Employee retention in a tight labor market

Employee retention is a concern among business owners in a tight labor market. There are fewer and fewer applicants for each opening and you risk losing your best people. The recruiters will start calling, their friends will tell them about some amazing opportunity, or they will read about labor shortages in the trade magazines and start looking on their own. But there are steps you can take now to head them off at the pass and ways you can inoculate your business against major talent defections.

This is Part Two of a five-part series on surviving the tight labor market. (View Part One here.)

People leave jobs for one of three reasons:

1. Most employees don’t leave jobs, they leave bosses.

The #1 reason that people leave a company is poor management. Don’t believe me? There’s ample evidence and more evidence. Poor management means they aren’t getting feedback, they don’t believe there are opportunities for growth, they feel under appreciated or under utilized. People with talent want to shine! How are you making it possible for them to shine?

2. Burnout.

As the work picks up, our staff starts to get stretched. If you cut your team when business was slow you already have people doing double duty. Then when things pick up some business owners will see it as a time to put money in the bank. “Everyone can work a little harder for a while and we can make back some of the money we’ve been missing.” While that makes great sense to your banker – it makes little sense to your people. It’s likely that the strains of being short staffed have built up in some of your team members and when the work load does pick up you may be faced with a lot of resentment if there isn’t adequate staff to deliver good work.

3. They are way underpaid.

Most people don’t leave jobs because of money, but if the disparity is great enough they will. This is most common when you have someone in the first 5 years of their career. You got them for a bargain when the economy was slow, and you’ve been able to get by giving them minimal raises. But the truth is, they’ve really grown in those first 5 years. Yes, they were barely useful when you first hired them, and you’ve put a ton of time and effort in to training them. But now they are really useful, even leading projects and handling things independently. How much would you have to pay to hire someone with that talent? You’d better find a way to catch them up. Start thinking about doing raises every quarter or twice a year for your younger people. If you can promote them, give them a title change (and a real change in responsibilities) that’s a reason to bump them up.

In tight labor markets we see salaries rise fastest for these young workers who have built some skills and a track record, but still relatively inexpensive. There’s a reason for that – they can create real value! Don’t let them walk out the door. Remember, too much money doesn’t increase satisfaction, but too little can be a big dissatisfier. You don’t need to pay top dollar, but you can’t pay good people below average wages (for long).

What actions do you need to take to keep your top talent? Are they well led? Are they well paid?

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Brad Farris

As principal advisor of Anchor Advisors, Brad Farris has experience leading businesses & business owners into new levels of growth and success. Through his work with over 100 Chicago area small businesses he has experience in guiding founders and business owners through the pitfalls and joys of growing their business. Prior to joining Anchor Advisors, Brad spent over 10 years managing business units for a family-owned conglomerate with sales of $2 million to $25 million.
When not working Brad enjoys cycling, cooking and the NFL. He is married with 5 children and lives in Chicago, Illinois. Connect with him on Google+, Twitter and LinkedIn.