"Here lies one who knew how to get around him men who were cleverer than himself."
-- Epitaph on the gravestone of industrialist Andrew Carnegie
How important are your employees? They're you're greatest asset. More to the point, "There is no other asset," says Bill Schnittker, founder and president of LIDP, a Chicago-based software company employing more than 100 men and women.1 Quality people can make your company; their loss can break it.
How can you keep your top people from walking out? Here are some suggestions:
- Hire quality. Find the right people... both qualified and dedicated. Conduct several interviews and follow up on references. Most of all, be objective. Don't be won over by charm, but by the promise of productivity. Very often, when an employee leaves, the business owner is not surprised, but saw it coming. So, don't settle or compromise. Decide what characteristics and experience you want in an employee; then hold out until you find it.
- Pay competitive salaries. Finding a first-class employee and then paying slave wages almost guarantees that he or she will jump ship at the first opportunity. "Many factors are important," says Schnittker, "but money is crucial. If you have good employees, you must pay them well." That's why some companies make it a point to pay above the going rate. That gives them the pick of the best employees in the field and virtually eliminates the problem of turnover.
- Provide a positive work environment. "We treat our people like we would like to be treated," explains J. Thomas Koch, President of AAFP Insurance Services, a subsidiary of the American Academy of Family Physicians. His approach works. "Our most tenured employee has been with us 18 years, and only one has been with us less than ten years. 1(Interviews for this article were conducted by telephone on April 16, 2001)
"We only have ten employees, but we have no turnover," Koch says. "However, we did lose several people when we moved the operation from St. Louis to Kansas City. It took us several years to recover. After all, losing even one employee meant a 10% manpower loss."
A positive work environment means more than providing casual Fridays and periodic "attaways." For example, explains Koch, "we work hard to keep all business communications honest and direct. As a result, we have little miscommunication or distrust in our office.
"Additionally, we have as few rules as possible. We hire self-motivated people and try not to micro-manage. Finally, we take into account each individual's issues and foibles. With just 10 employees, that's key to running a small business like ours. We try to be flexible and reasonable."
- Help them develop to their fullest potential. "We are always looking for growth opportunities," says LIDP's Schnittker, whose company started with a staff of 10 in the early 1980s and now has more 100 employees. "When we do salary reviews, we also review opportunities. We discuss how we can help them grow."
- Provide standard benefits. This is just a matter of remaining competitive with the company across the street. Think of benefits as necessities. "They are very important," says Schnittker, "part of the total picture that let's employees know that you value them." Benefits such as life, disability, and health insurance are part of that positive work environment. "Without them, people would feel a big hole in their security," adds Schnittker.
"Medical insurance is particularly important because it is so tangible," says AAFP's Koch. It plays a part in employees' everyday lives. "This isn't to say that life and disability insurance aren't important, but they're non-tangibles for many people."
- Consider a 401(k) plan. This is one of the most popular benefits available today, especially for younger employees, says Koch. It's high profile and very popular. These employer-sponsored accumulation plans allow employees to deposit money, through salary reduction or deferral, and determine how the money is allocated. Very often, a portion of contributions is matched by the employer.
- Use "Golden Handcuffs" for key employees. The official term is "deferred compensation." In a nutshell: If you have a highly-paid, vital employee, draft an agreement (with his or her approval, of course) whereby a portion of current salary is deferred to the future, generally payable in installments at retirement. If the employee dies, a designated beneficiary receives a benefit (generally funded by life insurance). A similar provision is often included for disability.
The employee defers income, saves taxes today, and is assured of job security as well as a supplemental, non-qualified retirement benefit in the future. Since, under the agreement, the employee agrees to forfeit the benefit if he or she leaves the company, the employer is assured that this valued employee will remain. Hence, the name, "golden handcuffs."
As the Nineteenth Century industrialist Andrew Carnegie learned, the key to success in business is to surround yourself with loyal, capable people. So, if you suffer from unhealthy turnover in your company, or just want to make sure you keep your quality people, protect those valuable assets by considering the steps above.
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