In the midst of all the outrage surrounding AIG’s infamous bailout bonus packages, a surprising detail has emerged. The so-called “retention” bonuses were paid to 52 people who have packed up and left the company. Though one could perhaps argue that the people who left technically could afford to leave, and anyway they weren’t doing such a good job in the first place, it still raises two powerful questions: 1. How could the powers that be at AIG be so out of touch and unconcerned with employee performance?, and 2. Shouldn’t the “generous” benefits have made their employees more loyal to the company?

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It’s very clear to me that the two are connected…

Employee loyalty does not begin and end with benefits and perks. A benefits package is only one piece of a bigger picture. Employees also need to feel appreciated and noticed; they need communication and feedback; and they need to feel that the work they are doing is challenging, yet doable. Basically, it all boils down to the fact that employees need to feel that they and their contributions to the company are valuable. Once that is in place, it makes it easier (though still not easy) for employees to swallow any necessary reductions in benefits and compensation without immediately fueling dreams of leaving the company.

This should come as consoling news to small business owners who have been forced to cut back on employee benefits and have had to let go of employees in response to the recession. Many of these people are dealing with low employee morale and worry that key employees will leave once the economy rebounds.

So what can small business owners do to retain employees and keep up the morale in this recession? Here are some points to keep in mind:

  • Make employee recognition a priority. It is human nature for people to want recognition for their input and hard work. Some free or low-cost ideas include: personalized “thank you” notes, sending along a compliment made by a customer or co-workers, and giving out gift certificates to high-performers. But keep in mind here that your comments and actions should be sincere to have the desired effect.
  • Ask employees for feedback. Your employees are one of your most valuable assets. Ask them for advice on how they can do their jobs better and how the company as a whole can improve. You may be surprised to hear what ideas your employees can come up with. Even if an idea is not beneficial or feasible, you should still let your employees know that you considered what they had to say.
  • Keep your employees up-to-date. One important element in being able to allay your employees’ fears about their job security and to boost employee morale in general is to be open with your employees about where your company is holding in terms of its performance and finances. But there is one important caveat here. You will have to determine an appropriate balance between disclosing information and withholding it. Openness does not mean you have to tell your employees everything. You may need the assistance of an HR consultant to help you determine what to say and what not to.
  • Be creative about benefits. Though reductions to your employee benefits may be inevitable, it doesn’t mean that all is lost. Here are a few tips to reduce the expenses of your health care coverage without giving it up. You can also seek out low-cost seminars for your employees, such as having someone come in to speak about financial planning.


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