Small businesses aren't just competing for supremacy in the marketplace—they're competing against one another in assembling what they hope will be an all-star team to help attain that supremacy. Once the team’s in place, a common challenge is increasing retention and minimizing attrition. A tested system that not only helps improve retention, but also workforce motivation and overall performance, is rooted in three basic steps: clearly outline goals for employees; ensure those goals are aligned with company objectives; and compensate employees based on performance toward achieving those goals.
This sounds like a simple system, yet research by Robert S. Kaplan and David P. Norton—Harvard University experts in performance management—found that just seven percent of employees today "fully understand their company's business strategies, and what's expected of them in order to help achieve company goals." Employees who don't understand their company's business strategy can't commit to it. As such, small businesses risk losing their best employees to competitors that provide a more fulfilling vision, more compelling strategy, and appropriate compensation. Compounding this prospect are two demographic phenomena: the emergence of Generation Y into the employment market and the impending talent gap. The Gen Y workforce demonstrates little of the employer loyalty that marked previous generations. They're impatient and often fickle, instilled with a technology know-how that enables frequent and rapid movement among employers. At the opposite end of the age spectrum, a survey by analyst firm Bersin & Associates reveals that by 2010, businesses will have ten million positions to fill due to Baby Boomers retiring en masse as they reach their 50s and 60s.
The new mobility, intermingled with the exodus of current talent, means companies are likely to recruit top people from other firms who lack a strong commitment to their current employers. The best employees in today’s organizations must be recognized, rewarded, and promoted in ways they view as valuable, or they will have an incentive to shift their talents to a competing company. There's nothing inherently new about this approach. But there are new means by which to deploy it, namely Web-based technology delivered via the Internet that automates the entire process, while creating a platform between managers and employees to consistently communicate feedback on performance—and tie it all to compensation.
These online tools act as a virtual HR department for small and midsize businesses, providing best practices that allow these companies to improve employee retention. And since they're delivered via the Internet, these systems are up and running quickly, with no IT SWAT teams coming in for complicated installations and training. This kind of Web-oriented service allows small businesses to access powerful applications for about the monthly price of a book of postage stamps for each employee, and avoid the need to hire or outsource a separate HR staff.
As San Diego, CA-based Gen-Probe evolved from a small, privately held start-up to a mature, profitable public company, internal HR operations needed an overhaul to handle new challenges such as retention. Gen-Probe needed to shift company culture from one that rewarded effort to one that identified and rewarded results and accomplishments. The company wanted to increase focus on performance reviews, goal management, and compensation—not only to increase overall productivity, but also to create a retention-friendly environment that fostered career development, and fairly rewarded top performers. To accomplish this, Gen-Probe implemented Web-based software from SuccessFactors as the foundation of an automated talent management system. It employed the SuccessFactors system to actively engage employees and managers to foster better communication and company loyalty; drive employee accountability through visibility and goal management, which now link directly to rewards; and align individual employee goals with company objectives.
As a result, employees became more engaged in the company's performance in terms of increased sales and corporate success, while managers were able to identify potential trouble areas, and focus attention where it was most needed from company strategy and employee development perspectives. Another bonus was the ability to use the system to easily communicate and align employee goals with the company's overall vision, allowing employees to measure their success at contributing to those goals. The end result is a more connected, collaborative, and successful work environment that drives retention and satisfaction.
These automated, technology-rooted programs transform the ability of emerging companies to develop loyal and goal-committed employees. Through a series of modules, the technology provides a workflow ensuring performance reviews are completed, wrapping in 360-degree evaluations from supervisors, multiple managers, and colleagues. The software offers a range of wording for managers to use in employee reviews to indicate the employee’s degree of success, or goals for improvement.
Applications link each employee's personal efforts to company objectives. Each aspect of the performance review ties directly to the set of goals and competencies originally established for the employee, so staff more clearly understand the company's objectives and the importance of those objectives to their own advancement. An employee's performance toward achieving these goals is then directly tied to compensation, creating a pay-for-performance culture spotlighting all-star workers, and identifying those in need of improvement.
Consider this from an August 2007 report on productivity from analyst group Forrester Research, Inc.: career development increases retention by providing opportunities: employees are interested in opportunities to improve job skills and advance along a career path into progressively higher-paying positions. Tools to measure competencies and define career paths are useful in helping employees develop long-term goals and strategies. If such career development opportunities are not provided, employees will look outside the organization. (The Forrester Wave: Integrated Performance And Compensation Solutions, Q3 2007)
The lines on the field of competition have been redrawn in the networked, global business environment. By going online, small and midsize businesses can more readily retain their top players, and consequently, the top position in their arenas.
Shelly Davenport is General Manager of the Small Business Unit at SuccessFactors, a leading provider of Performance and Talent Management Solutions headquartered in San Mateo, Calif. As general manager, Shelly is responsible for managing market strategy, sales strategy and customer service for all of SuccessFactors small-midsize clients. Prior to SuccessFactors, Shelly served as the Vice President of Sales at Salesforce.com. For more information, contact Shelly at firstname.lastname@example.org.