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First class coach - My small web services business has just lost two key technical staff to lucrative jobs with a big competitor. That company is hiring very aggressively and I am worried that I might lose my whole team to it. I can't compete on salary so

Last Updated: 31 Aug 2010

My small web services business has just lost two key technical staff to lucrative jobs with a big competitor. That company is hiring very aggressively and I am worried that I might lose my whole team to it. I can't compete on salary so how can I encourage my employees to stay?

Like many web-based businesses, your biggest challenge is attracting and retaining the best people. Unfortunately, your competitors are in the same boat - and for the staff it is a seller's market. That's the bad news. But it is also the good news, because as a small firm you have the advantage in competing against your bigger rivals. The key is to think about rewarding staff in a completely new way. The world of reward has changed dramatically, and you can take advantage of this.

You have a deal with each employee. In return for their time, creativity, commitment and motivation, you give them a range of things that go beyond salary. Traditional benefits such as health insurance and a company car are no longer the only options. Many young people now expect to job-hop throughout their career, so they are looking for a different kind of benefit.

Think of these deals as in four parts: pay, benefits, work environment and learning. A small firm can more easily adapt to meet these needs than larger, more complex organisations. Check whether you are sufficiently flexible on pay and benefits. A different mix may work better for some groups; for example, young designers and programmers may prefer cash now in the form of a spot bonus linked to a particularly strong contribution.

The old-fashioned benefits package is being replaced in web-based businesses with wealth-accumulation plans that focus on giving employees a real or surrogate ownership stake in the business. Get advice on this one, but pursue it exhaustively. It may provide a real competitive edge, particularly if you are moving towards an IPO.

Where you can score effectively is on learning and work environment.

In a recent pan-European study, employees were asked what they valued in assessing a potential career move. Twenty-one per cent said pay, but equal numbers cited the opportunity to learn and develop their career.

Even more (23%) would move to improve their work environment.

Step up your training and invest in helping people learn. Look at ways of building skills: coaching, buddying, mentoring as well as technical training. Use the web and trade journals to monitor new work being done in your field and archive the best. Invite the most respected people in your industry to host regular seminars. In other words, build a reputation as a great place to learn.

In a 1992 study of staff morale and commitment incentives (V Niebrugge's 'Declining Employee Morale'), employees cited 'interesting work', 'appreciation' and 'feeling in on things' as key drivers. Yet managers assumed that they would choose: 'promotion opportunities', 'good wages' and 'job security'. Don't underestimate the importance of the climate you create in attracting and retaining staff. Some things are obvious: casual dress code and interesting work space is expected these days in most web-based businesses. But consider also your working practices. Aim for flexibility in hours, career breaks and work location. The software firm F International, for example, has perfected this. Its people work from home if they wish, and individual contracts enable them to work tailor-made hours.

Ensure there are enough opportunities for all staff to do innovative and interesting work. Often the most unlikely employees have creative breakthroughs when faced with tough problems. The more you create opportunities for great work, the more you will build your reputation as a good employer.

Many big companies struggle to attract the best people in e-commerce. Their people skills and cultures are often unsuited to the new economy and they find it difficult to implement change quickly. They look at people like you with envy. The old economy focused on cost efficiency and effectiveness, but the new economy focuses on revenue through innovation, and that relies on people.

You have a great chance to offer a very attractive deal to your employees.

Expect them to move on from time to time - it is in the nature of your industry. But if you are really smart and build a firm that is good on total rewards and not just pay, you stand an excellent chance of replacing them with equally talented and committed recruits.

Margaret Exley leads Towers Perrin's European practice on change and communication. A founder of Kinsley Lord, she is a non-executive director of the Treasury's management board.

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