Ten to 15 years ago, employers seemed like they held all the cards. Back in 2009, unemployment peaked at over 10%, wages were falling, and the federal government seemed to be handing out money (grants and low-interest loans) as if it were candy. During this time, including a discussion about employee retention in the business plan was practically unheard of.
My, how the tables have turned. Unemployment is now hovering at historic lows of approximately 3.9%. To retain workers, business owners not only need to pay more in wages and benefits but they also need to design qualitative benefits, such as work/life balance programs. Because of the highly competitive market for skilled labor, our business plan writer feels that small business owners would be remiss to not have a strategic plan ready and summarize in a business plan. However, specific components should always be included in a well-structured employment strategic plan.
The first component that should be included in any strategic hiring or retention plan is how a business owner will conduct wage research. It is the opinion of our business plan writer that paying employees more than competitors is a sound strategy for just about all businesses. The simple fact is that if a business owner pays its employees more than the competitors than there is a lower likelihood their workers will leave.
The trick is finding out how much competitors are paying their employees. One way to do this is to simply ask new applicants, that may have worked for area competitors, about their end hourly wage. Another potential strategy is to check out competitor websites or popular advertising channels for pay discussions. For example, restaurant owners love to utilize classified ads and place pay ranges in their advertisements. Regardless of strategy related to wage research, make sure to summarize the information under your business models section of the business plan.
Recognition, Recognition, Recognition
Here is a disappointing statistic discovered by Gallup, less than 35% of our workforce is considered engaged on a daily basis. In other words, your employees are just going through the motions. Guess what… Your customers can sense this. Not a great customer service situation. Another startling fact noted by OC Tanner Research is that almost 80% of employees leave their jobs due to lack of recognition.
An important take away from this is that small business owners can save themselves significant funds on hiring and training by simply implementing an employee recognition program. Popular employee recognition programs may include “Employee of the Month” or “Star of the Day” strategies. Regardless of how you choose to recognize your employees, make sure to do this on a continuous basis and documents the strategies in your organization and management section of the business plan.
In summary, small business owners should take preemptive actions in the form of strategic planning to ensure a competitive advantage position is achieved in relations to employees. Specific strategies that may help small business owners attain a competitive advantage would include detailed competitor research in relations to employee pay and implementing employee recognition programs.
These simple, yet effective, practices may not only save a small business owner costs in recruitment and training, but may even, indirectly, increase revenues due to elevated employee morale in the long run. As with any other strategic plan, make sure to properly document the strategy in a well written business plan.
Author: Paul Borosky, Doctoral Candidate, MBA., Author