For small businesses, retaining your best employees can be a challenge, especially when larger corporations can offer perks you can’t. But what many owners don’t realize is that the ability to retain employees is fundamental to the successful transition of a business, regardless of whether it moves to family, employees or a third party.
A strong retention plan is important to succession because employees provide the continuity between the founding or current ownership team and the next ownership team. They have relationships with customers and suppliers that must be maintained if the business is to flourish under new ownership. They also hold the knowledge required to train new employees, and to ensure the business continues to operate smoothly. Buyers want to know that the people who run the business are going to stay for the long term; they also realize that they will have more difficulty obtaining financing if lenders see high turnover rate. Lenders need the assurance that the people who understand the business and are able to connect with customers will remain post succession.
When considering what your business can do to improve retention, be aware that people stay in jobs for different reasons than they are initially attracted to jobs. In a 2008 Towers Perrin Global Workforce study, respondents said that they are attracted to competitive pay and opportunities for career advancement. The reasons they choose to stay, however, include reputation, supervisor support, and a clear understanding of what their jobs are and how they contribute to the organization.
From my point of view, every business should implement a performance management system. It’s doesn’t have to be elaborate, but it must be defined so that employees know what is expected of them, what they will be evaluated on, how they will be critiqued and what their reward will be. Rewards might include a salary bump, a bonus, the ability to move up in the organization and/or take on additional responsibility.
Employee agreements in which key employees commit to staying with the company for a certain period of time are also very important, particularly when you are transitioning the business. They assure new ownership that crucial knowledge, skills and relationships will stay in the organization long enough to be passed on to others.
Beyond a performance management system and employee agreements, there are many steps business owners can take to improve retention, even when competing with large corporations. For instance, employees like to have the ability to advance in their careers. While there can be fewer opportunities for climbing the ladder in smaller organizations, advancement does not always have to mean upward movement. People can move laterally across the organization, tackle larger projects or take managing entire projects in order to develop new skills and knowledge.
In the same vein, providing personal development opportunities will also help your organization retain people. This is especially important for those who are just beginning in their careers. Initiatives may include supporting employees in taking courses or training programs, and providing in-house mentorship to help them succeed in their roles.
Flexibility is also a prime retention driver, ranked fifth overall in the Towers Perrin study. Though it’s not possible in every business, most companies can offer some type of flexible work arrangement, such as letting an employee start later and catch up on the time at the end of a day, offering a shorter work week, or providing opportunities to work from home.
Finally, competitive pay is absolutely necessary if you want to keep good people. I’ve known many people who wanted to stay with the companies they worked for but were forced to leave because the difference between what they were earning and what they could earn was so great. Retention initiatives are not substitutes for fair pay.
If you don’t have a retention strategy, it’s time to take action. A strong group of employees who are loyal to your company and engaged in helping it grow and thrive will help ensure success today, and that the business survives the transfer to new ownership and continues to thrive into the future.
Special to the Globe and Mail