By Karen E. Klein Q: I want to expand my business in 2005, but I have problems hiring people who'll stay with my company. The new employees start off great, but fade quickly and then quit. What am I doing wrong?
-- L.A.C., Orem, Utah
A: Your problem is becoming more and more common. In fact, a major personnel cost for employers is the turnover of employees with less than one year of service. The recruiting, interviewing, hiring, and training process is costly and time-consuming. When it has to be done repeatedly for the same positions, it can distract small companies and keep them from landing larger contracts or customers.
Research generally shows that if an employee stays for a year, it's a strong likelihood that the person will remain with the company for a much longer time, says Roger Herman, CEO of Herman Group, a Greensboro (N.C.)-based consultancy and publisher of the weekly Herman Trend Alert. But getting employees on board who will stay can be tricky. Typically it comes down to finding the right fit between the new employee and the job, Herman says.
DON'T SKIMP ON DETAILS. How do you find a good match? A common underlying problem is that the job hasn't been well-defined, says Harold P. Weinstein, chief operating officer at Princeton (N.J.)-based Caliper, an international management-consulting firm that specializes in personality profiling. "If the company can't define what they want the new employee to do, what the job's about, and how they'll measure the deliverables around the job, it's difficult to give somebody feedback," he says. "And when there's a sloppiness around the definition, it's hard to evaluate whether the hire is going to be a good fit."
Many new hires falter on the job and leave quickly because they weren't clear about what they were getting into. Entrepreneurs presiding over fast-growing companies are often harried and either don't choose or have time to craft thorough business plans and job descriptions. That due diligence, however, can make life a lot easier as the company matures.
"If the job has been well-defined, I can ask whether they have done similar jobs in the past," Weinstein says. "Then I can ask how that job went and probe for experiences, using a behavioral approach and a skills assessment. For instance, does the potential new hire have the technical skills to do this job? Does she have an interest in this job? Does her personality correspond to the tasks that will go with the job?"
NURTURE NEW WORKERS. Your key is to aim for new employees who will derive intrinsic gratification from doing their job, because, naturally, they're more likely to stick with something they like. Next, make sure you're paying them a reasonable wage, you're letting them know that their contributions are valued and that you're concerned about taking care of their future.
"Identify promising new employees early on and let them know you're interested in having them move up," Weinstein says. "Then give them training on their skills, develop their competency set, and invest in them. This is how you begin to develop a loyal employee who wants to stay with the company for the long-term."
Low-balling on salary may seem like an easy way to do more with less in your company's early days, but the added turnover costs can wipe out those savings. More generous compensation could actually save more money -- not to mention time and effort -- in the long run.
USE PERSONAL CONNECTIONS. Finding candidates to interview can also be tough, but one key is to cast as wide a web as possible, using contacts you've made in this and past careers. Mark Franko, of Franko, LaFratta & Farinholt, says word-of-mouth works best for his Richmond (Va.)-based residential construction company. "When I have a job opening, I let as many people know about it as I can," he says. "Friends, colleagues, other business owners -- it's amazing how word gets around, and pretty soon I'll have interviews lined up from referrals."
Those kinds of employees -- friends and acquaintances of, well, friends and acquaintances -- also tend to stay longer and make a strong commitment to the company, Franko says, than do new hires who answer help-wanted ads and have no personal connection to the company. And that connection just might be just enough to lay the groundwork for a lengthy and successful tenure. Have a question about your business? Ask our small-business experts. Send us an e-mail at Smart Answers, or write to Smart Answers, BW Online, 45th Floor, 1221 Avenue of the Americas, New York, N.Y. 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally