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Improving Productivity: Keep Good Employees Around

Too many small businesses have given up on the process of carefully screening applicants and choosing the best talent for their open positions. Instead, small businesses are increasingly choosing to operate like a turnstile—quickly turning over employees who leave their jobs after a brief tenure. On the surface, this seems like a plausible strategy, especially for small businesses hiring hourly wage employees. However, some studies have shown this to be an erroneous line of thinking. Losing an employee is quite costly, and it can cost upwards of two-thirds of that employee’s annual salary to replace them. Replacing employees is an expensive process, as the costs include advertising, interviewing, and screening candidates, on boarding new candidates, and training candidates. That doesn’t cover the cost of lost productivity and engagement from other employees, mainly if the individual who left was a team leader.



A recent study* shows job creation among small firms slowed in August, perhaps because there were fewer workers available to hire because job openings hit a 45-year record high. Sixty-two percent reported hiring or trying to hire, and of those business hiring or trying to recruit 89% said few or no qualified applicants for the positions they were seeking to hire. Twenty-five percent selected "finding qualified labor" as their top business problem, more than cited taxes, weak sales, or the cost of regulations as their top challenge.


As small businesses become more aware they need to work harder to retain the right employees that they currently have. That means offering fair compensation, avoiding legal issues, and understanding the cultural differences between employee generations. Fortunately, your business can avoid the costs of high turnover by adequately managing your workforce.


Innovative Ways to Find and Retain Quality Employees

Reducing employee turnover and increasing productivity and cost-efficiency means finding and retaining quality employees. There are several things that quality employees are looking for, and you’ll need to make sure that your business has something to offer them that makes them want to stay and be a part of what you are building. Naturally, quality employees are attracted to fair pay. Compensating good employees makes them feel appreciated. To continue that point on appreciation, it is critical that you acknowledge your employees for their hard work. When someone contributes to your company’s success, you should recognize them publicly, even in a small moment. This acknowledgment helps to improve morale. You should also make sure that the lines of communication are always open. One of the most prominent issues employees have is when communication breaks down, and they feel as if they can’t reach their employer to talk about important issues. Open lines of communication also allow you to give your employees feedback for improvement, and they can offer thoughtful feedback on your management style as well. Rewarding teams for success is another great way to keep quality employees around. Studies have found that teams are more productive if they have an incentive, even if that incentive is something as small as a gift card. It is also essential to make sure that you find the right fit for your company culture. Even if you have a great candidate who is tremendously skilled, they might not last long if they don’t fit with your organizational structure or culture. Take the time to find employees who are a fit with the kind of culture you are trying to create.

* NFIB Small Business Economic Trends, August 2018


Understanding Compensation Dynamics

We touched upon this in the last section, but it is vital that it makes a lasting impression. Ultimately, when it comes to your employees, you get what you pay for. If you don’t compensate your employees well, there is a good chance that your best talent will look elsewhere. Investing in your employees makes it more likely that they will feel valued and stick around for the long term, and when you reduce employee turnover, you cut your costs. Paying your employees less has a number of costs that might not be seen up front, but can definitely be felt once your best employees start to take other employment opportunities.


How to Avoid Legal Pitfalls

Legal issues with employees can be expensive, which is why you need to have defined rules for employees and management. Your business should always follow federal and state labor guidelines, and it is best to have training (and work regulation manuals that your staff can read if a problematic situation arises) so that they are making decisions that don’t increase your exposure to legal liability. That means doing things such as clarifying the terms of your employees’ work expectations, determining whether they are employees or independent contractors, and making sure that you are paying any benefits required by state or federal law.


Hiring Different Generations

Creativity and problem-solving abilities soar when employees bring different perspectives to the table. The life experiences of a recent college graduate, for example, likely will be entirely different from those of an experienced professional. Each can offer a fresh way of looking at things, and this divergent thinking can be just what your small business needs to push itself to exciting heights.


Baby Boomers, Gen X, and Millennials are generations that came of age at different times, and all have their feelings about work and management. Baby Boomers, who were born in the mid-1940s to the mid-1960s, have a different approach to work than Millennial, who were born after 1978. Baby Boomers are very loyal to their company and are willing to put in long hours to get the job done. Millennials are generally more technologically savvy and are more willing to receive instructions or feedback via new technological channels, such as Slack or Skype. Gen X (mid-1960s to late 1970s) tends to be more independent thinking when it comes to solving problems. Hiring across generations means finding the right fit for your employee culture, and then putting those individuals in a position to succeed. First things first, it’s important to recognize that all generations have a pretty big thing in common: they all want to be shown respect. Sometimes, you and your managers might need to attend a training on recognizing the differences between generations.


Finding the Right Temp Staff for High Sales Periods

There are plenty of reasons your business might need temp staff—seasonal fluctuations in customers, special events, and unplanned changes in current staff are just a few of the reasons companies hire temp workers. You have a few options for hiring temp staff. You can write an ad, search a job board online, or work with a temp agency. Working with a temp agency is one of the best ways to quickly get access to talented employees, as temp agencies have the time and resources to find and screen individuals. Make sure that you outline the position you are hiring for so that your prospective employees know precisely what to expect.


Having the Right Business Funding Can Give Your Company More Breathing Room

If you are starting this process from scratch, you might find that you need more funds to find, hire, and retrain employees. Even seasoned small businesses can experience their cash flow coming under pressure during a problematic high sales period, such as the holiday season for most retailers. A great way to reduce the pressure is with a small business loan. Small business funding is typically done through traditional loans, but there are increasingly more options every day. Finding financing is easier than ever, as there are many options for companies looking to secure capital for their operations quickly. Also, for many small businesses, getting the right funding means the difference between a profitable sales period or potentially losing money. If your business has come under pressure when it was hire more temp staff, then you should consider your financing options.


Understand that finding the right employees and retaining them isn’t something that comes easy, especially for small businesses. That is why it is best to create a process for managing your employees and sticking to it. Successful small business creates an environment that is conducive to high productivity without sacrificing an employee’s well-being. Your employees need to feel right about working at your company and being part of a team. That means you’ll have to find employees who are the right fit for your company culture. It also means that you’ll need to understand the cultural differences between generations and adjust your management style accordingly. So of course, you’ll need to avoid the legal pitfalls that can erode employee confidence in your leadership. For many small businesses, cash flow can be an obstacle that temporarily prevents management from being able to meet the needs of their employees or their customers. Traditional loans that increase the working capital of a small business can allow the company to hire more temp employees for a high sales period, or the capital can be used to offer new training or compensation that helps retain experienced employees. The happiness of your employees is critical to the success of your business, and high turnover can put a massive dent in your financials. If your business takes the necessary precautions and improves the employee experience, you will increase productivity and cost-efficiency while significantly reducing turnover.

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