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Seven Ways to Retain Top Employees How can a struggling startup keep valuable employees from jumping ship -- especially as the job market thaws?

By Diana Ransom

At oDesk's offices in Menlo Park, Calif., employees can grab a snack or fix a sandwich at the company's subsidized, communal kitchen. They can also sample fresh fruit from an organic farmers market or sip a made-to-order cappuccino. On Tuesdays, in a nod to the company's mission -- that is, connecting virtual workers to job opportunities -- employees can work from home.

But even this five-year-old, perk-packed firm has lost some key employees. "With good employees, you have to keep them challenged," says Gary Swart, oDesk's CEO, who has seen about 5 percent of the company's 40-person staff move on to other jobs over the last two years. "In a start-up that is easy, but as growth slows, people say, 'gee, I might be languishing.'"

In lieu of big bonuses or raises, start-up CEOs traditionally satisfy top-notch employees by handing over equity in the company. However, when growth slows, that equity stake can lose some of its luster. And even though business has picked up in recent months, the recovery has been spotty among small firms, says Burton Goldfield, the CEO of TriNet, a human resources outsourcing firm in San Leandro, Calif. So how can a struggling start-up keep valuable employees from jumping ship -- especially as the job market thaws? Here are seven tips:

1. Revisit old promises
During the downturn, many employers struck deals with workers. In the name of saving their jobs, some employees took salary freezes or agreed to reduced hours, while others waved goodbye to pensions and health benefits. As the recovery takes hold, workers may start wondering: How long must I sacrifice? Indeed, "many small-company owners are now at a point where they'll need to either make good on certain promises or have a conversation about continued hardships," says Kathryn Kerge, the president of Kerge Consulting, a human resources strategy firm in New York.

2. Take action
Regardless of whether you can muster a pay raise, however, now is the time for action. If employees have complaints, address them. Similarly, if they're asking for added responsibilities, more flexible hours or on-the-job training, be amenable. Also, try asking them for help, says Jennifer Bookspan, a vice president at Scottsdale, Ariz., recruitment firm Govig and Associates. "Employees want to feel like they are a part of a team, like what they say matters," she says. "If you have that and people are emotionally committed, it is much harder to leave."

3. Have fun
Swart from oDesk found that group activities outside the office also do wonders for connecting workers to the company. Each month, Swart and his staff of 40 participate in activities as wide-ranging as renting go-karts and indoor skydiving to hiking and picnicking in a local park. Often at small companies, the biggest employee benefit is stock options. But over time, when most of their equity is vested, workers may develop wandering eyes, he says. "You have to keep your company exciting as well as give employees opportunities for growth and development," Swart says.

4. Keep talking
Further, having a simple conversation about the status of the company and its prospects can go a long way toward allaying employees' fears, which, if unchecked, might drive them to other employers, says Bookspan. "In down times, people forget that they should be taking this person to lunch or having meetings regularly," she says. "The communication lines have to be open all of the time."

5. Be transparent
If it's hard to find good news to discuss, don't sugarcoat the bad. "Transparency is No. 1," says Kerge. For instance, if you expect continued hardships, tell employees. Likewise, if better news is on the horizon, let them know that, too. And if possible, show them how they fit in to the company's plans, she says. After all, "in a small company, if employees don't know why they are still there, hanging on to them is going to be that much more difficult."

6. Address inequities
If things are looking up for your firm, address obvious inequities first, says Goldfield. As owners are certainly aware, rewarding employees based on performance is a good idea, but what about personnel who don't necessarily contribute to the bottom line? "If there are pay inequities, guess what: Employees know about them," he says. If possible, target raises where inequities exist.

7. Be realistic
You might also consider creating a bonus program where employees compete for a set number of bonuses or base commissions on whether a deal leads to revenue, says Kerge. But if money is still tight, be aware that for some employees attending a business pitch or lunching with the CEO won't cut it, she says. "Some degree of attrition may be inevitable."

Diana Ransom is the former deputy editor of Entrepreneur.com.

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