A lot has happened in the last three years, from a pandemic to supply chain issues and now inflation and a rush of tech company layoffs.
With all of these changes, I wanted to offer a few thoughts on the value of human capital and why you should be retaining talent in a competitive market.
As a family business owner, you may be feeling pressure to reduce staff, but the old adage that a bird in the hand is worth two in the bush is particularly apt when it comes to your employees.
Despite the concerns about inflation and the push for layoffs, the companies that keep staff on the payroll will have a distinct advantage. Here are just a few reasons to retain your top talent if at all possible.
WHY IS RETAINING TALENT IN A COMPETITIVE MARKET IMPORTANT?
When faced with rising costs and an uncertain market, cutting back on personnel may seem like the financially sound move to make. Unfortunately, the numbers don’t tell the whole story.
Here are 3 reasons why you should work to retain your top talent.
A-PLAYERS ARE ALWAYS A VALUABLE ASSET
If you’ve already put in the work to find the A-players currently on your team, it will be incredibly frustrating to settle for B-leaguers down the road—especially during a recovery period.
Over the years, both in my own work life and as a speaker, I’ve found that the most commonly shared trait of “essential employees” is a positive attitude. Having these upbeat, can-do people on your team will be crucial as you adapt to new economic conditions.
They will be the ones who help you develop creative solutions to the problems you’re facing and who will help you retain your customers.
When I was in the middle of turning around my 100-year-old family business, we sadly had to close a loss-making dealership—and, of course, that process involved eliminating some necessary redundancies.
As much as we could, though, we tried to take the long view, keeping as many of our productive employees as possible. We knew that once we’d successfully stopped our losses, we’d need these critical staff members to grow our business again.
And we did. Without those employees, we would not have been able to grow our business as much as we did.
NEW EMPLOYEES ARE EXPENSIVE. VERY EXPENSIVE
According to studies conducted by the Work Institute, each departure costs your company approximately one-third of the employee’s annual earnings. This high percentage is found in both soft costs, like reduced productivity and interview time, and hard costs, like recruiting, background checks, and temp workers.
Particularly for smaller closely held companies or family businesses, it can be difficult to compete with larger corporations that can offer more robust health benefits or stock options. These perks will be paramount for incoming employees in a recovery economy, so you may be looking at additional expenditures.
Bottom line: it’s cheaper to just keep them.
YOUR YOUNGER EMPLOYEES MAY SURPRISE YOU
We’ve talked about the intellectual capital of established employees, and as I’ve mentioned, I don’t deny their value. But there’s nothing like a remote global economy (one that basically had to be set up and deployed in a few days’ time, thanks to the pandemic) to call your team’s technical shortfalls into sharp relief.
Living in a world of seemingly endless Zoom or Teams meetings and a staggering array of digital productivity and organizational tools, you may be starting to see some bright new leaders emerging…and they probably weren’t who you were expecting.
The current situation is precisely the kind of environment in which the “digital native” workforce, including younger Millennials and even some Gen Z employees, can truly shine.
When evaluating who’s critical to the success of your company, I encourage you to look beyond salary and seniority. The most nimble employees are often the youngest and most junior—and it will do your team well to have some members for whom remote working and technology tools are second nature.
These kids just might teach you something new.
HOW TO RETAIN TALENT IN UNCERTAIN TIMES: 3 WAYS TO CUT COSTS SO YOU CAN KEEP YOUR BEST PEOPLE
It is a lot easier, of course, to talk about retaining talent when you are not facing financial difficulties. If you are in the fortunate position to have solid cash flow, then you can simply maintain business as usual.
However, if you are concerned about cash flow, there are some strategies that can help you “trim the fat” from your current operations.
1. CASH IN
Look for creative ways to generate the cash you need to operate. Here are a few ideas to think about.
- Get serious about chasing debtors + accounts receivable
- Negotiate longer payment terms with your major suppliers
- Offer larger customers a discount for early payment of invoices
2. TRIM FAT
As difficult as it will be, now is the time to eliminate anyone on your team who is not pulling his or her weight.
As I mentioned above, this process should be age- and experience-agnostic—look at long-term potential as well as their general ability to contribute to your business.
3. WORK LEAN
If you’re faced with reduced cash flow, now is the time to prune back your operating expenses in any way you can. Don’t be afraid to get creative…and remember, it never hurts to ask.
- Renegotiate property leases or ask for temporary rent relief. Landlords don’t want empty properties, so they may be willing to work with you.
- Look at all subscriptions and memberships to see if they are essential
- Audit your company-owned or leased vehicles and ditch any you don’t need
- Eliminate marketing and advertising costs or reduce to the bare minimum
- Incentivize staff for collection of debt with a bonus. This can be very effective in generating a cash injection for the business. (By doing this, we collected $600k of aged debt that the accountants wanted to write off!)
RETAINING TALENT IN A COMPETITIVE WORLD
Regardless of where your company is at financially, keeping good talent is a sound practice. Just remember that, as I shared above and in other articles, good talent isn’t just about skill set.
Skills can be taught, but employees with the right attitude and approach to work are worth their weight in gold. Those are the employees worth retaining and the ones who will help you succeed no matter what is happening in the world.