Retaining key employees is central to the success of any business. Keeping qualified and hard-working staff onboard can result in greater customer satisfaction, more efficient administration, and improved profitability. Offering incentives above and beyond basic compensation is one of the most effective strategies for building employee loyalty and motivating employees to consistently perform well.
For any organization, high rates of turnover can be costly and disruptive. A steady stream of exiting employees can take its toll on morale, as well as on the bottom line. When an employee leaves, knowledge and experience walk out the door. Resignation and apathy may set in as staff members see their friends and colleagues leave for greener pastures, and those remaining face greater job responsibility and the need to train yet another new hire.
Paying market-rate salaries is, of course, essential to recruiting and retaining staff, as is providing employees with a basic benefits package. But offering top-of-the-line wages and robust benefit packages to employees is not always possible for smaller businesses. Lacking the economies of scale that allow larger organizations to offer a wide range of benefits and other perks, such as subsidized cafeterias or onsite fitness centers, you may be concerned that your company will be unable to compete for top talent.
Bigger Isn’t Always Better
Instead of thinking about the incentives you cannot afford to provide, consider how your business can leverage its strengths. Compared with larger organizations, smaller employers can offer staff a more intimate atmosphere, in which all employees have direct contact with owners. This shorter chain of command between employer and staff can foster greater loyalty and a stronger sense of mission. It is easier for employees to appreciate the impact of their contributions when they are felt immediately throughout the organization.
A shorter chain of command alone does not, however, automatically create employee loyalty. It is important for business owners and managers to communicate regularly with staff about financial and management issues. If your company does not have a formal system for sharing information with all staff members, such as regular emails, in-house newsletters, or staff meetings, some employees may fall out of the loop and become disconnected. Employees who understand the company’s short- and long-term goals and challenges tend to be more engaged.
Performance Incentives and Flexibility
Performance-related bonuses, even if they are not large, can go far in motivating employees. These may be offered individually, by department, or across the organization. Bonuses may be tied to specific targets or to overall profitability. Be sure to always set targets at attainable levels, or they may serve to discourage, rather than to motivate, employees. The knowledge that better organizational performance can result in concrete financial rewards provides a substantial incentive to work harder and more efficiently.
Your business can also compete in the labor marketplace by helping employees manage their responsibilities at work and at home. For many employees, especially those caring for children or other family members, the opportunity to work flexible hours or telecommute can be a deciding factor in their choice of employers.
Because opportunities for career advancement are usually more limited in smaller businesses, ambitious employees may choose to leave rather than remain stuck at the same level. Companies can tackle this problem by providing staff members with training opportunities and progressively greater job responsibilities. Your business may, for example, offer an administrator additional compensation for acquiring new skills that can be applied on the job.
Relatively inexpensive morale boosters can make a big difference in how an employee feels about his or her employer. Staff outings, office parties, free coffee and snacks, or occasional unscheduled breaks in the day can break up the monotony of the workplace routine. Wellness initiatives can also be highly motivating, yet relatively inexpensive.
Offering employees incentives is important, but so is avoiding disincentives. While guidelines and structure are necessary in any organization, too many petty rules and penalties for minor infractions may frustrate employees and cause them to resent management. Praising good performance is often more effective than policing staff.
Each employee is likely to be motivated differently, so it is important to consider the individual when developing an incentive program for your employees. Retention, productivity, and profitability may be improved as a result.