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Retaining Top Employees in Tough Times

After repeated rounds of layoffs, managers must focus on retaining and motivating those who are left over. Even in a bad economy, experts say the most talented workers always have options; retaining those employees can be critical to keeping the business on track during rocky times.

Here are some dos and don'ts of retention.

Do give pats on the back.

The most inexpensive retention strategy is employee recognition, says Chason Hecht, President of Retensa, a New York-based retention consultancy. Whether a hand-written note or a moderate cash reward, recognition builds loyalty and lets managers reinforce good behavior immediately. On the other hand, performance-based bonuses typically are given out just once a year (if that) and are far more costly.

Dow Jones Newswires' Simon Constable speaks to Retensa President Chason Hecht about how companies can retain good employees without fat bonuses.

One warning: Make sure all employees, from top to bottom, have the opportunity to participate in the recognition program, says Eric Mosley, CEO of Globoforce, a designer of employee-recognition programs. Otherwise, you'll risk playing favorites.

Do invest in employee training.

While laid-off employees might receive a retraining allowance to make themselves more marketable, remaining employees often experience training cutbacks in a downturn. Those cutbacks may seem like a minor sacrifice, but employees will need new training to fill the gaps in lost productivity. Failing to provide that support could result in turnover, says Mr. Hecht.

Moreover, employees who receive training, workshops and mentoring are likely to remain loyal, says Mr. Hecht. Some even plan a long-term career at the company. Employees of financial software producer Intuit, for example, use a Web-based program to show managers their resumes and explain where in the company they'd like to move next, says Jim Grenier, Intuit's vice president of human resources.

Do not overcompensate any employee.

It may seem obvious, but it bears repeating: forking over outsized rewards for short-term gains is a recipe for disaster, no matter how talented the earner. Paying huge amounts to top talent can demoralize lower earners and hurt your overall culture, warns Mr. Hecht. "Managers often make the mistake of bending over backwards to retain the highest money maker," Mr. Hecht says. "That sends the wrong message and de-motivates others."

However, significant rewards may still be an option in some cases, says Mr. Mosley. You can justify weighty compensation by correlating it to long-term added value.

Don't leave your employees out of cost-cutting reviews.

Ask employees for input on how else to cut costs. They may have spotted inefficiencies that managers haven't noticed. Plus, failing to solicit employees' advice will likely alienate them. "You're going to end up frustrating a lot of people if after you've cut jobs and frozen salaries, you then try and do an efficiency exercise that's not inclusive of employees," says Mr. Hecht.

Do spruce up the workplace.

A consumer who can't afford a getaway might opt instead to spruce up the homefront, says Mr. Grenier. Likewise, if you can no longer afford travel budgets for employees, then begin investing in the physical workspace, he says.

Reducing travel often means losing face-to-face communication. To address this, consider improving video-conferencing technology in your offices, says Mr. Grenier.