The dynamics of the labor market are constantly shifting. At times, employers find themselves in the driver’s seat, with an abundance of available talent and fewer pressures on wages. At other times, the tables turn, and skilled employees can command higher wages and benefits due to scarcity. This cycle has been part of the business landscape for decades.
In a recent Wall Street Journal article, “Bosses Are Finding Ways to Pay Workers Less,” we see how the pendulum is swinging once again. However, despite these shifts, small business owners can thrive in any labor market – the key is a deliberate, well-executed HR strategy.
This article outlines a three-part HR strategy that empowers small businesses to thrive in any economic climate. By focusing on Recruiting & Selection, Leadership & Culture, and HR Operations, you can create a compelling workplace that attracts and retains top talent.
Small Business HR Blueprint for Success
At Focus HR, HR Strategist Clint Parry has developed a proven framework, the “HR Blueprint for Small Business,” that helps employers stay competitive, even during challenging labor markets. This three-part plan covers:
- Recruiting & Selection – “Get Them”
- Targeted Recruitment: Attract top talent by tailoring your job postings and recruitment channels to reach your ideal candidates.
- Strong Employer Brand: Build a positive reputation as an employer of choice to attract and retain top talent.
- Effective Selection Process: Implement a structured selection process that ensures you’re hiring the right people for your team.
- Leadership & Culture – “Inspire Them”
- Leadership Development: Invest in leadership training to empower your team and create a positive work environment.
- Strong Company Culture: Foster a company culture that aligns with your values and attracts top talent.
- Employee Recognition: Recognize and reward your employees’ contributions to boost morale and loyalty.
- HR Operations – “Keep Them”
- Efficient Onboarding: Ensure new hires have a smooth transition into your company.
- Effective Benefits Administration: Offer competitive benefits packages that meet your employees’ needs.
- Performance Management: Implement a performance management system to track employee progress and provide feedback.
Winning the Talent War
As small business owners, you have the ability to craft a magnet for top talent – one that isn’t just based on wages. It’s about creating an environment where people want to work and grow, regardless of whether wages are rising or stagnant.
We often see a correlation between compensation, benefits, and job openings, as illustrated by data from Allison Cole, Associate Professor of Finance at Arizona State University. The chart below shows the relational nature of job openings and total compensation:
During periods of high demand for workers, compensation tends to rise, while benefits remain relatively steady. However, as the job market cools, the leverage swings back to employers, leading to more modest pay adjustments. This means small businesses need to focus on other value drivers – such as culture and HR efficiencies – to retain employees during both boom and bust cycles.
Employee Engagement: The Hidden Cost of Disengagement
Low employee engagement is a silent threat to many businesses. Gallup’s research reveals that 66% of employees are not engaged, and 17% are actively disengaged, which translates to significant financial losses. Disengaged employees can drag down profitability by 15%, adding hidden costs to turnover and presenteeism.
At Focus HR, we understand that engagement is more than a buzzword – it’s essential for business success. Here’s how you can increase engagement and reduce turnover:
- Regular Pulse Surveys: Gather real-time feedback from employees to understand what’s working and where you can improve. Use this information to make data-driven adjustments to your employee engagement strategy.
- Develop Strong Leadership: Invest in leadership training and development to ensure your team is well-supported and inspired. Great leadership plays a pivotal role in keeping employees engaged and motivated.
- Create a Strong Value System: Clearly define and uphold your company’s values. When employees resonate with your company’s core values, a vibrant culture emerges where employees are more likely to stay engaged and committed.
- Handle Employee Suggestions Gracefully: Showing that you value employee input fosters a more inclusive and positive work environment. It’s crucial to act on feedback or at least acknowledge it in a meaningful way.
- Leverage HR Technology: Utilize HR software to manage your compensation and benefits, performance management and foster collaboration with your team.
The ROI of Engagement
Engaging your employees isn’t just about improving the work environment; it has a direct impact on the bottom line. Disengagement can cost businesses thousands per employee, but by investing in engagement strategies, small business owners can significantly boost profitability.
How Resilient Is Your Business? Find Out With an HR Health Check
Human resources represents one of the most critical functions of your business. A great HR strategy will help promote healthy relationships between staff and the leadership team. Your goal should be to transform your business into a place where people want to be.
So how do you know if your business is positioned to weather the pay cycle and attract top talent? Schedule an HR health check with Focus HR. Our team will deliver actionable insights about your human resources functions and how they contribute to employee recruitment, retention, and satisfaction.
