If you work for a small business, your team can feel as close-knit as a family. After all, you work closely with the same people daily, and their unique personalities directly shape your business.
Finding the best candidates for open positions can propel your business to new heights. But keeping them engaged and happy in their jobs is another task altogether.
42% of employee turnover is preventable—which is where this guide comes in. Let’s explore the benefits of employee retention and how to minimize turnover risk at your business.
Why Employee Retention Matters
Prioritizing retention can help your business by:
- Reducing costs of turnover. Turnover can be extremely expensive, with some sources estimating it costs between 50-200% of the employee’s annual salary. Especially with small businesses, you need to preserve as much revenue as possible to keep the lights on. Investing in your existing employees allows you to do just that, helping them grow as contributors to your business without expending extra time on training.
- Increasing productivity and performance. Collaborating with the same team over time can reinforce positive habits and streamline workflows. However, constantly training new recruits makes it harder to work seamlessly as a team (and puts more work on the people in charge of training).
- Building a strong company culture. Establishing a strong company culture requires more than just aligning on business objectives and values. Your team also needs to get to know each other personally and trust each other on a deeper level—which can only be achieved over time. Retained employees have more time to learn about their team members and build strong working relationships.
- Fostering innovation and growth. As your team members grow in their roles and gain more experience, they’ll develop new ideas and ways to advance your business. Long-term employees also hold institutional experiences they can share with newer employees to help them improve as team contributors.
- Ownership mentality. Long-term employees often stay with your business because they feel invested in its success. This is an ownership mentality, which can lead to improved decision-making and prioritization of the company’s needs and growth.
Tips for Improving Employee Retention
1. Cultivate a Positive Workplace Culture
As previously mentioned, creating an empowering workplace environment can make a significant difference in your employee retention rate. Here are some ways to improve your business’s workplace culture:
- Implement a gifting program. Employees want to be acknowledged and appreciated for their hard work and contributions to your business. Show your gratitude by giving them gifts that truly resonate. Whether it’s a gift card during the holidays or a voucher for a free birthday lunch, gifting initiatives leave a lasting impression on your employees. Plus, Unwrapit’s guide to corporate gifting companies lists numerous gifting providers that can make launching your program effortless.
- Provide career development opportunities. Many employees want to learn skills beyond what they need to succeed daily at your business. They might be interested in building a broader skillset, like leadership, or diving into more niche topics, like a new programming language. Set aside a career development budget so employees can attend conferences, fund graduate program tuition, and purchase workbooks.
- Improve work-life balance. Burnout is a leading cause of turnover, meaning you must give employees time to decompress outside of work. This means limiting your communication with employees after hours, providing ample paid time off (PTO), and respecting any boundaries between work and home. You could even use employee gifting programs to promote decompression time—for instance, you could gift a spa day as a birthday gift.
2. Offer Competitive Compensation and Benefits
If your employees feel they’re being fairly paid and treated, they will likely stay with your company longer, contributing to your reputation and results. Consistently update your total compensation plan (i.e., both salaries and benefits) to meet or exceed industry standards.
You’ll likely start this process by analyzing compensation. Additional benefits can take your policies to the next level, such as:
- Corporate giving. According to Astron Solutions, nearly 70% of employees are more loyal to companies with corporate giving initiatives. Matching your employees’ donations to their favorite nonprofits and providing time off to volunteer are just a few ways businesses support their employees’ charitable pursuits.
- PTO. Allowing employees to recharge outside of work combats burnout. Make your policy more competitive by awarding employees floating holidays, a free paid day off on their birthday, and offering additional PTO for each year an employee spends with your
- Flexible working policies. Hybrid and remote workplaces have become more widespread in the past few years, so many employees are looking for flexibility in their work environment. Review your business’s daily activities and gauge which tasks could be completed from home, then create a hybrid or remote work policy if it aligns with your business model.
- Employee ownership and profit sharing. While establishing an employee ownership or profit-sharing program takes some work, these forms of compensation can boost engagement and inspire long-term employee engagement.
3. Foster Strong Management Practices
While adopting specific practices to improve retention is crucial, your overall management practices are also important to consider. After all, they primarily shape your employees’ everyday workplace environment. Here are some management practices that can make your workplace healthier:
- Set clear expectations and goals. Whether you’re touching base about long-term career pathways or this quarter’s goals, clearly define standards for success and how these goals support your business’ trajectory.
- Organize regular performance check-ins. Instead of surprising your employees at yearly performance reviews, help them grow daily by providing frequent feedback—both positive and constructive—on their contributions to the business.
- Open communication channels. Ensuring employees feel heard and respected is key, so create a way for them to provide feedback whenever needed. Even if you don’t implement a suggestion, acknowledge the employee who submitted it and explain why not to keep communication open.
- Provide mental health resources. Work can become stressful for anyone—especially combined with struggles outside of work—and as an employer, you should support your employees whenever possible. Provide relevant resources to help, like mental health insurance coverage and workshops on alleviating stress.
- Open books. By being transparent about the company’s financial health, you can build trust and help the entire team see the bigger picture. Plus, open books can develop financial literacy within your team.
If you take one lesson from this guide, it’s this: support your employees, and they’ll support your business goals in return. By listening to and addressing their concerns, actively improving your work environment, and congratulating them on jobs well done, you can mitigate retention risks and continue growing your small business “family.”
ABOUT THE AUTHOR
Peter Deitz
Peter Deitz is a B Corp entrepreneur committed to creating enduring companies that have a deeply-rooted social and environmental purpose. Over the past 15 years, he has co-founded two successful social purpose businesses, Unwrapit and Grantbook. He is active on LinkedIn and regularly posts about leading positive change through sustainable business, relationship-building, and philanthropy.
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