Small firms scramble to retain workers
with creativity, flex time -- and BMWs
By Richard Burnett • Bankrate.com

Workers finding greener pastures are making small-business owners blue.

Today's good economy means that Americans are changing jobs in record numbers, generating the highest turnover rate in 20 years, according to the Bureau of National Affairs Inc., a Washington research firm.

The exodus has left companies holding the bag, absorbing the high costs of recruiting, retraining and filling the jobs -- and scrambling to solve the problem.

No company, whether large or small, high-tech or low-tech, is immune from the epidemic, experts say. And while conventional wisdom says big corporations should fare better because they can pay more, that may not necessarily be so.

Turnover costs money
"Nobody has much of an advantage these days because of the frequent unsettling reorganizations and shrinking benefits," says Priscilla Elfrey, a business liaison executive with NASA's Kennedy Space Center. "Small firms may even have some advantages in the flexible work environment they can create.

"However, basically, I think small and mid-sized firms may worry more about the problem because turnover is an expense that is especially difficult for them to absorb."

The cost is high: A study by Hewlett-Packard shows that the cost to recruit, hire and retrain an employee is nine times higher than the cost of keeping a worker.

To address the turnover problem, corporations have trotted out a smorgasbord of traditional and innovative benefits -- most of them stretching the purse strings.

A smorgasbord of perks
Here are some of the benefits, perks and treats that companies have brought to the table in recent years:

• Stock options. Especially found in high-tech startups and large companies with a hot market and high-growth potential.
• Flex time. Employees coordinate work hours with time demands of home and family life, departing from the straight 9-to-5.
• Holiday gifts of hams, turkeys or fruit; gift certificates on birthdays; complimentary coffee or sodas.
• On-site day care for children.
• Tuition assistance for continuing education.

Even if such things appear expensive, companies must try to offer at least some of the benefits in order to be competitive, especially in the high-tech arena.

"We did most of those things at our company," says Charles Parrish, former CEO of Computer Labs Inc. in Greensboro, N.C., and now a business consultant and educator in Orlando, Fla. "The idea is to create an environment where people want to come to work instead going to your competition."

Many small, high-tech startups facing the current Internet craze are trying to attract top-flight people through attention-getting benefits, says Tom Pisello, president and cofounder of Puertabella.com, an Internet startup that sells worldwide interior design items.

Let them drive 'Beemers'
In addition to perks such as stock options and child care, Puertabella is even considering leasing BMWs for staff members, he says. The idea is to provide unique benefits they can't get anywhere else -- an alternative to the more staid companies, he says.

"To us, the cost-benefit analysis of such benefits is simple," Pisello says. "It's just a matter of what it will take to get the right people on board and keep them. The costs of turnover are much higher."

Money alone can't buy you loyalty
But good pay and benefits alone, whatever form they take, are not a cure-all for the turnover problem, says Dick Finnegan, a former human resources executive for SunTrust Banks Inc. and now a business consultant who specializes in employee retention.

"Money and perks can be used to attract people to your company, but they can't be used to keep people there," he says. "The biggest reason people give for leaving their job is because they are disconnected from their bosses or work situation. Good people simply won't continue to work for a jerk or under unfavorable daily conditions, and that is a tough thing to fix."

Putting your best foot forward -- in financial compensation -- is a given for any company, but the real focus must be on making work interesting and establishing good managers, says Finnegan, author of the upcoming book Taming the Turnover Beast.

One study by a high-tech economic development group in Pittsburgh turned up the following keys to retaining employees:

• Provide challenging work assignments.
• Develop clear career advancement opportunities.
• Create high-quality leadership among managers.
• Foster a favorable, positive work environment.

"You don't see anything in there about child care or BMWs, do you?" Finnegan says. "Employee retention is driven by good bosses. Benefit programs aren't bad, they're just not the most important thing. The first thing any company must do is develop good bosses and hold them accountable."

Hold managers accountable for turnover
Alas, nobody has a surefire formula for good-boss creation, he admits. But CEOs do have a certain card up their sleeves to motivate managers to become good bosses.

"You need to say to your bosses, 'Turnover is your responsibility. Here is your goal and your bonus is tied to it,' Pisello says. "Now you've got their attention and it's amazing how they'll listen. Then you can help them be better at hiring and managing."

This approach can work especially well in small or mid-sized companies because the atmosphere is more personal than at large corporations, Pisello says. In general, the flexibility of smaller companies gives them an advantage even though the big players have deeper pockets.

Some big companies recognize that and try to foster a small-business entrepreneurial corporate culture in order to stimulate and retain workers.

Consider Cirent Semiconductor, a microchip manufacturer owned by communications giant Lucent Technologies Inc., described as "a global company with an entrepreneurial heart and soul."

"When you're on technology's cutting edge, you'd better cultivate an environment that celebrates freethinking, collaboration and experimentation, and reinforces the value of each person's contribution," Cirent Vice President Bob Koch says.

Keeping Gen Xers happy
But big companies are finding it particularly challenging to attract and keep some of the high-tech "whiz kids" coming out of universities or high schools today.

A clash of cultures between the so-called Generation X people and older baby boomers is at the heart of much of the debate over the work force retention issue, says Jackie Kelvington, communications director for the Economic Development Commission of Mid-Florida.

"The Gen X people have a different take on the workplace than their older counterparts," she says. "They don't want to wear a coat and tie. They want to dress more casually. They don't want strict 9-to-5 hours. They want come in later and work later. A lot of older, more traditional business people are having a very difficult time with that."

Based on that analysis, perhaps the greatest asset a company can use to keep good people is FUN, says Pisello of Puertabella.

"Let's face it, forget salary or benefits; you've got to convince people that they will be working on stuff they enjoy at your company," he says.

Richard Burnett is a freelance writer based in Florida
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-- Posted: March 16, 2000