Small Business Owners Often "Held Hostage" by Employees
Small business owners enjoy the excitement and challenge of building
their own team. With every new hire, management hopes the employee will
fit into the company's culture, perform well and stay with the company
for a long time. Business owners are often willing to reward good team
members with special perks such as flexibility and time off.
However, entrepreneurs frequently feel like they are "held hostage"
by an employee who has generated business, become well-acquainted with
customers and understands company operations and the marketplace. Business
owners can feel threatened by the thought of the employee leaving and
worry about retaining clients or maintaining business processes. Before
this happens, it's important to take action to protect your business.
Business owners should consider these signals to assess the likelihood
of a "hostage" situation:
- An employee has had sole contact with key clients for an extended
period while management has no interaction.
- An employee's base pay has been increased beyond marketplace norms
in response to their threats to leave.
- Employees have not signed a business confidentiality agreement stating
that they will not solicit current or prospective clients for one
year following separation from the company.
- An employee is the only individual who knows how to do what they
do.
If any of these traits apply, the following action steps can help:
Confidentiality and Non-Solicitation. First, protect the company's
products or services, processes and client base. From the employee's
perspective, it may look tempting to start and run her own business.
It's critical that all new hires—at all levels—sign an agreement
regarding confidentiality of all business-related information and non-solicitation
of the company's clients. If business owners have already hired employees
and have not required confidentiality agreements, it's not too late.
However, when implementing such documents, business owners must do it
uniformly, requiring a signed agreement as a condition of employment.
Owners must be prepared to terminate any employee who won't sign one.
Remember, anyone who has a problem agreeing to these conditions may
have already misused information or shared it inappropriately.
Cross Training. Define the key tasks of each employee, and attempt
to cross train the three most important ones. If cross training is not
possible because of the small number of skilled employees, then have
the employee fully document how the task is done. Remember, an employee
could leave without a moment's notice for a variety of reasons, and
business owners have the right to be able to pick up where that employee
left off. Although many employees are territorial about how they do
their work, the work and the results of that effort still belong to
the company. Review documentation yearly.
Client Contact. Although business owners hire salespersons or
customer service reps to maintain all the client relationships, they
should still speak with key clients quarterly. Perform formal client
reviews with the company's sales or service reps two or three times
per year to ensure client service meets management expectations—not
just the employee's standards. Unfortunately, sales persons tend to
take ownership for their clients and the relationship with the client
can sometimes obstruct sound business judgment.
Survey clients annually to validate that your business is meeting management's
expectations. One local company who had a third party survey their clients
found out that the and the clients weren't making repeat purchases.
Management didn't even realize the company was losing business due to
the employee's style.
Marketplace Benchmarking. Keep base pay in alignment with the
marketplace, and reward actual accomplishments via bonuses. Obtain factual
information and market data annually regarding pay and bonus structures
for positions within your company. This data may prevent overly generous
pay raises as a mechanism to keep an employee from leaving. Raising
the employee's base pay beyond market standards is often a poor strategy.
Employees quickly come to expect astronomical annual raises. Since benefit
costs are usually driven by employee base pay, this can trigger higher
employee benefit costs for the company as well. One-time bonuses based
on measured performance and results—not effort—are one way
to avoid inflating base pay. Professional associations can be a valuable
resource for salary information.
Small business owners frequently take pride in their team being "like
family." But it's still possible to create a collegial work environment
while protecting your corporate assets. Employees will have a greater
respect for your company if they see that it's worth protecting. Human
resources consultants, employment attorneys, and networking with other
small businesses can help companies assess whether or not they have
protection in case of unexpected turnover and can provide valuable assistance
in putting the proper safeguards in place.
Michael W Newell. Preparing for the Project Management
Professional Certification Exam. New York: AMACOM (American Management
Association), 2001 and J. Davidson Frame. The New Project Management.
San Francisco: Jossey-Bass publishers, 1994.
Send this article to a friend
Authored by: Danielle Rodenbough, principal of
Trouble at Work?, a human resources consulting and employment service
firm specializing in small businesses. She may be contacted at 913-345-8592
or danielle@troubleatwork.net
Source: Creating Quality Newsletter, Volume
12, Number 11, November-December 2003
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