From the August 2003 issue of Entrepreneur

At the moment, employers control the job market, able to hire and fire employees as they see fit. But employer-friendly labor markets don't last forever, and the next labor crunch could be even worse than the one seen in 1999. In fact, the Bureau of Labor Statistics is projecting a shortage of 4 million workers by 2006 and 10 million workers by 2010, numbers influenced both by demographics and a shrinking pool of skilled labor. Some industries, including nursing and engineering, are already suffering from a shortage of talent.

With well-trained workers in limited supply, it may be time for you to create some old-fashioned loyalty, where employees stick around for years, if not for the gold watch. "Everyone available to work for the next 25 years has already been born," says Marc Drizin, employee- loyalty specialist with Walker Information, a survey research company in Indianapolis. "It's going to be incumbent on [entrepreneurs] to engender loyalty for as long as they possibly can."

An economic downturn-when employees aren't expecting loyalty from employers-is a good time to start maximizing loyalty in your workplace to beat the crunch. Become an "internal headhunter," looking for ways to hang on to talented employees before headhunters start calling them again, advises Sharon Jordan-Evans, president of the Jordan Evans Group, a leadership consulting firm in Cambria, California, and co-author of Love 'Em or Lose 'Em: Getting Good People to Stay (Berrett-Koehler).

Now's the time to meet with valued employees one-on-one and tell them how important they are to the company. "Say 'I'd like to know what will keep you here. What do you want?'" Jordan-Evans suggests. "You can even be so bold as to ask 'What would entice you away?'" Employers often shy away from this conversation, Jordan-Evans says, because they're afraid employees will ask for a raise. And that may happen. If you can't afford a raise, explain why. "Tell the truth, but tell them they're worth it to you. Don't dismiss it," she says.

"I want to offer meaningful employment for life," says Lyle Estill, CEO of Blast Internet Services in Pittsboro, North Carolina, a technology company with 22 employees and annual sales of $2 million. "I have no doubt I've retained customers by retaining employees."

Estill, 41, follows what he calls a "paternalistic, old-fashioned, clunky management style." The company relies on open-book management. Employees can take time off for personal reasons, and they're featured prominently on the company's Web site. Many of his employees have been with him for more than five years. When Estill merged Blast last year with another very small firm he owned, there were no layoffs. "You have to be genuine about creating loyalty," says Estill.

Consider using a survey to measure loyalty in your workplace, says Arlene Vernon, founder of consulting firm HRx Inc. in Eden Prairie, Minnesota. Some questions to ask: Why do employees join us? Why do current employees stay? Why do employees leave? What does the public know about us as an employer?

"The first two questions answer what you are doing right and how to keep doing that to make sure people stay," Vernon says. "The third question answers what you need to fix." The last question gauges your "HR PR," which extends beyond your products to how you're marketing your company as an employer. "You don't know what you've sold and what [employees have] bought," Vernon says. Their answers will help you improve your retention strategy.

Also calculate your unintentional turnover (in other words, people leaving whom you wish would stay) and how much it's costing you to replace each employee-numbers that don't show up on a price-earnings sheet. The answers "are always buried inside the organization," Drizin says. "Start calculating it annually to see how big an issue it is."

Recognize the role managers play in the loyalty equation. Managers "have phenomenal influence and power over keeping people," Jordan-Evans says. "Loyalty happens one-on-one between employee and boss." Speak with managers to make sure you're on the same page. You can also include a question on your loyalty survey that asks employees to rate their managers.

Some employees will latch on to the idea of long-term loyalty; others won't. "It's not a culture that works for everyone," Estill says. Forging a long-term loyalty strategy seems counterintuitive in an age of layoffs. But the steps you take now will pay off down the road.

"Leaders at all levels had better wake up," Jordan-Evans says. "If they have talented people, these are treasures, and they'd better figure out a way to keep them. The [entrepreneurs] who get a jump-start now will be miles ahead."