging and value can be a very strong substitute. I believe this management style breeds loyalty and loyalty, even when misplaced, can help keep an individual in the fold.

 

A great leader listens to their employees and preemptively acts to prevent problems, seeks information and ideas from all levels of employee and customer and acts to continually improve conditions on all levels. A great workforce feels and believes that each member is a respected and important member of the team. Employees don’t leave a company like this unless someone makes them an offer they simply can’t refuse and there is always that 1% unexpected reason or need to leave a company that cannot be avoided, but you can keep the majority of people.

Tangible ideas that are working:

• flex time
• 4 day work weeks as well as
• Ability to work from home.
• Convert extra space to put in a gym with men and women’s showers and hire a fitness coach who comes in 3 times a week.
• Provide Massage services twice a week
• Vacation time
• Health club memberships
• Provide more responsibilities than what big companies can give, Decision process involvement at the top levels.
• Recognition programs
• Creative bonuses paid quarterly
• Daycare
• Instituting an equity program for key employees. Typically this can be either a stock option or profit sharing program. Once again this shows the willingness of the company to reward people for their efforts, it is a tangible way to demonstrate the value the company places on the individual.
• UP your 401k contribution. I have a client that offers fifty cents on the dollar matching up to 6% where the industry average is 3%. This is an attractive benefit to many employees.

• Offer strong leadership – evaluate managers and train poor managers.

• Offer a fun atmosphere,
• A firm that donates money to nonprofit,
• Flexible schedule,
• Ability to work from home a couple of days a week,
• Recognition for a job well done,
• Recognition in front of other staff when an idea was theirs, ideas listened to,
• Send to training classes(they can be for a half day),
• Weekly and monthly contests with different criteria so that all have ability to win, the weekly prize could be a scratch ticket…
• In-house training classes …

Where do I start?

A beginning point for any company would be to assess what is currently being done now to effect retention. That is, are there any clearly known and understandable strategies currently in place to improve employee retention? By examining what actions a company is currently taking is, in itself, a step that will reveal logical next steps.

1. Is your company experiencing an above average turnover rate compared to the market?

· For example, is there a particular Division/Branch/Department that has a high turnover rate? If so, your may have someone in leadership driving people away from your company.

1. Does your company conduct employee surveys? If so, do you act on the results?
2. Does your company offer tangible career paths? What objective data do you have to support your claim? That is, how many professionals have been promoted to higher levels of responsibility? Have they been successful?
3. Who in your management ranks interviews and selects the best people who have been hired? You can track this.
4. Likewise, who has hired the worst people? (you should remove them from the interview process)
5. What training do you offer your management team? Is the training offered considered beneficial by those who have taken it or is it just a requirement HR said you had to take?
6. Is your company performance reviews serving the purpose intended or is it just a paper exercise? Whatever your answer, what objective proof do you have to back-up answers (or is it just someone’s opinion?) For instance, you could confidentially survey your management ranks and obtain a report that quantifies their perspective.

These considerations just scratch the surface of steps a company can take to attract and retain professional talent. Essential questions a company should ask are 1) Am I taking action to address this and 2) and am I sincere in my motivation to understand how to create a positive work culture?

In the Recruiting profession we try to impart the knowledge to Hiring Authorities that “people go to work for people”. Notice that the majority of reasons people leave jobs – has to do with people. Therefore, it is important that candidates feel comfortable and confidant in the quality of the people who are interviewing them and who they will be working with. People normally do not leave a job; they leave the people, they leave poor management, poor company cultures. Every company, no matter how great you are, can improve in these areas. It is important, now, more than ever, to focus on these issues if you want to retain and recruit top talent.

-Gary Perman