Perk Power

Positive Points

Not all the news from the survey is bad. Small-business employees remain highly motivated, according to business owners. Sixty-nine percent gauge their employees' motivation by their willingness to work overtime, improve job skills and enhance job performance.

Sixty-three percent of those surveyed say workers do more than expected and want to move up in the company. In addition, hard work seems to be rewarded in today's small companies: Twenty-one percent of the owners say promotions are based on merit, 34 percent on a combination of merit and seniority, and just 4 percent on seniority alone.

Given the scarcity of benefits, what motivates employees to stay at small companies is a mystery. Schedule flexibility and the chance to participate in decisions may explain part of it. "Some employees are motivated by things other than money," Sirinakis says. "Having flexible hours or being able to leave work [early] to pick up a son or daughter may be what's important."

Benefits don't have to be expensive; many small firms find that flexible hours and other nonfinancial incentives work just as well. Sirinakis recommends that entrepreneurs think creatively about how to provide employees with useful benefits rather than assuming they must provide costly, traditional perks. "Sometimes simply talking to them makes a difference," she says. "And that doesn't [cost anything]."

Hirshberg, for example, uses an open-book management style and shares the company's financial details with his staff to motivate employees by making them feel involved. William Dotson, president of Northwest Business Group Inc., a management consulting firm based in Eugene, Oregon, says recognition for a job well done can motivate employees as effectively as a pay raise. "Verbal and written recognition are important," adds Dotson, "Celebrations in the form of parties and picnics are also important."

An alternative to retirement plans or health insurance is ownership in the company. "We're looking at stock-option plans," says DeLong. "We'll probably come out with them this year and allow people to become shareholders in the company by diverting part of their bonuses into stock."

DeLong's on the right track, says Dotson. "In the 21st century, employees are going to want a piece of the action," he says. "It's a real plus for a small business to do that." The amount need not be large. Just a 1 percent or 2 percent ownership share will provide many employees with adequate motivation, Dotson adds.

Whatever their benefits programs, entrepreneurs remain confident that they'll be able to attract new workers. Thirty percent of those surveyed expect to add employees in the next year. Minority business owners are even more optimistic, with just less than half projecting employee growth.

Even if you compete with other small firms for workers, you may not need Fortune 500-caliber benefits to attract and keep quality employees. Instead, concentrate on more innovative extras such as participation, performance incentives and flexibility.

A company's atmosphere can make a big difference, Sirinakis maintains. After all, perhaps the most important benefits an employer can offer are a little dignity and respect.

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This article was originally published in the July 1998 print edition of Entrepreneur with the headline: Perk Power.

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