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7 Rules for Small Business Employee Retention

How to Get Retention Right


Employees standing abreast and staggered in office
Image from Canva, altered by author.

Micro and small businesses employing up to 100 people can often face retention complications that can go unnoticed. This is because smaller businesses tend to have fewer managerial resources to identify the overall cultural health of the workplace.


Profitability often occupies most of the attention of owners, management, and staff in a way that larger businesses don’t face since they often have entire departments dedicated to employee relations. Particularly with small businesses that are family run, there can be an assumption that because the business is small or that the managerial staff are tight-knit, good employee relations and retention will follow.


It's important to bear in mind, nonetheless, that good employee retention is often not guaranteed by a smoothly running business. Rather, a smoothly running business is often the first step for building a culture in which employees feel respected and loyal to their employers.


Too much to think about as a small business owner or manager?


Not to worry! Here are P2U’s Rules for Retention.


 


1. Loyalty only lasts as long as it's constantly nurtured

New hirers typically experience a willingness to be loyal to their employer for the opportunity of having a job or career. There's more. Jobs offer what researchers refer to as a “psychological contract” that creates overlapping identities between the employee and the business (Grazulis 2011:36).


However, without the proper means and mechanisms to sustain the overlapping identities, employees will start to see their work as a necessary chore, and thus their employer as something to tolerate in order to earn a living.


Socialization and organizational development measures can help prevent this diminishment.


While there is not a one-size-fits-all in the world of business, a Golden Rule about nurturing loyalty is finding ways in which employees can re-experience and renew their overlapping identities and commitments to the organization. Furthermore, doing so is a way for the business to confirm its commitment to its employees!


2. People are not replaceable: Treat people as ends and not means

Each person is unique. When one employee leaves and is replaced by another, it’s the role that gets re-filled. Think of those times when someone leaves a job, only to be replaced by two people!


The reasons for mentioning this rule in matters of retention?


It’s dispositional (or character building) and therefore preventative and facilitative. If a business owner understands that no one is replaceable, they will be more apt to treat employees with respect (preventative). Therefore, the owner will be more open to candid feedback and potential organizational transformations when staff identify the need for change (facilitation).


A culture that takes respect between peers and colleagues seriously will need to ensure that habits and attitudes about respect are sufficiently developed. All this comes under the aegis of personal development and can take on different shades and grades.


A good starting place begins with a well-known philosophical maxim:


Treat people as ends and not means.

[The idea comes from Immanuel Kant (1724-1804): "So act that you use humanity, whether in your own person or in the person of any other, always at the same time as an end, never merely a means. (2011:38)]


That is to say, whenever you find yourself treating someone as a mere means to get what you or the business wants, you will need to ensure that you are not being exploitative. In some sense, we are each a means at some point or another. A doctor, for example, is a means for a patient to keep healthy. A teacher is a means for the student to learn.


But the key is that each person is not essentially or merely a means to some other end.


How is your business treating its people?


3. Commit to a living wage

A real pain point for small businesses is being able to provide their employees a living wage. A lot of businesses often avoid addressing this issue head-on because they

  • expect and come to rely on high turnover due to the nature of the job;

  • rely on it being an employer’s market; and/or

  • have settled into a business structure that has some unnecessary overlap or redundancy at the higher levels of management.

Some businesses are content or even committed to point 1. I’m assuming if you’ve made it this far in this article, this is not you. There’s a lot I could say from a philosophical and consultative perspective about why I think such businesses are doing more harm than good and, in fact, don’t have to buy into the high turnover model. But that’s grist for another mill.


$50 bill in the middle of a plate, on a table, with fork and knife
Image from Canva, altered by author.

As for point 2, businesses relying on an employer’s market are simply playing the cyclical game. Post-pandemic, we have seen a strong labor market. To be sure, it may not be strong in a few months since, as recently as July 2023, most of the strength of the labor market has been due to continued hiring in the governmental sectors. But why waste time playing this game? Build a strong and committed foundation from the start, and your reputation will attract quality workers.


Point 3 involves businesses relying on a specific management setup, usually for historical reasons. A familiar example of this is a small business run by a family. Owners will create roles for family members, which at the time may be apropos. But often as the market changes, family members can fall prey to hanging onto their roles when they may not be needed. As a result, over time a larger chunk of the profit pie will have to go to them, as opposed to paying staff a decent wage.


It may therefore be time to re-think the business structure. It does not mean letting go of people but finding ways in which people in older, somewhat obsolete roles can create real value for the business.


The upshot: Finding ways to be honest with your staff and taking the steps to increase wages to an acceptable level is a way of building trust from the start. Even having a candid meeting about pay might help. Do staff have any ideas to make the business more efficient? gain clientele? and so on.


4. Team cohesion

Small organizations can be deceptively complex, not only because people and their needs and desires involve what philosophers like to call “the murky and messy world of values”; but also because small organizations can live under the illusion that being relatively less in size means business communications will run better.


The seeming “familiarity” of a small business culture can breed contempt when interrelations between workers and management operate under the assumption that each person understands what is required of them and others, what the short- and long-term goals are, and how they may be expected to fill in when others are indisposed.


I’ve seen this countless times in micro and small businesses.


The upshot: Clear and consistent communication is key to maintaining a healthy working environment; and it goes a long way in helping to build a safe psychological space since clear communication provides the seeds for transparency and fairness.


One of the ideas that I found helpful is the use of the employee huddle, which usually happens before opening hours. Managers huddle the team together to report on updates and priorities. Employees are given the opportunity to comment and express concerns. It’s also a great way to boost morale for the day and introduce any incentives.


The huddle can work for businesses relying on shifts, as long as shift managers and co-workers are able to communicate the gist of the huddle to later shift workers.


5. Staff friction

There can be a fatal tendency in small businesses for management to assume that if they’re not hearing any complaints from staff, then things must be going well.


The truth is that most people like to avoid confrontation and complaint when they can; and in the workplace, staff who may be experiencing problems will persist in working with the hope that management will notice the problems that they are weathering.


Six employees standing in a circle, perhaps gossiping
Image from Canva, altered by author.

Symptoms of this kind of friction:

  • employees are only doing what’s required of them

  • teamwork is mostly individuals on the team taking their assignments and burying their heads (individually) in their work (i.e. not working as a team)

  • relatively high turnover in more junior roles

  • there is complaining amongst a specific sector of the staff (i.e. bonding through complaining)

  • the office or workplace is not very chatty or social


The easiest way to remedy staff friction is through the use of an external mediator or consultant to diagnose and identify specific pain points. Someone from outside the business can go a long way in assuring employees of anonymity and fairness, and thus accurately assessing the problem(s).


An example:


In my consultation, I came across a small medical practice with an oddly high turnover rate at the receptionist position. Part of the problem was that the owner didn’t think she was paying enough for the role. But the more significant problem was that a more senior staff member—while very competent at her job—was creating a negative atmosphere in the office and making the reception job unpleasant.


A two-part solution:

  • assess how much the owner is spending unnecessary time and money in re-hiring; figure that into increasing the hourly wage

  • use a temperature-check method to interview employees and bring to the fore both merits and problems; the temperature-check acts as a catalyst to raise questions and intervene as necessary


6. Hubris and denial

We’re only human, oh so human.


One of the deceiving effects of running a successful business is the impression that because one is good at the business, one is good at everything related to the business. When this happens, a vicious form of leadership can take hold of the workplace.


What’s so vicious?


Leadership becomes sedimented into believing that they know best and, subsequently, they are not entirely open to what others think. The tech industry is rife with this problem, mostly because innovations in tech are often genius. Ingenious achievements can lead their creators to believe that no one else really knows better.


Older white male executive point a finger
Image from Unsplash, altered by author.

Enter high turnover and unhappiness amongst staff.


What’s more, in really bad cases, these problems won’t matter or register to leadership because . . . well, they know better. So staff be damned!


The hard bit is getting leadership to realize that they have this problem. Below are some tips to facilitate the process.


  • Executive coaches who have a different take on leadership can make all the difference. Look for a philosophy of leadership that emphasizes a different style of leading which incorporates “bottom-up” interaction; accentuates leadership qualities like humility, openness, and learning how to succeed through failing well; and employs aspects of a flat organizational structure to help balance hierarchical management flows.


  • Cultural nudges. Look for and promote sources internally within the company that explore ideas of openness, welcome new perspectives in anticipation of significant macroeconomic changes, and link purposes outside specific business values to larger social enterprises. An example from the Boston Consulting Group examines the role between culture and leadership, how the two need each other, and how innovation is the key linkage.


  • Serendipity and individual nudges. Even leaders and owners can be nudged. It just has to be done in the right way. How many anecdotes (especially in tech!) have you heard about leaders being resistant or reticent to ideas until they have been rephrased and replanted to make them seem as if they were the result of their own (i.e. the leaders') thinking? The process of serendipity is finding a way to get owners and leaders in front of new ideas subtly and indirectly. It takes skill and savvy, and each situation and leader will no doubt create a specific context requiring astute interpretative abilities. Sometimes what works:


  • pointing out the competition is considering a similar idea;

  • asking leading questions or posing hypotheticals;

  • asking for their point of view on a resource related to the topic you wish to introduce.


Serendipity is about creating the conditions in which “discovery” can occur. So it takes time.


7. Don’t be afraid to seek external help for Employee Retention

Ok, a plug for me and my consulting ilk . . .


Just remember that outside consultants can do wonders as they

  • present a neutral perspective;

  • provide objectivity in reporting and problem-solving;

  • encourage candidness and safety; and

  • thus explore avenues and ideas when usually there is reticence.

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An outside perspective cannot only be a great way to refresh things, but also provide the key to unlocking all the ideas, questions, and concerns that the organization has been withholding. That’s the cathartic power of the “talking cure”.


If you want to keep on top of ideation and practical steps for creating a smart and innovative business culture, subscribe to P2U's free Meaningful Work Newsletter (below)!



 

About the Author

Todd Mei (PhD) is former Associate Professor of Philosophy and is currently a researcher and consultant in meaningful work. He is founder of Philosophy2u. With over 20 years of experience in teaching, researching, and publishing in the philosophy of work and economics, existentialism, hermeneutics, and ethics, Todd enjoys bringing insight, innovation, and worklife revolution to organizations, businesses, and individuals.


Sources

  1. Grazulis, V. (2011). “Successful Socialization of Employees – Assumption of Loyalty to Organization,” Human Resources Management & Ergonomics V: 33-26.

  2. Kant, I. (2011 [1785]). The Groundwork for the Metaphysics of Morals. Cambridge University Press.

  3. Manly, J. et al (2023). “An Innovation Culture that Gets Results,” Boston Consulting Group; https://www.bcg.com/publications/2023/innovation-culture-strategy-that-gets-results.

  4. Mei, T. (2021). “Incorporating Virtues: A Speech Act Approach to Understanding How Virtues Can Work in Business,” Philosophy of Management 21(1): 15-29; https://link.springer.com/article/10.1007/s40926-021-00171-3.


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