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3 Ways To Retain Your Employees
By Mollie Neal

Few micro-business owners are immune to today’s economic realities. Operating on a lean budget is more critical than ever. Payroll, often an employer’s largest expense, can stick out like a sore thumb.

PayCycle, an online payroll service in Palo Alto, Calif., reports that half of the nation’s small-business owners are reducing payroll. Many are resorting to layoffs; others are finding creative ways to minimize payroll.

Few are concentrating on retaining perhaps their most valuable asset: their employees.

“Small-business owners who aren’t thinking of employee retention are making a big mistake,” says Beverly Kaye, owner of Career Systems International and co-author of “Love ‘Em or Lose ‘Em: Getting Good People to Stay,” (Berrett-Koehler Publishers, 2008).

Drastically reducing or even eliminating payroll expenses may seem like a good short-term fix, but could easily backfire.

Layoffs, for example, may look like a quick way to ease financial burdens. However, such drastic measures can easily dampen morale and impact productivity for remaining staff. Overworked or disgruntled employees may also take out their frustrations on customers, causing sales and service to suffer.

“When things pick up, the best and brightest employees could well pack up,” warns Kaye.

In fact, a recent Society for Human Resource Management study among members predicts that turnover will rise significantly once the job market improves. This could leave you at a competitive disadvantage. Plus, you’ll have the costs, aggravation and distraction of recruiting, hiring and training new employees.

Employee retention is critical to the success of a business, regardless of employment rates and economic conditions. Here are three things you can do today to make sure your top-notch employees stay.

1. Value Your Employees
Enlisting the help of your staff and encouraging them to be part of a solution are good ways to develop loyalty, says Leigh Branham, founder of Keeping The People Inc. and author of “The 7 Hidden Reasons Employees Leave: How to Recognize the Subtle Signs and Act Before It’s Too Late” (AMACOM, 2005).

Branham suggests gathering staff, explaining the financial realities, and brainstorming ideas together. This can be productive and especially helpful during a tough economy.

Back in October when gloomy business reports became pervasive throughout the media, Jesse Jacobs, owner of Samovar Tea Lounge in San Francisco, decided to be proactive. He encouraged his 50-member staff to think creatively about his business in an effort to avoid future layoffs.

He held meetings, opened his books in a simplified form to give staffers insight into the operation, and encouraged a dialogue.

In turn, many employees became more enthusiastic about helping the business succeed, says Jacobs. They came up with ideas for new products and sales techniques, and made cost-cutting suggestions that saved Jacobs a substantial amount of money.

“This has also led to increased business revenue, more server tips and better served customers,” says Jacobs. “That’s a win-win for everybody.”

Jacobs has not only avoided layoffs, but he’s also reduced his employee turnover rate while operating in an industry that’s notorious for attracting job hoppers.

“Nobody wants to be a cog in the machine,” Jacobs says about his employees. “They are valued not just for washing dishes or serving customers, but for their opinions and ideas.”

If employees feel valued they will, in turn, be more committed, which ultimately boosts long-term retention, says Branham. They may not only help you realize ways to shave expenses, but also recognize opportunities for long-term growth.

“Perhaps one of the greatest things a boss can do is listen to an employee’s ideas and take action,” Branham says.

Workers then feel valued for contributing to the company’s success and have a sense of ownership or stake in the business. People who are engaged are going to be more satisfied with their job. And they’ll be more valuable than unmotivated workers.

2. Show Appreciation
Recognizing employees is important, says Branham. Staying late to prepare a presentation or working overtime to solve a problem should be acknowledged at least with a pat on the back, a genuine thanks and words of appreciation.

“A lot of managers don’t show gratitude, and that’s got to change,” says Branham.

Saying thank you in the workplace lets employees know you appreciate and care about them, and that their contributions are valued, says Kaye. It’s those kind of little actions that can help boost morale, loyalty and employee retention.

This is especially true for younger workers who grew up with instant feedback from computers and video games.

Small tokens of appreciation and recognition can go a long way and don’t need to be expensive. These may include flowers, a gift basket or wine for a holiday or birthday. Thank-you notes, gift cards, plaques or lunch with the boss can also honor an employee’s effort.

3. Create An Employee-Friendly Company Culture
There’s a common misconception that employees always leave a job just to chase the almighty dollar, says Kaye.

While pay can be a factor, “the real reason most people quit is they aren’t learning, challenged or growing; don’t enjoy their work; or they don’t believe in or trust their boss.”

Most bosses work hard to cultivate client or customer loyalty. Kaye suggests they apply that same mindset to employees.

“Treat your employees like your internal customers,” she says.

Show your interest in them, give them your attention, find out what they need and keep your promises. If you aren’t sure what those needs are, simply ask. Instead of conducting exit interviews when employees leave, Kaye suggests conducting “stay interviews.”

After a few months on the job and periodically thereafter, ask employees:

  • What they like or dislike about their jobs
  • What they’d like to learn
  • If they have any concerns
  • What makes a great day at work
  • What would make them more satisfied 
  • If they owned the business and had a magic wand, what they’d do to make improvements

Answers to these questions will offer insight into what makes a particular employee tick, says Kaye. If you’re afraid to ask such questions, you lose an opportunity to develop simple ideas for making your business more employee-friendly.

For example, some employees may want to have more opportunities to learn new skills. Sending them to a conference or giving them time to attend a webcast could help fulfill that desire. Their newfound knowledge could, in turn, contribute to your return on investment, says Kaye.

Other employees may be interested in personal growth. Bringing in professionals to conduct seminars on topics like nutrition, saving for college or retirement planning might be appreciated. Or giving periodic time off for volunteer work may be well received.

Retaining talented staff is critical to remaining competitive for Amanda Vega, owner of Amanda Vega Consulting, an integrated marketing firm in Scottsdale, Ariz. She knows her staff could get jobs working for higher-paying agencies with more attractive benefit packages. Yet her 16 full-time employees remain loyal.
Vega is a firm believer that job flexibility and performance-based perks contribute to employee retention.

“We don’t offer outlandish salaries like some agencies,” says Vega. “Yet, we give them things other employers don’t,” she says. “We sell them on a lifestyle.”

Staff members who bring in new clients and help the business reach financial goals receive perks like iPods, iPhones, MacBooks or a shopping trip to the local Banana Republic discount warehouse.

Those who finish projects early get to “bank days,” and some have earned lengthy vacations. Individuals are free to do some of their work at home during off-hours. They can leave the office for a midday jog or skip out early to attend a child’s softball game—as long as they get their job done on time and clients remain happy.

Vega is careful to hire people who not only have the necessary skills, but also the disposition to be comfortable working in a nontraditional environment. She believes that it’s important to express clear goals with specific, measurable results, as well as to conduct regular performance reviews and offer feedback. Employees appreciate these interactions because they understand what’s expected of them, she says.

Vega didn’t sit down and create a grand plan for keeping talented people on board. “I just thought about the kind of company I’d like to work for,” she says.

Apparently, the corporate culture she’s created is working. She hasn’t lost an employee in nearly 10 years, and the business is growing.

You can’t win the battle for talent on money alone, says Kay, but you can gain a real competitive advantage with an employee-friendly corporate culture. A close-knit and energizing work environment can be more appealing to employees than working for large companies weighted down by bureaucratic red tape, internal politics and unapproachable management.

Measures such as dress down days, half-day Fridays in the summertime and flexible scheduling appeal to employees who want a more casual lifestyle or greater work/life balance.

In fact, many of Vega’s employees left higher-paying and more stressful jobs just because they wanted to work in a different environment.

Finding ways to retain talented staff is pretty practical, says Kaye. However, “it’s all common sense that is uncommonly practiced.”

Micro-business owners who pay attention to continually developing ways to win the battle of attracting and retaining the best employees will have a competitive advantage regardless of the economic conditions.

If freelance writer Mollie Neal ever applies for another job, she’ll be sure to ask about the company’s employee turnover rate.