Rewarding and Retaining Employees
Q. One of the biggest challenges of a small business looking to grow is finding and retaining high quality employees. What thoughts or ideas do you have on structuring a business and compensation to attract and retain great employees without going bankrupt in the process?
A. There are really two questions here. Last week, we discussed how to hire high quality employees. This week, we’ll explore how to retain and motivate those employees once you have attracted them. Our experience and research suggest that companies can retain good employees by making them feel that they are a recognized, contributing member of a winning team
The first element of this magic equation is that people need to believe they are a part of a winning team; that the enterprise to which they have committed themselves is succeeding. Therefore, companies should take every opportunity to celebrate their successes. Disingenuous celebrations won’t work, and if a company is underperforming, management needs to acknowledge that reality. However, even when a company is in trouble, if it begins to move in a positive direction, it can celebrate the progress. Celebrations communicate to employees that the company is succeeding, the first of the three things needed to motivate.
Second, employees need to understand how what they are doing is contributing to that success. How will they know this? Their manager needs to tell them. If you can’t come up with a way that an employee is contributing to the success of the company, you should ask if you need that position or that employee.
Finally, employees want their contributions to be recognized. We’ll explore both monetary and non-monetary recognition.
Monetary recognition – Many companies choose to recognize employees for their contribution to the company’s success with monetary rewards. Used correctly, this works! Used incorrectly, it is at best a waste of money and can actually de=motivate employees. To make sure your monetary rewards pay dividends, follow these simple rules:
Use bonuses rather than compensation increases to motivate employees. A salary increase, even a significant one, loses its power to motivate very quickly. High salaries don’t motivate. The expectation of compensation motivates.
Link compensation to performance, very tightly. Pay for results, not activities. The good news is that when a properly structured compensation plan produces good results, you will have the money to afford the monetary recognition.
Monetary rewards should be at least 10 percent of base pay for the period. Research shows that this is the threshold for successfully motivating employees.
Non-monetary recognition – Simply saying thank you when an employee does a job well can be powerful. Instead of speaking to employees only to correct them, catch employees doing something right and praise them. When you praise an employee make sure that you are specific about what you liked and that you link their behavior to a company or professional goal. It doesn’t have to be expensive, but a well-timed gift certificate, recognition at a company meeting, extra time off, or even a sincere, “job well done” will go a long way towards motivating employees. It’s become cliché for companies to say that employees are their most valuable asset. Well, cliché or not, it’s true.
Therefore, once you have attracted good employees, do what is necessary to motivate and retain them. Make sure that your employees are recognized, contributing members of a winning team.