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Employee Retention: Leveling the Playing Field

Small business operators often ask me, "How can I compete with the big players in my industry?" To be sure, major-sized competitors enjoy cost advantages that are tough for smaller companies to beat. Let's face it, if you're a retailer who stocks anything that Wal-Mart sells, odds are they're buying it-and selling it-for less money. And your larger rivals are able to flex their purchasing power when acquiring raw materials, health insurance, utilities, and everything else needed to run a business of any size. But in all likelihood, your opponents have one serious weakness that you can exploit: employee retention.

A new research report published in December by AberdeenGroup, Inc. sheds light on how you can use employee retention as a decisive advantage. The report, titled Retaining Talent: Retention and Succession Planning in the Corporate Workplace, states that 85 percent of surveyed human resources executives said "attaining and keeping talent was the primary challenge keeping them awake at night." The report describes the negative effects turnover has on all companies, regardless of their size: loss of key employees reduces productivity; the average cost of recruiting, hiring, and training replacements is over $13,000; it takes, on average, eight weeks to find and hire a new employee; high turnover affects the morale of the workers who stay behind; and frequent staff changes alarm customers and lead to customer dissatisfaction. These effects should not surprise anyone. However, what is surprising is how few companies make a primary business strategy.

The Aberdeen report cites some reasons managers give for failing to actively address retention. The top explanation, given by 52 percent of respondents, is that the type of rewards that entice employees to stay cost too much. Of course, financial rewards factor into retaining employees. But the report stresses an equally critical activity:
"A vital part of employee lifecycle management is recognition of the employee as an individual. Too often employees can feel unappreciated or over stressed. Knowing that their organization cares about their personal and professional needs is a powerful way employers can ensure retention."
There was a time when the most desirable employers were those who offered the best perks. That led some companies to add expensive benefits like fitness centers, in-house childcare centers, and take-home catering. But these days, studies have shown that employees are focusing less on the financial rewards and more on the values rewards. Today, people seek out employers whose values are consistent with their own, and look for ways to satisfy their interests and needs by aligning with an organization's mission. If you need proof of this trend, compare the qualities on Fortune's list of the "100 Best Companies to Work For" from this year to five years ago.

Organizations are slow to recognize the role of values in retention. So here's your opportunity to get a jump on the competition. To keep employees, you must keep them aligned to your company's values. Do that by identifying shared aspirations-that is, show them how aligning with the purpose of the enterprise will help them achieve their own goals and meet their own needs. Once workers see that connection, they won't want to go anywhere else. And while the giants are scrambling to find employees, you'll be happily growing your market share.
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