7 Tips to Assure Small Business Employee Retention

by Carolyn Sokol on January 8, 2014

Retaining employeesWhen an employee leaves, it costs small business owners big. According to The Center for American Progress, “The typical cost of turnover for positions earning less than $30,000 annually is 16 percent of an employee’s annual salary.” You can notch the percentage up for higher salaries. In any case, it is not an expense or a process you want to revisit.

Small business owners all know the pat response that goes, “If you hire the right people, they will stay.” On the assumption that you do not waste your time on poor recruiting and bad interviews, you need to embrace some people management tips directed at employee retention.

  1. Never launch a business without a firm compensation structure that reflects area wages, trends in the available labor pool, and potential equity. Most owners are not equipped to create a compensation structure, but the cost may be well worth it. Otherwise, you will be throwing incremental increases at sequential hires until you hit on their market value.
  2. Use your regional living wage as a benchmark instead of the minimum wage. The living wage will pay those borderline employees who wait for the next best offer. By starting employees higher than the minimum standard and just slightly more than the regional experience, you are competing on a level playing field.
  3. The cost of medical insurance benefits and/or the effects of the Affordable Care Act (PPACA) may preclude your ability to retain employees with a benefits package. But, there are other low cost benefits you can manage to budget: life insurance, extra holidays, flex-scheduling, bonuses, day-care support, and so on. If you can offer the options, make sure you communicate their value.
  4. Certainly until you are able to grow the employee headcount, you will be asking a lot of your early hires. You need to recognize their work and contribution with some regularity. Try to be more creative than free donuts. Give a gift card to a store or restaurant the employee prefers. Send flowers or a gift package to the employee’s home. Issue a press release for the local paper featuring the employee’s work. Schedule the employee for a formal photo session. Add an employee’s name to your business letterhead or buy him/her a set of business cards.
  5. Bring each employee into a collaborative environment. Recognize their contribution at the start of a meeting. Have the employee prepare the agenda or chair the gathering. Send a thank-you note for a display of quality, production, or a moment of leadership.
  6. Build a periodic individual performance evaluation on input from the employee. Make the employee responsible for sending you a summary of weekly or monthly accomplishments. Turn that input into quarterly conversations on the employee’s likes and dislikes about the job, the changes s/he would recommend, and the direction they would like to take next. Just remember that this is a conversation – not a promise or commitment. It is the conversation – and respect therein – that is important.
  7. Hire employees into a trial period. This differs from the traditional probation period because it is proactive and mutual. Rather than letting a probation run itself out, work at developing the employee relationship and loyalty with one-on-one meetings, 360 assessments, and incremental progress reports. Share short and long term goals with the new hire, bring him/her into the big picture.

One added tip is to explain these habits to each new hire. Help them see where they will be in four weeks, where and when they will have the chance to provide feedback, and where they fit in the larger picture of things. Communicate this as a standard best practice that they can count on throughout their trial.

{ 1 comment… read it below or add one }

John Madumere January 13, 2014 at 7:54 pm

Great tips on retaining good employees. I might also add that encouraging open exchange of ideas among employees is a good way of improving retention. This will lead to higher employee engagement which is the most important factor that facilitates retention, higher productivity and increase in revenue in any organization.


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