Entrepreneurs with small companies on the verge of a steep growth phase often ask us how they can compete for talent when larger companies are able to offer more attractive comp and benefit packages.
Just because you can’t pay as much as the biggies doesn’t mean you can’t attract the best talent. By understanding what is most valuable to employees and creatively leveraging your differentiators to meet their needs, you can attract and retain employees without overextending your budget.
Approach the situation with a new lens. Instead of thinking of it as a money problem (i.e. high pay + good benefits = top talent), look at it as a risk/reward calculation. When you consider the risks that an employee is taking to work for a smaller company (i.e. potential job loss if the company hits a financial bump), and the risks a business is taking to hire that employee (over leveraging finances to get an employee in the door), then you can put the right rewards in place to mitigate these risks.
Focus on What Makes Your Opportunity Unique and Attractive
You can ameliorate the inherent risks of working for a startup or scaling a company by providing benefits that are of material value to candidates, especially those that maximize the offerings unique to smaller companies. Consider these.
1. Create Intrinsic Value through Purpose
While people do need to pay the bills, money alone is not likely to sway someone’s final choice. They also need to see themselves succeeding in the job, feeling passionate about the work, and trusting leadership and investors.
“Risk is abated by purpose,” says Charles Fred, the Chairman and CEO of TrueSpace, which helps entrepreneurs grow their businesses. “If I am weighing the risks of taking a job at your startup, I will look at the whole picture: What is your company’s reason for being and does it align with my values? What other top talent have you been able to attract? Is the current team happy, content, and part of the success of the business? How can I grow with the company? Without this intrinsic value alignment, it does not matter what money or promises of payouts you pile on to attract me.”
2. Create a Great People-Focused Culture
Smaller companies out-compete larger companies when it comes to great work cultures, so this is an area where you can shine. As a leader, set the framework of your company’s culture early on, then be intentional about who you hire. Each new employee will either build up your culture, or tear it down. You want to hire those who believe in your mission, values and vision and will positively add to your culture as your company grows.
Keep in mind that connection to purpose and strong work culture are especially important to younger generations of employees like Millennials, who will make up 75% of the workforce by 2025.
3. Commit to DEI
The face of the workforce (and consumers) is more diverse than ever. Whether focusing on diversity and inclusion is on your radar or not, shifting demographics means that doing business the “old way” will no longer serve companies today and in the future. Companies that lean into their commitment to DEI early on, and make it a foundational part of their business, will be better set up for long-term success. Yes, it is the right thing to do, and it is also the necessary thing to do.
When it comes to recruiting, inclusive companies that hire diverse employees will have access to a bigger and stronger talent pool, and therefore be more likely to recruit A-level talent. In fact, many candidates also proactively seek out employers that are diverse and inclusive. Tools like Glassdoor help them easily learn how a company is doing in this department. Candidates will sniff out performative gestures, so your DEI journey needs to be authentic and material.
“Previously silenced minorities are now gaining a bigger voice and making clear what they will and won’t be part of,” said Neill Turner, a partner with Strategic Wealth Partners, which helps business owners protect, grow, and exit their businesses.. “Companies that are deaf to these changes will miss the boat. The old way of doing business is not attractive, especially to the younger generations. They don’t want to work for their parent’s boss.”
4. Be Transparent + Build Trust
Candidates want to know where your company will be in a year and how it will get there. By giving people a clear picture of your company’s financial situation, growth plans and their potential role in it, you help dispel risk and engage people at a deeper level.
Transparency and information lay the foundation for building trust, which will be paramount to an employee’s decision to come to work for you. Have candidates talk to a few current employees, including at least one who is new to your company, and one who has been with you longer. This connection gives them the opportunity to put themselves in their shoes and walk around a little to see if the fit is right. It also proves that you have nothing to hide and want them to have all the information to weigh the risks and rewards of coming to work for you.
Great Benefits Packages Don’t Have to Financially Be Out of Reach
Not all of the benefits candidates want will cost your company money, and not all benefits that do cost money are as expensive as you think when compared to the high costs of recruiting, turnover and lost opportunity when a role sits empty. Here are a few examples.
5. Offer Flexibility
Flexibility used to be a differentiating benefit some employers offered. Today, it is expected. If you are not flexible with things like schedules and work-from-home options, candidates are likely to walk away.
“People want to know what benefits you offer and how they will make life easier,” said Turner. “They want to be able to manage their life, maintain their well-being, and get their job done, all on their own time. This is so valuable to people that they are willing to make less in income to gain non-monetary benefits like flexibility.”
6. Take a Fresh Look at Traditional Benefits
Incorporate risk-based questions into your interview process to learn what is most valuable to the people you want to hire. Get to know what they are leaving behind to come work for you. This is a big part of their risk/reward calculation. Benefits like healthcare, parental leave, volunteer days, and a matching 401K are highly incentivizing for most people. To hire great talent, you may need to prioritize offering benefits over other optional business costs.
“Small companies have not traditionally offered matching 401K plans because they thought they could not afford them,” says Fred. “But building and protecting wealth for your employees shows that your company cares about their future and is committed to them. This is a game changer and mathematically it is not as big a hit as many employers believe. Say your company has 30 employees making an average of $100K. If you offer a 3% match, your maximum contribution is $90K. Compare that to the cost of having a role sit unfilled while you are spending time and money on recruiting.”
7. Be Agile and Move Quickly
Smaller companies have the advantage of being able to move quickly when hiring. Make sure your recruiting and interview process is fast enough to snag your best candidates. In this market, people have their choice of jobs. If your process takes too long, they will move on and you will miss out.
Smaller companies are also more likely to be able to offer direct connections to leadership, more versatile work that boosts people’s professional development, and more opportunities to work directly with interesting products or technologies – all of which are high-value benefits to employees that cost very little.
8. Retain Your Best Leaders with Equity Compensation
Offering things like stock options, profit sharing, non-qualified deferred compensation plans, and other benefits that pay down the road are key tools to retaining your higher-income executives. Have a strategic plan behind offering meaningful incentives to show your leaders that they are part of your company’s long-term success. Again, the cost to your company is a lot less when you weigh it against the risk of losing leaders every few years, especially during a critical growth phase.
“These incentives should be in addition to income and benefits, not in place of them,” says Turner. “They build in retention because they show leaders that you are committed to incorporating them into the company’s growth. It gives them a sense that they are part of it.”
People make your business work. Rather than looking at the people component line item of your budget in a single year, look at the long-term picture. Which levers will you pull today to shift the risk/reward balance so that you have talent in place tomorrow?
