How Do Small Businesses Keep Key Employees?

Since any departure leaves her 14-person team short-handed for weeks, Ms. Martin tries to be proactive. She meets frequently with individual staff members, helps new employees pay first and last month’s rent, is generous with titles and promotions and offers benefits ranging from educational assistance to a free trip anywhere in the world after three years of employment. Last year’s recipient went to Paris.

“We don’t have a 401(k) and can’t always offer a big salary,” she said. “So I’m forced all the time to think about how to keep key people.”

With a tightening labor market, more entrepreneurs are facing similar challenges. A record number of job openings, with worsening skill shortages and a tendency among young adults toward briefer tenures, is forcing small-business owners to find increasingly creative ways to hold onto their best and brightest.

After rising in recent years, quit rates in private businesses held steady at just less than pre-recession levels in 2015. But survey data from the Bureau of Labor Statistics, which looks at job openings and labor turnover by size of establishment, suggest that the number of employees voluntarily leaving small companies remains on the rise.

At businesses with fewer than 10 employees, for example, 1.8 million people quit in the five months through May, a 34 percent increase from the same period in 2014, the bureau’s data shows. In companies with 10 to 49 employees, resignations rose by 12 percent year over year, and, in those with 50 to 249 employees, the increase was 9 percent.

In a June 2015 survey by the National Federation of Independent Business, 80 percent of employers reported they had difficulty finding, or could not find, the talent they needed. Even when they do find it, said Holly Wade, director of research for the organization, “issues come into play when small businesses can’t afford some of the bells and whistles bigger employers can.”

Colin Darretta, a former investment banker, knew when he founded WellPath Solutions in New York last year that he could not compete with a Google or Uber on pay. So in seeking engineering talent for his company, which makes customized nutritional products, he bypassed the Ivy League and hired a local developer from App Academy, in New York.

The fact that the candidate had taken a less traditional path, he added, may have made him better suited to a start-up. “Here was a guy who had developed an interest at a later stage and was willing to take a personal risk to pursue it,” Mr. Darretta said. “The key is looking where those big companies aren’t.”

He has also made a point of spending one-on-one time with all 10 staff members and likes to capitalize on their interests. After a recent busy period, he took a star performer and a newly hired engineer, both big video game players, to a “League of Legends” event at Spring Studios.

Another company can still try to steal employees by offering more money, Mr. Darretta said. But the employee “wouldn’t be getting the flexibility and the other stuff,” he added. “A lot of the time, the other stuff is what matters to people, and it doesn’t cost that much.”

Most people who leave a company do not do so for more money. In a 2015 survey of 11,000 employees by the staffing company Randstad USA, the main reason cited for quitting was a lack of a career path or growth opportunities. Nearly half of respondents said work-life balance was the biggest factor motivating them to stay.

For any incentives to work over the long term, employees must be invested in a company and its mission.

Dr. Amy Baxter, an Atlanta physician who founded MMJ Labs in 2006, has six employees with advanced degrees on a shoestring budget. Her company developed Buzzy, a hand-held device that uses cold and vibration to relieve pain from causes as varied as hypodermic needles, carpal tunnel syndrome and plantar fasciitis, an inflammation of the band of tissue that connects the heel bone to the toes.

“We didn’t even get F.D.A. clearance until last year, which makes it all the more amazing that people have stuck with me with no promise of equity,” Dr. Baxter said.

She said flexibility and transparency helped. MMJ Labs’ manufacturing manager spent early years fitting her work hours around an infant daughter’s heart treatment. If Buzzy loses a customer, everyone is involved in figuring out what happened and helping to fix it. Outings like the company’s regular staff dinners and the all-expenses-paid Caribbean cruise that employees and their families took to celebrate selling the first 25,000 units do not hurt either.

But Dr. Baxter says she believes the main reason her original hires are still with her is their belief in the product and the ethics of the company, including the fact that the device is reusable and in keeping with the company’s concern for the environment. “If I made Buzzy disposable, some employees wouldn’t stay with me,” she said.

Knowing what really matters to employees, personally and professionally, can be critical to retention, human resources specialists say, and easy to learn in a small business.

When Brandon Baker and his wife, Carmela, founded Loveletter Cakeshop on Fifth Avenue two years ago, they knew they would be making wedding cakes for a affluent clientele where there is little room for error. So as soon as they realize they have an exceptional employee, Mr. Baker sits down with him or her to discuss career aspirations and creative interests so he can assign responsibilities accordingly.

“Sometimes just the act of asking is enough,” Mr. Baker said. “When you find talent you have to nurture it.”

This can be challenging as an organization grows. Proxibid, which bills itself as the largest online marketplace for high-value items (like tractor-trailers and classic cars), has expanded to 167 employees since its start in 2001. Ryan Downs, the chief executive, also faces the dual challenge of finding young talent and luring it to Omaha, where the company is based. To do that, he says he has worked hard to maintain an open culture that offers opportunities for advancement.

He credits this with helping him retain the company’s top engineers when software developers have never been more in demand, or recruiters more aggressive. “You’re not going to stop recruiters coming around,” he said. “But if you give a technical person cutting-edge stuff to work on, we’ve found you can overcome other companies’ irrational prices.”

Michael Mulligan, a senior software engineer, who has been at Proxibid four and a half years, agrees. He says that although he hears from one or two recruiters every week, it would be difficult to match the opportunities of his current position, or the voice he has in the direction of the company. Proxibid, he added, also gets the culture right, with outings, support and companywide recognition of individual success.

“For me, that’s the biggest thing,” he said. “At other places, it was like I was just a number. I know it sounds cheesy, but this is the first company I’ve come to that truly seems to care if their employees are happy.”

Unfortunately, in the rush to serve customers and clients, communication can quickly fall by the wayside even when small-business owners know better.

David Niu, a serial entrepreneur, learned this the hard way when he was running BuddyTV. In 2012, a top employee quit, seemingly out of the blue. Frustrated and burned out, Mr. Niu took a break from the company. “It caught me off guard,” he said. “I kept thinking, if I had better tools maybe I could have prevented it.”

That led Mr. Niu to create Tinypulse to help other employers get a grip on retention issues. Tinypulse, which is based in Seattle, and similar companies like Culture Amp and BlackbookHR allow managers to solicit anonymous feedback from employees. This often provides an early warning that workers are unhappy. Today more than 500 companies use Tinypulse alone, the company said.

Other small-business owners still rely on the old-fashioned way of keeping tabs. At her public relations firm, Ms. Martin says she talks to her employees constantly and has them keep her cellphone number on speed dial. Most recently, she gave the people who have been with her the longest a share in her business.

“How many under-30-year-olds get to say they own something?” Ms. Martin asked. “But when you do find someone who is amazing and treats your business like their own you want to reward that.”

Her approach seems to be working. Ross Garner, the senior account executive she sent on a 10-day vacation to Paris last year, said he still could not get over the gesture. “Stuff like that,” he said, “makes you want to work at 110 percent for somebody.”

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