5 employee retention secrets from growing businesses with a proven track record

More than five million new small businesses were started in 2021—a record year for entrepreneurship. And as these new businesses grow, so do their teams. More than half of small business owners say they plan to expand their workforce this year, according to data from QuickBooks. One in four says hiring new talent is their top priority in 2022. 

But finding skilled employees is a challenge. In fact, 20% of small business owners say the skills shortage is the biggest threat to their business this year. And more than half say it's getting harder and harder to hire talented workers. 

Keeping skilled workers has proven to be just as tricky. More than 40% say employee retention is a challenge. Today’s employees want more than basic benefits and pizza parties—and they’re not afraid to shop around. With so many options on the market, employers are having to work harder to keep employees engaged.

Going beyond basic benefits

To combat employee turnover, small business owners are increasing employee pay, benefits, and bonuses for new and existing employees. In fact, 50% of business owners said they plan to increase pay for existing employees at the next opportunity, and 42% plan to increase employee bonuses. 

The majority of small businesses (75%) already offer employee benefits, including paid time off and basic health care. Many are beefing up their offerings this year to improve employee retention and attract quality candidates. 

But a competitive salary and benefits package might not be enough to attract and retain talented workers—many employees consider these baseline requirements. Things like a healthy work/life balance, flexible work options, and an empathetic leadership team are key to your organizational culture and employee retention. 

To find out what’s really keeping employees invested in their employers, we turned to a few businesses with a proven track record. These are their secrets to stellar employee retention rates:

1. Focus on diversity

Today’s employees crave diversity, equity, and inclusion (DEI) from the businesses they work for. According to data from Glassdoor, more than three in four employees say a diverse workforce is an important factor when evaluating companies and job offers. And nearly a third say they wouldn’t even consider working for a company with a lack of diversity. 

DEI in the workplace enhances every employee’s sense of belonging, especially those in underrepresented groups. What’s more, teams with a focus on DEI tend to foster more diverse ideas and make smarter business decisions. When it comes to DEI, everyone benefits: diverse companies are notably more profitable, according to a recent McKinsey study.

The team at Pacaso, a second home real estate marketplace company based in California, landed the No. 6 spot on Glassdoor’s Best Places to Work this year, thanks in part to their focus on DEI. “Our crew loves working at Pacaso because we are a mission-driven company, have a seasoned leadership team with the expertise and vision to deliver on our mission, and cultivate a culture that’s focused on DEI and transparency,” said Nina Tran, CFO at Pacaso. 

If diversity hasn’t been your top priority, 2022 is the year to make it one. Show your team you’re committed to DEI by being open and transparent about the gaps in your business, seek feedback from employees (especially those with diverse backgrounds), and clearly communicate your initiatives to improve.

2. Consider a remote or hybrid workforce

In the aftermath of the pandemic, nearly half of small business owners (49%) reported that they have remote workers. For small businesses looking to grow their workforce, offering remote work not only opens the door to a more diverse and talented workforce beyond your local community, but increases employee retention. According to research from Owl Labs, half of workers said they would not return to jobs that do not offer remote work. 

The team at Pacaso have this figured out, as well. “We offer our crew flexibility and freedom of place through a distributed workforce,” said Tran. “All while still investing in moments that bring the crew together, both virtually and in person, for collaboration and connection.”

But they aren’t the only ones. The team at Grammarly, an AI typing assistant, has embraced a hybrid work environment that fosters inclusivity and trust—and their employees feel it, landing Grammarly at No. 27 Best Places to Work. 

“We believe that autonomy and trust are key to empowering our team members to pursue Grammarly’s mission in a way that also aligns with their interests, talents, and personal well-being. The flexibility that comes with our remote-first hybrid work environment is an example of demonstrating trust in a way we know matters to our team members. It also helps us build an inclusive culture that supports each person’s unique growth path,” said Erica Galos Alioto, Global Head of People at Grammarly.

Employers who aren’t ready to make the switch to a fully remote workforce can offer hybrid work options to give employees more flexibility. But a hybrid work model can have unintended consequences for lower-level employees, people of color, and women—especially mothers. If you plan to implement a hybrid working model, make sure you give employees plenty of notice, ask for feedback, and create a policy that works for your team. 

3. Invest in employees

Getting a paycheck is many employee’s top priority, but it's rarely their only priority. Employees want to know they’re more than just a cog in the machine. When you invest in employee training and development, you show your workers you care about their success. In fact, a LinkedIn Learning report found that 94% of employees would stay at a company longer if it invested in their career. 

And why wouldn’t you? A small business is nothing without the people who run it. The Lifetime Value Company (No. 50 Best Places to Work), knows that employees are their greatest asset—and their employees know it, too. 

“Supporting the growth and wellbeing of our team is our most important job. Creating an engaging culture that supports and celebrates individual strengths and interests is essential in today’s workforce. Especially in the midst of the Great Resignation, we are proud to have maintained a retention rate of over 91% throughout the past several years. Our secret at LTV Co. is really no secret at all: We love our employees and we do everything in our power to show them that every day,” said Stefani Ribaudo, Chief People Officer at LTV Co. 

Kevin Jolly, co-owner of Fat Quarter Shop, an online fabric store, agrees that keeping employees engaged and invested in the company is key. “If I needed to provide a ‘secret’ for employee retention, it would be that an employer must get (and keep) employees invested in their job. That investment provides a sense of purpose and emotional connection beyond just a paycheck or some other perk,” he said.

Executive Coach, Alysha Love, says career coaching can be an effective tool for employee engagement—and worth employer investment. “Coaching is a way to speak to the whole person—and to show that you care about their growth and well-being. That's more critical than ever following the impacts of COVID-19 in the workplace. Coaching provides an opportunity for both personal and professional development, and there are distinctive benefits for the employer, too.” A majority of employees in cognitive behavioral coaching said they became more productive and less stressed at work, a 2021 study found. “That's a recipe for an engaged, fulfilled employee who's invested in staying with a supportive employer,” Love said.

4. Put people first

Work-life balance is a buzzword that’s been around since the ‘80s, when working women decided they were fed up with being expected to balance work with housekeeping and family-rearing. But the concept of work-life balance is no less important today—especially as the lines between work and life have blurred due to COVID-19 and remote work policies.

In fact, a recent Gallup survey found that 61% of employees say work-life balance and personal wellbeing is “very important” when it comes to their career. Employees want to know their employers care about them as a person. 

At Grammarly, it all starts with empathy. “Our empathetic leadership team retains our valued team members by fostering a sustainable balance of purpose-driven productivity and well-being,” said Alioto. “We encourage folks to balance their passion for their work by making good use of our PTO, sick leave, mental health support, and other offerings.”

Jessica Fierro, owner of Atrevida Beer Co., a small, woman-owned craft beer brewery in Colorado, believes in giving employees requested days off, even when it’s hard. “This is not an easy one as a business owner,” she said. “But I find that giving them the time to ‘live life’ is so important to the overall morale of the company. When they come back, they are refreshed, happy, and ready to work.”

But, above all, Fierro knows the key to employee retention is authenticity. “Be you,” she said. “Authenticity is paramount to any successful relationship whether personal or professional. Your employees should know that they can count on you; that they can approach you about work related issues, that they can just casually talk to you or joke with you and know that in any one of those given scenarios they are going to find the same person all the way through. Consistency in who you are is important!”

Likewise, the team at ShareThis, No. 24 on Fortune’s 100 Best Small Workplaces, knows what it means to put people first. “The secret to our employee retention is our advocacy for a healthy work/life balance. We have designed policies that encourage our employees to take care of themselves. We believe that our employees produce their best work when they feel empowered to take care of their mental health, physical health, families, and lives outside of work when needed,” said Myha Trieu, SVP of People and Operations at ShareThis.

5. Allow employees to have a voice

In 2020, when small businesses across the country were forced to shut down for what they thought would be a two-week hiatus, employees stuck at home spent their time…probably building a very large plant collection and baking sourdough, but more importantly, reflecting. According to Gartner research, many reflected on their expectations for their job and their employer. They decided they wanted more purpose at work. 

Companies like KlientBoost, a performance marketing agency, rose to the occasion. KlientBoost nabbed the No. 1 spot on Glassdoor’s Best Places to Work 2022, and Johnathan Dane, founder of KlientBoost, attributes that win in part to the leadership team’s ability to “aggressively listen and aggressively take action.” 

“We have a ‘Feedback Loop’ system where everyone is incentivized (we literally have a leaderboard with cash prizes) to share anything that could be better within KlientBoost,” he said. “We have a team dedicated to improving our systems with that feedback, and we alert the team member who originally gave the feedback on the progress. We take it as far as creating a ‘Domino’s Pizza Tracker’ of feedback movement, we turned it into a slackbot that notifies the original person that gave the feedback that their idea is soon becoming a reality.”

Likewise, Laura Shafferman, founder of Legally Addictive Foods, says their secret to employee retention is “making everyone feel appreciated, finding ways to help them grow as individuals, and open communication. We listen to their feedback and find this allows for everyone to feel comfortable and respected,” she said. “We have very little turnover, so we think our tactics work.”

Don Brown, founder and CEO of LifeOmic, a health and wellness platform, founded his business to drive better health outcomes for people. Needless to say, he’s not in the business of hiring robots. LifeOmic landed the No. 4 spot on Best Places to Work this year, and Brown attributes that to his company’s dedication to employees. “We have an unusual degree of transparency at LifeOmic. Whether it’s finances, underlying structure, or the customers we’re working with, we want to make sure our employees know they're working at a company where they know what’s going on. Where they have a voice at the table and they aren’t just robots,” he said.

The bottom line

You don’t need a huge budget and an unbeatable benefits package to improve employee retention. Yes, employees care about benefits like basic health care and paid time off, but things like flexible work schedules and empathetic leadership are just as important. Today’s employees want to feel valued and respected—like their work is making a difference. Seeking employee feedback, creating space for unique circumstances, and investing in personal development may be the key to keeping employees happy, productive, and invested at work.