Great employees are a cornerstone of any successful business, but the benefits of good employees can be amplified for smaller business operations. However, hiring and keeping the best staff possible can be a challenge for small-business owners. Small businesses reported that finding and retaining good talent was their biggest hurdle in a survey conducted by Bank of America in 2013.
Employee retention is an issue that continues long after a new hire’s first day. Here are four crucial aspects to consider about finding and holding onto amazing workers.
Bad Employees Can Damage Company Culture
Studies show that hiring a bad employee can reverberate among the entire staff — one bad employee can lower morale and productivity significantly. The overall costs of an unproductive, disgruntled, or listless worker are difficult to measure, but chief financial officers around the country report how destructive these employees can be. In a 2014 survey of over 2,100 prominent CFOs by professional staffing firm Robert Half, 39 percent of those surveyed claimed lower staff morale was the greatest impact of a bad hiring decision, with another 34 percent complaining of lost productivity. In fact, only a quarter claimed monetary losses were the greatest “cost” of a terrible employee.
There is no way to guarantee every person you hire will turn into an excellent employee, but mastering interviewing techniques and writing effective job postings are key, as is making sure you always check references.
Turnover Costs Real Money
While turnover is extremely high in some sectors (the National Restaurant Association noted that the hospitality industry saw a 66 percent turnover rate in 2014), frequent turnover is an extremely wasteful practice for companies of all sizes. For small businesses, though, the costs are far more obvious. Hiring and training new employees can cost thousands of dollars in time and effort. Companies pay an average of $15,000 to replace an employee making less than $75,000 a year, according to a study published by the policy think tank Center for American Progress. Loss of knowledge is another important factor, especially if the business pays for employees to go to attend expensive training programs, for example.
In addition, calculating the cost of turnover can be important to combat the sunk cost fallacy, a tendency economists claim we have to keep investing in something we’ve spent a lot of time or money on, even if it would be rationally better to stop. While it can be costly to replace an employee, the damage a bad hire can do in the long term could be worse. There are detailed calculators available online that can help you in this decision.
Creative Compensation Keeps You Competitive
In many cases, a giant company can promise a great prospective employee a better salary than a small business. While you might not be able to hand over the same salary offer, creative compensation could convince a candidate to join you. Annual bonuses, for example, could be directly tied to overall business profits, a system that is also a great way to incentivize workers. Small businesses can attract candidates with options like medical benefits, life insurance, and paid leave. Nonmonetary benefits can be attractive, too, like flexible scheduling or telecommuting options. A company’s culture can be incredibly enticing — team movie nights, dinners, or other events could woo a hire away from a less exciting workplace.
Continually developing perks and bonuses helps solidify staff loyalty. Keeping your workforce happy and motivated is an ongoing process.
Employee Retention: More Than a Management Strategy
Creating a positive corporate culture is one of the best ways to retain quality employees. Almost 90 percent of employees believe a distinct workplace culture is essential to business success, according to a survey by financial consultancy Deloitte [PDF]. Open communication is a fundamental aspect of a healthy culture. Keeping office doors open can be reassuring, for example, and encouraging employee collaboration on varied projects can keep your staff on the same page.
Listening to employees’ ideas and concerns not only increases employee satisfaction, but it can also inspire new practices that could improve your bottom line. You could host company-wide brainstorming events, for example. An employee could pitch an idea that could pivot your entire business.
Because they focus on a specific part of a business every day rather than the overall enterprise, your employees can have insightful thoughts about improving processes, increasing return on investment, eliminating waste, and other money-saving ideas.