How to retain key employees as the job market heats up
The long-term success of your business depends on an engaged, happy and well-trained staff. It is the glue that binds your customers to your company and sets your business apart from its competition. As the U.S. job market rebounds, though, hanging on to your most talented managers and employees may be increasingly difficult. It’s important to make sure the grass stays greener on your side of the fence. It's important to make sure the grass stays greener on your side of the fence. Check out our tips on "stay interviews", an employee retention strategy that can often help retain your top performing employees.
Count the Costs of Turnover
There are plenty of statistics that attempt to quantify the financial cost of losing a key employee, says Susan Hengel, Senior Vice President of Organizational Effectiveness for Regions Financial, but she cautions against reading too much meaning into them. Each business, and each employee, is unique. It’s more useful to measure your own costs of employee turnover — both hard and soft — and then weigh those expenses against what it would take to keep that employee happy where he or she is.
For example, hard costs include both the time and expense of recruiting, hiring and training a replacement. Then you must add in what could amount to months of lost production. “It’s going to take a while for the new employee to get up to speed,” she says. Finally, there’s the impact that losing a key employee can have on the rest of the staff and your customers. “If the person leaving has a close relationship with a primary customer, that loss is acute and puts that customer relationship at risk,” Hengel says.
Sweeten the Deal
The initial response of business owners faced with the loss of a key employee is often to focus on money; promising raises, bonuses or higher commissions to keep that valued employee on board. But that could be a mistake, Hengel warns. By focusing too much on the dollars, you could be creating a system that ends up working against corporate goals by putting the individual before the team, the company and the customer.
“Compensation packages should be designed to drive the behaviors that support the company’s core values and mission,” Hengel says. To do that, you first need to identify the types of behaviors you want to promote, and build a reward system that encourages those behaviors while motivating the team.
Each employee might have different priorities that are key to retaining him or her — whether that’s flexible scheduling, healthcare benefits or fulfilling work. Hengel recommends conducting periodic “stay interviews” with key employees to get a better sense of what they want out of their job, so you can provide them with the right incentives.
Know the “Secret Sauce”
In fact, financial compensation plays a minor role in driving employee engagement, Hengel says. According to research from Gallup, at least 70% of employee engagement is influenced by managers,1 and this is where you can raise the bar for your company and your employees. “Your competitive advantage comes from having leaders who inspire confidence in your company’s mission statement, set realistic expectations and keep employees accountable,” she says. The first step to keeping your employees engaged is having a strong understanding of your own management style. “You need to know what motivates you personally, how you respond to different situations and how you manage those responses,” Hengel says. Ask yourself:
• How am I perceived by my employees?
• Do I create an environment in which employees know what is expected of them and why they matter?
• If I am asking for respect from others, am I showing respect first? “It’s important for managers to clearly and consistently communicate to employees why the company exists, what your organizational strategy is and how each employee contributes to those objectives,” she says. “Then you reward employees who meet those goals and liberate those who don’t.”
Play to Your Strengths
When it comes to hiring and retaining top talent, small companies have a unique advantage over their bigger counterparts: flexibility. While larger companies, by necessity, have to work within more rigid personnel boundaries, small-business owners have more ability to personalize compensation packages to fit the needs of individual employees as well as to meet the goals of the company.
Another benefit of running a smaller company is that leaders have the opportunity to build relationships with the entire staff. “Don’t overcomplicate it,” Hengel advises. “It’s as simple as treating your employees with enough respect to realize that they have a whole life, not just the life they bring into work. And giving your employees the ‘why’ when you ask for ‘what.’”
The most important thing any business owner can do, though, is to lead by example. Be genuinely engaged with your staff. When you ask them how they are, really listen to the answer. And let them know that their ideas and feedback are important to you. Ask any recruiter: It’s much harder to lure happy employees away from a job they love.
¹Gallup, “Estimating the Influence of the Local Manager on Employee Engagement,” 2014.
