Managing people is biggest business challenge
Running a business has constant challenges like finding new markets or customers, ensuring proper financial supports are in place to grow, dealing with ever-changing economic and regulatory environments, and keeping up with technological change and environmental issues, among many.
All these are critical in any successful business, to be sure, but one of the most fundamental and ongoing challenges continues to be the recruitment and retention of employees. Indeed, with labour force issues becoming more critical with the exit of the baby boomers from the workforce in unprecedented numbers over the next 10 years, retention of employees will become even more challenging.
TURNOVER IS EXPENSIVE
In my 40 years of owning and operating a business, stability of the employee base was always one of my greatest goals. There is a high cost of replacing employees, as most employers understand.
Business relationships suffer with employee turnover. This is particularly the case for business-to-business companies that depend on personal relationships with clients. Stability of those relationships is based largely on the stability of your employee base.
Turnover is inevitable for any business for a variety of reasons. Employees generally leave a company to pursue perceived better opportunities or because of some dissatisfaction with their employer. Employees reach the age of retirement and leave. Employees are asked to leave due to poor performance, bad attitudes, incompatible values or a combination of these reasons.
GENERATIONAL DIFFERENCES
In today’s workforce, there are four generations of workers, including baby boomers (those born between 194664), Gen X (1965-80), millennials or Gen Y (1981-96) and post-millennials (born after 1996). Each of these have slightly different views of the world and the workplace.
For example, millennials are thought as having a greater need for life balance than preceding generations. While there is some observed truth in this perception, in my experience, not all millennials are the same in terms of work values, and with proper recruitment, any business can hire younger employees with the values that align to their company’s culture.
KEY FACTOR
An argument can be made that alignment of values with a company’s culture may be the key deciding factor in the decision to hire, once the appropriate skill set and experience has been determined. My preference was to hire based more on personality than on experience or skills for entry-level positions. I always believed that you can teach employees the necessary skills, but you can’t teach attitude or values.
Values alignment is likely the most important determinant of tenure with a company. Employees should be seeking that alignment just as much as employers, as it is likely to lead to higher levels of job satisfaction and advancement.
WORK CULTURE
In my business, I tried to develop a culture that was based on mutual respect for all, regardless of job responsibility, recognized employees appropriately for success and rewarded employees based on performance. I also promoted individual job autonomy that allowed each employee to manage their job responsibilities without heavy levels of oversight, and provided opportunities and support for individual growth and advancement.
My practice was to allocate 25 per cent of the company’s annual profits (before taxes) for employee performance bonuses so that everyone, regardless of their level or responsibilities within the company, had an opportunity to share in the company’s success. That practice was in place for nearly 30 years.
A large majority of employees, regardless of job responsibility, participated in that profit sharing every year based on their individual contributions. Fortunately, the company was profitable every year.
I believe that our culture led to high retention rates of our core senior employee group
that continues to this day under new ownership. That stability of our employee base was (and is) a major market differentiator in our industry, where client relationships are so critical.
In my early career, I was of the view that every problem employee was salvageable, and I was very reluctant to let someone go who was not a proper fit with our culture. I learnt with time that this was harmful to the work environment and became much quicker to act.
It was clear in the end that it was not only better for the company to act sooner but also for the departing employee to find a better situation.
DIFFICULT TIMES
It is important to support employees who are going through difficult personal issues, such as health problems, divorce and death in their family. Over the course of 40 years in business, there were few personal issues that I did not encounter.
Loyal and dedicated employees need loyalty and commitment from their employers. It could be financial support, moral support, extra time off, different working arrangements or counselling services. My experience was that supporting employees during difficult times was reciprocated by employee support during challenging company times.
I am particularly proud that I never had to lay off employees due to economic challenges. I was always prepared to sacrifice the bottom line for long-term job security of our employees. There are a lot of business owners who did exactly the same following the Great Recession of 2009, particularly over the decade that followed. The pandemic has made such a goal much more difficult for most companies.
TRANSPARENCY
Another key in the retention of employees is transparency. It is important to ensure as much information as possible about what is happening in the company is shared, starting with ensuring a companywide understanding of the long-term corporate strategy and short-term business plans.
Keeping employees abreast of the company’s performance and challenges is important to ensure support from employees for any decisions, particularly difficult decisions, which might have to be made to improve or change the trajectory of the company. A participatory approach to solving problems is dependent on having the appropriate level of information to understand and support difficult decisions.