Staff Retention During a Recession: How are Small Businesses Weathering the Storm?

With fears of an impending recession, we know from our first-hand research that there is an increase in employees looking to jump ship, and are on the hunt for job security. After all, it’s no surprise that the global economy has taken a severe hit due to COVID-19, inflation, and the surge in gas prices rooted in the Ukraine War.

As an employer, the band-aid solution may seem like an attractive option, digging for gaps in your budget and throwing money at the problem in the form of higher wages. However, this will have you running into two fundamental problems. First, given the gloomy business environment rooted in the Fed’s hiking up interest rates to cool down inflation, it’s likely that you won’t be able to crunch the numbers to give pay rises. Secondly, and more importantly, as employees strategize their next career move, they’re no longer just thinking about money.

According to a McKinsey global research report, the proportion of employees who would consider quitting without a new job offer is 60%, which tells us that employees no longer decide to stay because of money, but it is rather based on the entirety of their experience.

This may translate into questions like: ‘Do I actually like my boss?’ and ‘Do I enjoy coming into work?’. In the best case scenario, the answer to both would be a resounding ‘yes’. However, considering the uncertainty clouding businesses at the moment, if you’re unsure about what your employees would say, it’s time to start thinking about your game plan to ensure you have a tight-knit team.

Although that sounds slightly daunting, we’ve spoken to numerous small businesses and collected data to give you a clearer picture of what you can do to retain your staff organically. From work culture to greater transparency, there’s plenty of tools at your disposal to build a recession-proof employee retention business.

Staff Retention Statistics 2022 – What’s Going On?

What does the labor market currently look like, and what should you be aware of as you’re sketching out your business retention strategy? Here is what we found:

• According to the US Bureau of Labor Statistics, 4.25 million people quit their jobs in January 2022, up from 3.3 million in 2021
• The US total annual employee turnover will likely jump by nearly 20% from the pre-pandemic annual average of 31.9 million employees quitting their jobs to 37.4 million quitting in 2022
• More than 40% of US workers are currently actively seeking a new job or plan to do so soon – that’s twice the rate in 2019
• 14% of senior executives identify a recession among the most pressing concerns today, which is up slightly from early 2022 (9%)
• Over the next year, 86% of global CEOs anticipate a recession to hit, with 71% predicting it will impact company earnings by up to 10%
• According to a study conducted by Visier Insights, which uses more than 9 million anonymized employee records from more than 4,000 global companies, resignation rates are the highest among employees aged 30-45

We’ve also found a recurring trend in statistics where there is a mismatch between the expectations of employers and employees, which is, in part, driving employees to look for other jobs. We know that:

• According to the Achievers Workforce Institute’s 2021 Engagement and Retention Report, the top reasons employees would stay in their current job include:
  • Work-life balance (23%)
  • Recognition (21%)
  • Compensation (19%)
  • Satisfactory working relationship with their manager (19%)
• From a survey of more than 3,500 employees, Gartner found that half believe remote working is still stigmatized at their organizations, while 70% believe on-site workers are more likely to be promoted and paid more compared to remote workers
• 52% of employees report that flexible work policies will impact whether they choose to stay at their organizations
• A LinkedIn Learning Workplace Learning Report found that employees at companies with high internal mobility typically stay almost as twice as long as employees at companies with low internal mobility
• 25% of workers say they’d leave a role for better compensation, 21% also reported that better benefits are important

Although these are lots of numbers and percentages, focusing on the overall trend we see that there is a need to transition from an office-centric to a human-centric work design. What does this look like in practice? We spoke with small business owners to find out.

How Are Small Businesses Weathering the Staff Retention Dilemma?

Flexibility. Work culture. Transparency. Benefits. These were the key trends that kept popping up in conversations with small businesses. In other words, it’s all about: organically motivating staff to stay by reassuring them about job security, ensuring they are immersed in a healthy work environment that keeps tangible barriers between work and home life, and providing opportunity for growth.

Sherbet Donkey Media – A Staff Retention Story

Among the myriad of small businesses that are trialing creative methods to retain their staff during a recession, Sherbet Donkey Media has stood out as a model answer because of its impressive and robust growth. Expert Market spoke with Lucy Hurst, the Managing Director, who has overseen the company’s growth from four to 35 employees in just the last 16 months.

In aiming to understand this success story, Lucy placed work culture and proactive recruitment as the star ingredient of the fertilizer that drives Sherbet Donkey Media’s impressive growth. She says, “[the company] provides a fun workplace, but we still get the work done.  Our employees aren’t numbers to us, our employees are like a second family”.  In addition, Hurst adds, “People are looking for job security at the moment, and I think that new employees, as soon as they come in, they can see this company is going places and they see it growing.”

She also told us that transparency in communication has been paramount. As part of the proactive recruitment strategy, Lucy noted that prospective employees are encouraged to message current employees on LinkedIn to obtain an unfiltered impression of what working at Sherbet Donkey Media is like.

Work culture, however, can be exceptionally hard to construct and turn into a driving motivator that employees lean on when they’re wondering whether they should stay or go. So how do you make work culture feel tangible beyond that poetic mission statement you wrote on your company’s website? Lucy told Expert Market that, at Sherbet Donkey Media, they “encourage everybody to work as a team, to build each other up, and always encourage progression” and, through a couple of giggles, revealed that “the director and myself hate the word boss” because they consider themselves to be on the same level as their employees. This very down-to-earth attitude at work that erases the lines that delineate a workplace hierarchy seem to be the key to motivating employees to come into work with a sense of belonging that works magic for retention.

When pondering on what other small businesses seem to be getting wrong when approaching staff retention strategies, Lucy told Expert Market that “other agencies don’t reward soon enough” and that at Sherbet Donkey Media “we reward based on progression, based on what people bring to the team, and we do it in a timely manner”. She also emphasized that “budgets are getting tighter, but your staff is the lifeblood of your business – those are the things that you need to take care of, and you need to nurture”.