Employee retention is a difficult issue for all small businesses, but it can become a particularly serious challenge for SMEs who are dealing with cash flow difficulties. Tight budgets can make it impossible to offer the benefits and pay that larger established competitors provide, and startups often don’t have the funds to financially reward employee excellence through bonuses or raises.
While this might make increased employee attrition look inevitable, that isn’t something that SMEs can accept. Losing and constantly training new workers drains further resources, and makes businesses less efficient. To become profitable, grow, and compete against those larger businesses, SMEs need to find other ways to nurture a sense of loyalty in their employees, in order to keep employee turnover at a healthy rate.
Improve internal transparency
When employees believe that they aren’t being compensated as well as they could be, denial is a bad policy. It’s critically important that employees aren’t left to feel that they’re being taken advantage of. While some might see the salary they’re owed in absolute terms, most workers just want to feel that they’re being treated fairly. The easiest way to do this is to be transparent about the business’ finances and pay structure.
Depending on the specific type of business and its size, it may make sense to reveal less or more financial data. The most important point of the exercise is to adequately communicate that employees are being compensated to the best of the business’ ability, and that they are valued members of the team. An informed high performing team member might be disappointed at being turned down for a raise, but will likely understand the situation. One who is lacking that context, on the other hand, is far more likely to feel frustrated, potentially to the point of launching their search for a new position.
Be reliable and predictable for employees
Businesses who can’t directly compete with larger, better-funded businesses when it comes to wages need to find other ways to compete for top talent. One important way to do that is to provide a clear pay structure, and to ensure that employees are always paid correctly and on time. This is particularly important for the sense of stability it provides workers.
While it sounds simple, ensuring that there are no payroll hiccoughs can be a tricky job for a small business on a tight budget. Seasonal slumps, some specific cash flow interruption, or unexpected costs can leave startups unable to make payroll, leaving employees in the lurch. Even one or two days’ delay on a paycheck can have serious consequences for someone living pay cheque to pay cheque, as 35 per cent of Australians do.
To avoid these kinds of delays, businesses need to work with their financial institutions to find fast solutions. Short term financing tools such as invoice financing and supply chain finance are ideal for this. Not only are these widely accessible to businesses in all kinds of financial situations, they also typically ensure that businesses have the funds they need within a matter of hours rather than days or weeks.
Focus on team building
While pay is a major issue, interpersonal and culture issues such as inadequate communication, bullying, lack of recognition, and poor management are actually more frequently cited by employees as the driving force behind a departure. By focusing these issues to build a strong sense of community and a supportive work environment, businesses can boost employee retention without scrounging for hard-to-come-by funds.
While, for many larger businesses, team building involves fairly elaborate activities and events, a large budget is not really a requirement. Team building is, in essence, just about building social bonds between coworkers. A business that encourages socialising at work, and perhaps provides spaces that facilitate social interactions, will naturally develop a more cohesive and socially integrated team than one that requires that everyone be relatively silent and on task at all times. Not only does this help people feel more connected to their company, it also creates opportunities for collaboration and innovation.
SMEs don’t have access to the funding that their larger competitors might have. However, it’s easier for them to develop close-knit teams and a sense of solidarity than those competitors. Combined with improved transparency and the strategic application of financial tools like invoice financing, businesses can boost employee retention even in the face of financial hardship.