Attracting and retaining talent is becoming more important as the economy continues to improve, yet how can small business owners -- especially those in the professional service industry -- compete not only with matching a competitor’s base salary, but also provide raises and promotions to keep employees motivated and productivity high?
The first step, according to human resources expert Rebecca Mazin, is to get a salary survey. “I think it’s important that employers know what their competition is doing,” she says. Mazin is founder of Recruit Right, a Larchmont, NY-based consultancy that creates human resources policies and procedures, guides implementation, responds to issues and questions and develops and facilitates management and staff training.
“I’ve never seen a very successful outcome when someone marches into an office and says someone down the street has offered me $20,000 more, and I will stay if you can offer me $22,000 more,” says Mazin. “In the HR world, we say that person has already emotionally resigned. We rarely see that work in the long run. The conversation will repeat again in a year or two.”
Instead, Mazin suggests looking at bonus plans and other creative incentives to reward valued small business employees. Employers can offer a clear, measurable bonus plan that is evaluated on a quarterly basis with an annual payout. “This protects base compensation and also gives an employer the opportunity to create a percentage of overall bonus linked to profitability, or have a go or no-go based on profitability, so if a financial goal is reached, the bonus can be triggered,” says Mazin.
If you decide to offer a raise, those should also be benchmarked. “People just assume they should be getting a 10 percent increase, but they have hovered around 3 percent for at least the past 10 years,” says Mazin.
At the same time, the economy is improving. Employees have more choices, and many experts agree that it’s only going to get harder to attract and retain top talent. “You need to throw the recession mentality out the door,” says Roberta Matuson, president of Florence, MA-based Matuson Consulting. Matuson has helped leaders of companies of all sizes, from Fortune 500 companies to small businesses, achieve dramatic growth and market leadership through the maximization of talent. “You want to look at the people you want to keep, who are adding the most value, and pay them appropriately,” says Matuson.
Meanwhile, employee incentives don’t necessarily need to be in the form of a bonus or a raise. “Not everyone wants the same thing,” says Matuson. “You don’t want to just throw dollars at them. Take the time to get to know your people personally and provide them with rewards that mean the most to them.”
Collaboration is key. Work with employees to determine the benefits that will give the highest value at the lowest cost.SooJi Min is a freelance writer and nonprofit executive based in Ann Arbor, MI. She has written on small business topics for Crain’s, Imagination Publishing and The University of Chicago Booth School of Business.