Four ways small business owners can hold on to their best employees

The 'Great Recession' was bad news for almost everyone but it did give hiring managers the upper hand in the recruitment process, as company bankruptcies, downsizings and lay-offs swelled the ranks of available job candidates.

However, recent research from Careerbuilder suggests the power is now shifting from employers back to job candidates, and in the face of a looming talent shortage up to 80% of employees are now “open to or actively looking for new job opportunities”.

As the war for talent grows small businesses may find themselves at a disadvantage, because they may be unable to offer the same financial compensation and employee perks as larger corporate employers. Losing talent is expensive, as a company's investment in training and development walks out the door and a further investment in both recruitment and training becomes necessary.

However, when a candidate decides whether or not to accept a new job offer there is often more than salaries, bonuses and free meals at stake. Here are four ways small business owners can compete with corporate headhunters and retain their very best talent.

1. More Responsibility

Many employees believe larger companies offer more opportunities for advancement and career progression, because of the larger firm's hierarchy and 'corporate ladder'. However, climbing the ranks is not the only way an employee can advance their career, and sometimes the corporate ladder involves increased workloads and incremental changes to job titles without any real opportunity to take on new responsibilities and learn new skills.

Small business owners should therefore emphasis their company's flat structure to existing employees and prospective hires, highlighting the employee's ability to enhance their skills and take on more responsibilities rather than a fancy new job title. Small businesses can offer staff the opportunity to tackle new challenges and take on new leadership roles at a much earlier stage, which represents a major selling point.

2. Greater Flexibility

A few years ago Yahoo! made headlines for all the wrong reasons after its CEO, Marissa Mayer, banned flexible working arrangements for the company's 12,500 employees. But the truth is flexible working has always been something that comes easier to small businesses and agile startups, which are generally less hampered by rigid bureaucracy and dense hierarchies of line managers, supervisors and 'vice presidents'.

With recent research suggesting 14.1 million people in the UK want flexible working arrangements, small businesses can improve their recruitment and retention by offering employees greater flexibility when it comes to how, where and when they work.

3. Stronger employer branding

A strong brand helps companies retain customers and reduce customer churn, and the same principle applies to retaining your existing employees. A strong 'employer brand' helps employers demonstrate their company's values and culture to employees, and gives firms an opportunity to 're-recruit' their existing staff by regularly selling them again and again on the advantages of working for the company.

In its simplest form employer branding is about communicating what the company stands for. Strong employer brands codify the company's core values and highlight how those values serve all internal stakeholders, but particularly employees.

In a sense employer branding amounts to internal marketing, so it makes sense that a recent talent management article in the Harvard Business Review suggested firms should improve their employer branding by making it the responsibility of the marketing rather than the HR department.

At smaller companies the business owner, founder or CEO should take responsibility for employer branding, since the company's core values are often derived from that individual's own personal values.

4. More feedback

Many younger employees crave regular feedback, which helps them 'keep score' as they strive to better themselves and ensures they don't encounter nasty surprises when it comes to an annual performance review.

Far from an annual appraisal, a recent survey of 'millennial' workers quoted in the Harvard Business Review found that most millennials want to receive feedback at least monthly, and in many cases small businesses are better placed to meet these requirements because they often have a flatter corporate structure and a more hands-on approach to management.

By offering employees feedback on a frequent, ongoing basis small business owners can not only satisfy the desires of younger team members, but can also discover and address any dissatisfaction or unhappiness before it encourages an employee to look for vacancies elsewhere.