Leaner and Meaner (Part 2): Retaining Good Employees

Last week we discussed the post-recession challenges that face business owners, and the economic and demographic shifts that mean we need to run our companies better than we ever have before.

Between 2008 and 2010 many business owners faced a task they had never previously dealt with; reducing staff. There are few things that impact the culture of a company more than layoffs. The pain for both the employees who stay and the owner who had to make the tough decisions lingers for a long time, but eventually it subsides, and the business continues. This time, continuation doesn’t mean returning to former practices.

Small businesses create almost two-thirds of the new jobs in America. As our persistent unemployment figures show, those jobs are not coming back at a rate that anyone could consider healthy. At the same time, the employers who I work with are complaining about the generally poor quality of applicants for the positions they have available. What created this anomaly?

Some of the slow job growth is caused by a reluctance to overstaff. In the event of another economic hiccup, owners want to avoid being in the same position as before; subjecting their companies to the pain of downsizing. The more important reason, however, is that in many businesses two people are now doing the work that three employees did before.

Downsizing is Darwinian. The slower and less skilled employees are dropped, and those who are more experienced and productive are retained. The net result is that any attrition going forward involves a more difficult replacement challenge than before. Running leaner usually means that the entry-level folks, the assistants and limited-task workers who provided the raw material to train for more demanding positions, are no longer there.

This missing pipeline of employees-in-training may be due to a reduction in staff, or simply because you have avoided hiring, but it is endemic in small businesses nationwide.

The other side of the coin in a leaner operation, therefore, is that when you experience inevitable turnover, the replacement employee has to be more capable than those you hired in the past. Every termination now takes with it a proportionately higher piece of a small company’s “corporate knowledge.” That experience in “How we do what we do” can’t be immediately replaced by any new hire. You now need people who know more to begin with, and can get up to speed on the remaining capabilities faster than they did before.

Most small businesses could do with a stronger recruiting and screening process, but we’ll leave that for another day. The secret to retaining the corporate knowledge of experienced employees is simple. Don’t let them leave! Like existing customers, the most valuable employees are the ones who already do a good job for you. They are the most likely candidates for new responsibilities. They have a work ethic that you know, and their ability to absorb new training is enhanced by the base of knowledge they already possess.

Owners complain that resumes today show too much “job hopping.” Younger workers have been trained to believe that opportunity requires regular job changes. Too much time in one position is considered a sign of low ambition.

I think those days are coming to an end. Longer job tenures will be partly due to a leaner hiring environment, but also because employers are realizing the need to “hang onto the good ones.” We have an obligation as employers to reorient our workforce. Tenure in a position should not only indicate dependability, but it should also reflect an employee who was worth an ongoing investment.