Small businesses have the most to gain and the most to lose in the marketplace of talent because one employee makes up a much larger portion of the team. Without the infrastructure to buffer the failings of an underachiever, small businesses can live or die on just a few hires.
So why do managers in small businesses give so little thought to how they reward (and thereby attract) talent? My experience is that these managers think they lack the resources for competitive compensation, but what they really lack is imagination.
Talented employees don’t need a complicated “Compensation and Incentivisation Program.” They need rewards. Done properly, this gives you the tools to attract great talent and to develop your employees. Fortunately for managers in small businesses, one only needs a few kinds of tools:
Salary, Wages, Benefits
This is what you give employees for showing up on time, working as part of the team and not screwing anything up terribly. Sadly, this is the beginning and end of most “Compensation and Incentivisation” packages. Since it’s the baseline, it only encourages baseline behavior.
Performance-based Rewards
Most fast-talking, book selling “management gurus” like to call this “incentivizing” employees. I chose not to call it that because the ideas and culture that have grown up around the term are limiting. Performance-based rewards are useful for any behavior you can measure and track responsibly. Sales Commissions are a good example, but unfortunately most businesses stop there.
Example
A common performance-based metric in service and repair businesses is turnaround or time-to-completion. The faster you repair a customer’s car, computer, or appliance the happier the customer is. In scope-limited, repetitive tasks, employees can be rewarded for getting faster. In variable-scope tasks employees can be rewarded for the degree to which they surpass a productivity baseline.
Warning
Performance-based rewards can be powerful, but consider what you measure very carefully because quantitative metrics will always sacrifice a qualitative human factor. You need to balance this with other rewards or corporate culture.
Warning Example
Because shorter support calls mean shorter wait times, nearly every call center on earth tracks and rewards call times (that is to say, they fire reps with long times). But fast Reps are likely to be terse to the point of curtness and focused on closing the call quickly, not on empathy or customer experience.
Targeted Rewards
Encourage positive behaviors that cannot be easily or responsibly measured. That may seem challenging, but it is by far the easiest reward to implement. Pick out a handful of positive behaviors or positive outcomes and publicly share competitions or rewards for them. You won’t be able to find these behaviors in your timekeeping or business process systems, you have to actually work with your employees and customers to find them. Anything that you’ve had to repeat in staff meetings is a candidate for a targeted reward.
Example
Errors in pricing and informational signage are embarrassing and potentially costly for a retail business. Reward employees for pointing out errors, discrepancies, or out-of-date information. Don’t give away the farm, but make sure your rewards scale with the value of the behavior.
Spontaneous Rewards
Encourage positive behaviors or outcomes that you have not stated–or even decided upon–in advance. This requires constant vigilance on the part of managers, but can pay off in a big way. I’ve noticed that spontaneous rewards are most effective when they’re frequent, small, and non-monetary: two movie tickets are often more appreciated than a $20 bill.
Spontaneous rewards also have a valuable ripple effect: they encourage employees to look for and practice new types of behaviors–often subconsciously–in hopes of earning a reward. To capitalize on this you must recognize behavior regularly, or you’ll lose momentum and instead encourage dissatisfaction among employees: they will think, and rightly so, that your rewards were all lip service.
Example
An employee stops in the parking lot to pick up trash in front of your building on the way in. It demonstrates that the employee cares about the business: that it is clean and well-perceived. A targeted reward for this would be unmanageable or dangerous (encouraging coordinated littering and cleaning) but the positive impact on your culture and business as a whole is worth recognizing and the attitude behind it worth cultivating.
