If you are afraid your key employees will leave, there are some ways to avoid it.

Every time one of employees leaves, a company loses expertise, faces the expense of hiring a replacement and risks losing customers who must deal with a new recruit.

Employee retention is a major concern for entrepreneurs in every corner of the world. In fact, entrepreneurs named it as the single most critical factor for business success in 2006, according to Entrepreneur magazine and PricewaterhouseCoopers’ first annual “Entrepreneurial Challenges Survey,” which was reported in January issue of Entrepreneur. 73% of the founders and CEOs of 340 fast-growth businesses surveyed said retaining key workers was the biggest issue they faced. The next-ranking issue, developing new products and services, was named important by only 38% of entrepreneurs.

Experts say retention should be a serious concern. If you accept high turnover rates, it is costing you a lot of money. It costs about two and a half times a person’s annual salary to replace them. And the more talent a person brings to the company, the more expensive that person becomes to replace. High turnover can also affect marketplace perception, employee morale and productivity, and a host of other factors.

Immigration restrictions, retiring baby boomers and shifts in the way people view the employer-employee relationship – these factors may also be increasing the difficulty of keeping key workers. The pressure is even greater on small companies because they usually can’t offer pay, benefits and opportunities for advancement superior to those available in big companies.

But some entrepreneurs are overcoming the challenge, using both time-tested and innovative new techniques for employee retention. One way of hanging on to top workers is by offering a benefits package that matches those of larger companies. Employees are looking for more than just a paycheck. They are looking to be treated fairly, be recognized for what they do and have the chance for advancement. Other concerns are offering flexible hours, sponsoring monthly meetings where employees who have ideas for improving operations can speak up, and providing training and opportunities for promotion.

Time-Tested Tools

If you are loosing more people than you would like, you don’t have to sit there and watch it. Many things can contribute to an employee’s decision to move on, but one stands above the rest. The immediate supervisor is by far the number-one reason people stay or go. Retention experts say that people don’t work for companies, they work for people. It’s a good thing to keep in mind when you are addressing the retention issue.

After you handle problems with supervisors, take a look at how you hire. Companies with low turnover almost universally say it starts with hiring the right people to begin with. Improving hiring process is one of the most powerful actions a small firm can take to reduce turnover.

Entrepreneurs put themselves at a disadvantage because they often hire on instinct rather than with the help of a system. They may end up with a company full of people just like themselves, in which case many may leave because they don’t see opportunity for advancement. It is helpful to bring in a professional HR manager early on to keep personal idiosyncrasies from negatively influencing hiring.

A company’s culture also makes profound influence on retention. When hiring, address such factors as recognition, development, and the opportunity to understand and influence the company’s overall objectives and success.

It is also important to develop employees. Education assistance is not the only way to help employees gain career-boosting skills. Cross-training helps them gain new proficiencies and also benefits the company. Having the latest technology is critical for retaining technical workers who must keep their knowledge up-to-date. Few small firms can afford cutting-edge technology, but there are other solutions. For instance, companies can beta test key software applications so employees get to use new technology and also give feedback to developers.

Corporate culture is the murkiest part of the retention equation. Far more important than fringe benefits is the feeling that a company cares about, listens to and supports its employees. People stay where they feel at home. If you make an environment where people feel at home, they are much less likely to go.

Challenge is an important element in the company culture and in the people it hires. Keeping high-achieving employees challenged keeps them engaged. One way the company can do it is by setting aggressive goals. Another approach is to move people who are feeling stale into new positions in the company where they will face new challenges.

Limits of Retention

No entrepreneur gets a perfect score on retention. Some employees should leave while others, for one reason or another, simply won’t be kept. Besides, some approaches to retention do more harm than good.

One of the worst remedies is to throw money at employees who are viewed as important to the enterprise. Entrepreneurs who hope to do well at retention must offer competitive packages of pay and benefits, experts say. Beyond that, however, pay is not the answer. Trying to get people to stay by giving them more money is a three- to six-month aid at best. Money is a satisfier, not a motivator. You can’t use compensation as a retention tool on its own.

It is also worth considering that some employees, including people who may be important to the enterprise, are actually holding retention back by their presence. This is especially common among entrepreneurial companies. As firms grow, old-timers who have been there since the beginning often block other employees from making input or having opportunities to advance.

Today’s successful retention program may not work tomorrow, as employee needs and competitive offerings evolve. The workers of the near future are likely to be more interested in work-life balance than baby-boomers are, and also less likely to job hop than Gen Xers. They are not going back to the same mindless loyalty of baby boomers, but they are hardworking and loyal.

Ultimately, employee retention and entrepreneurial success are different sides to the same coin. Entrepreneurs can’t succeed without quality employees. But top-shelf workers won’t stick around a floundering enterprise, either. If the company grows and continues to grow, and it’s challenging every day, people will stay. The best way to retain employees is by working hard to make sure the company grows.

Three Main Tips of Employee Retention

1.    Listen well:
There is no one-size-fits-all solution to retention. Ask employees what they want and then supply it. If they want to advance in the technical area, give them technical seminars. If they want to advance in management, enroll them in project-management courses. When a worker gives birth and doesn’t want to use full-time day care, let her work from home four days a week for a year. Flexible hours and ways of working are very important to workers in the company.

2.    Test people:
Bad employees can slip through even the most rigorous interviews. That is why it is helpful to send new hires through a several-week boot camp to evaluate technical and people skills. Despite extensive pre-interviews, as many as half will drop out or will be asked to leave before the end.

3.    Give employees ownership:
In the late 1990s everybody wanted stock options. After the dotcom bust, nobody did. Now, giving employees equity stakes may be coming back. Entrepreneurs are finding that workers who own part of the company are less likely to leave. Employees, meanwhile, are realizing that their best prospects lie with companies that not only build value, but also share it with team members.

Source: Entrepreneur magazine