In the current job market, attracting and retaining people is difficult largely because there are so many options and employees have few barriers to change. The idea of having a career defined by many rather than a few jobs is not only acceptable, it is the baseline expectation for most people. Thus, employers have to actively work to keep their people and they have to find ways to be perceived as different and attractive to grow or replenish their staff.
Not long ago, it seemed always possible to buy talent. Whether businesses could afford to buy the talent was the question. This regularly put small and medium-sized businesses at a disadvantage because they almost always have shallower pockets and higher benefit costs. While this situation has not completely changed, it is changing and there are currencies other than cash which attract and retain talented people. Culture, flexibility, rate of career advancement, and leadership engagement are among the many emerging “new” forms of reward currencies. Often smaller businesses are much richer in these new currencies than their deep-pocketed competitors.
The weakness in the idea that the right talent is always accessible if you have the enough budget is that within every lifestyle, a person reaches a point where incremental income ceases to be as attractive as it was at lower income levels. The cost of $10k to a company remains the same but the value to the employee differs dramatically between employees earning 50k, 150k and 1.5M annually. Often a cheaper substitute reward will have more motivational impact, yet many companies still try to use cash as the principle (and sometime only) tool for attraction and retention because it was all that employees showed they understood well in the past.
Modern employees are starting to drive companies to revisit that approach and requiring them to become more savvy in the ways they structure compensation, benefits and intangible elements of their total rewards.
Though a subtle change in employee mindset, this has big implications for smaller businesses. When employees were taught to make decisions based on income alone, deep pockets were the best tool one could hope for. As employees continue place ever greater value on new “currencies” like flexibility, personalization, and job satisfaction than on additional wealth, the point at which incremental cash loses incremental appeal drops and the demand for these other currencies rises.
Smaller businesses are in a much better position to capitalize on the hunger for personalization and flexibility since their smaller headcounts reduce the burden associated with managing the complexity of non-traditional reward currencies. Furthermore, these businesses can afford to take some risks, especially when privately owned, giving them license to be different and make being different be a competitive advantage not a risk.
For example, a business needing to hire only three people per year, not 300 can more easily incorporate a higher-touch apprenticeship model for onboarding and integration than the larger company who must rely on a less personal, standardized approach to avoid the burden of on-boarding so many people disrupting business activity. While the larger company may be able to offer higher cash compensation, forward-thinking candidates (the ones you really want to hire) should recognize that better on-boarding increase the likelihood of their early success, something far more impactful on long-term success than near-term cash.
In a second example, a small business can create greater flexibility in the rewards it gives to employees. Large companies must avoid the administrative burden of highly customizable rewards which typically leads them to pay for some rewards which do not add value to subsets of their population while leaving opportunities to motivate other segments unaddressed as the company presses up against affordability constraints. In smaller environments, it becomes possible to optimize spend on employees so that no money is spent on rewards that have little or no impact and that the most important elements to the employees get addressed.
This can enable situations where employees who already have healthcare through their spouse may opt to have the company redirect that cost elsewhere or an employee who likes the flexibility to work from home may swap cash for that flexibility with no impact to production, but with positive impact to both company spending and employee satisfaction. It also presents an opportunity to attract top candidates through preferred process and/or culture.
Recruiting process is a prime example. Smaller companies often have fewer stakeholders involved in decision-making and/or fewer or less rigorously defined processes related to recruiting. This empowers them to create attractive experiences for candidates even to the point of customizing the experience for each candidate. Though a subtle nuance for the company, this can have a profound effect on the decision-making by the candidate.
Not only does small size allow for flexibility in process, it allows for taking risks that might be ill-advised at large scale. Experimenting with changes in incentive programs is more easily done with a small group of people, especially if they can be executed without costly or complex changes to IT systems. Likewise, offering new or different mentoring and skills development programs can often be executed by small businesses with manageable cost and reasonable optionality to revert if the experiment does not work out but not by large companies.
In the current environment, being different powerful. Many of the best people who found themselves drawn to large companies by the compensation and stability now see unique opportunities in smaller companies who can offer something materially different and compelling. Small and medium sized businesses should embrace this change and benefit from it. To compete with companies with deeper pockets, these companies shouldn’t try to mimic them, but should instead create something different and appealing. They should address issues in creative and innovative ways that generate compelling reasons to join without creating substantial costs.