After months of cost-cutting just to stay solvent, businesses are back to hiring. And despite there being millions of Americans still out of work, it’s been difficult to fill open positions and keep employees.
There are theories as to why this is happening, but I’m not wading into that debate. Instead, I want to offer ideas to retain the best talent over the long run.
With so many job options, it is important to think about why your valued team members should stay put. Some employers dangle new-hire bonuses. You can match those, but that puts you in reactive mode. You can counter these lures proactively with retention bonuses—say $750—for employees who stay at the company for a certain number of months. Deferred compensation can also incentivize employees to finish a project or the year with the hopes of a larger year-end pay stub.
You could also consider what economists call efficiency wages, which essentially means overpaying an employee. Instead of $15 per hour, you go to $16.50 with the idea that the extra money will keep the employee around, avoiding the costs of advertising, hiring, and training a new employee. The higher wage enhances retention and also attracts new candidates to your job postings.
Don’t just wait for feedback to come to you. Set up conversations to understand better your employees’ aspirations and insights.
Attracting employees in this economy is certainly difficult, but failing to listen to your employees is a sure way to encourage them to look elsewhere. I recently read You’re Not Listening: What You’re Missing and Why It Matters by Kate Murphy and was reminded of the many reasons we fail to fully listen to employees. The take-home message of Murphy’s book is that even when we’re trying to listen to others, we tend to focus our mental energy on what we want to say in response. We’re not really listening, and that holds us, and by extension our businesses, back.
Maybe your company solicits employee feedback via performance reviews or other means. Is your company taking those seriously? Are you willing to make broad changes to the structure of a department or to how work is done to create new opportunities to learn and contribute, or are you paying lip service? If it’s the latter, your employees know you are not hearing them, and in today’s climate, this puts you at risk of losing them.
If you are receptive, don’t just wait for feedback to come to you. Set up conversations to understand better your employees’ aspirations and insights. Maybe you’re constantly having to fill certain positions because the demands on those roles are too great or the jobs aren’t fulfilling. Making some small modifications to job descriptions or a department’s structure could help you retain high-quality employees.
If this isn’t your forte, consider hiring an intern to gather this information. I’ve seen MBA students take on these kinds of assignments and offer unbiased views for companies that have difficulty considering change on their own.
Companies that survive and thrive are those that innovate to refine processes and their products. Right now, these types of innovations might lower your costs while making your company more attractive to a large pool of potential employees when you need them most.
Stacey Kole is clinical professor of economics at Chicago Booth. This column is part of the Chicago Booth Insights series, a partnership with Crain’s Chicago Business, in which Booth faculty offer advice for small businesses and entrepreneurs on the basis of their research.
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