Motivating staff is essential to the success of any small firm. Motivated and engaged employees will go the extra mile, they contribute more ideas and work harder to achieve your business objectives. And good workplace morale also improves staff retention
In fact, we're likely to see staff turnover levels rise in the next few years – and that can be costly for small firms. Chris Smith, consultant at Hay Group, says: "As conditions improve, dissatisfied workers pose a significant flight risk. Recognising and then meeting the needs of the workforce will be key to retaining talent in the next few years."
But how do you motivate staff when money is still tight? Survey after survey shows that, actually, money isn't the biggest motivator. And while a bonus may provide a short-term boost, praise, recognition and career advancement are all far more powerful influencers in the long term.
A 2009 McKinsey Quarterly survey backs this up. It found that three non-cash motivators — praise from immediate managers, attention from the top managers, and a chance to lead projects — were just as or more effective motivators than cash bonuses, a pay rise or stock options.
"Money isn't everything. If someone hates their job then they are going to be unhappy whether they get £25,000 a year or whether their salary rises to £30,000," says Simon Jones, director of HR consultancy Ariadne Associates and author of the book Happy Working Relationships. "Having said that, staff pay has got to be right and fair."
So if money is not the only factor for staff, why don't more firms focus on motivation and why — according to McKinsey — are levels of staff satisfaction actually falling?
The answer says McKinsey — in big companies at least — is that managers still believe money talks, so they accept falling staff motivation during tough economic times.
That may be the prevailing wisdom in some large firms, but SMEs know better. Indeed, small business managers have many advantages over corporate bosses when it comes to motivating staff.
"The advantage that small firms have is that they can offer staff more rewarding and interesting jobs, especially if they are start-ups. Small businesses can't always offer the benefits that large companies can, so they need to attract and motivate staff in different ways," says Simon.
"Small firms have the opportunity to keep staff much more involved in the development of the business," he adds. "They can share with staff how the business is progressing, ask for their input and involve them in the overall picture. Big companies just can't take the views of their staff on board in the same way."
What's more, there is less hierarchy in small businesses, so communication is often better and staff feel more involved. And SME owners and managers have the flexibility to tailor roles to the individual, helping to improve job satisfaction. "Although most people work to pay the bills, they also want to get something positive out of their jobs," Simon says. "Having opportunities to progress, a chance to contribute and being able to extend skills with training and career development is a big motivating factor for employees. It doesn't have to cost a lot and it can really improve levels of motivation within the workplace."
Recognition and appreciation is also key, he says. "Saying thank you is absolutely vital. Although it's easy to do, it's actually something that lots of businesses don't do. But it's about understanding the people who work for you. Some staff love public shows of appreciation while others would hate to be in the spotlight. In small firms, the MD usually knows the staff well and it's easier to tailor rewards to the individual."
When Pontus Noren and James Monico, co-founders of Cloud Reach, established their cloud services business, they got advice from one of the founders of Google who suggested they should create a fun place to work.
That advice certainly paid off. Cloud Reach — which has 65 staff — has been voted the number one best small business to work for in the 2013 Sunday Times Best Companies awards.
"People come to work for a company, not for a salary only," says Pontus. "They are looking for a place to work where they are happy, fulfilled, part of something exciting, and where people care."
The firm's core values have been developed by the whole team — respect the individual; promote personal growth; be easy to work with and stay one step ahead. In addition, everyone has share options.
Team-building and fun stuff includes breakfasts in the company kitchen every day, "Cloudy lunches" in local restaurants and weekends away.
But it is staff development that is at the heart of the Cloud Reach approach. The company spends more than £1,800 a year on each person's training and supports more than half of the staff to take work-related qualifications. Four times a year, employees get an extra day off to work on their own creative project that might benefit the business.
Respect your staff
Involve your staff
Develop your staff
Appreciate your staff
Reward your staff