How Houston startups and small businesses can effectively plan for 2023
Overcoming unforeseen challenges is often enjoyable for successful entrepreneurs. Recently, though, “unprecedented” obstacles seem to lurk after every turn. Some of the most pressing problems are a possible recession coupled with the tight labor market.
Small businesses can take action to protect themselves from these obstacles in 2023. To keep their businesses strong, leaders should strategize on preserving a positive culture, finding the right talent to innovate and holding onto existing workers.
Invest in culture
During the early stages of growing a business, culture can feel easy to overlook. However, culture is critical to growth and to curating a solid team of leaders and employees. As entrepreneurs try to scale the business model and grow profitability, leaders might feel tempted to encourage employees to work long hours with the mindset that culture can be corrected later. In fact, transforming a culture of toxicity is far more difficult than creating a positive culture from the beginning.
A positive culture is increasingly important to workers. In the 2022 Global Talent Trends Report from LinkedIn, 63 percent of job seekers said work-life balance was a top priority in selecting another role and 40 percent reported colleagues and culture were a top priority. Over half of employees named professional development opportunities as a top area for employers to invest in culture. Other top areas that were valued included flexible work support, mental health and wellness, training for managers to lead hybrid or remote teams and diversity and inclusion initiatives.
Though budgets should include room for some level of spending on culture in 2023, effective HR departments do not need a hefty budget to cultivate a strong culture. Bigger companies may have more funds, but startups and small businesses can offer a more intimate environment. Unlike CEOs of major corporations, leaders of smaller teams also have the luxury of a close-up view of culture every day.
Small businesses’ culture also benefits from the ability to know every or at least most employees individually. At vast companies that neglect to engage with workers one on one, employees may grow cynical of pricey bonding activities and company values. Likewise, upward movement at huge corporations can be slower while smaller, nimble teams can recognize talent and promote quickly. Not every small business can offer subsidized tuition or training program benefits, so employees should be encouraged to take advantage of opportunities for promotion, learning and growth on the job. Hands-on learning with demonstrable results can speed up career development more than many certificate programs.
Attract the right talent
After the “Great Resignation” of 2020, employers are still struggling to recruit qualified candidates who feel less tied down to traditional jobs than in previous years. Many candidates leave their jobs without another position lined up in a reflection of these changing values. McKinsey discovered in March 2022 that 44 percent of workers who left their job without another lined up said they had little to no interest in accepting an offer for a “traditional job” in the next six months.
The Federal Reserve Bank has raised the interest rate several times this year in hopes of increasing the labor participation rate. Despite these efforts, the labor market is tight. Startups and entrepreneurial businesses should lean into their cutting-edge business models, openness to innovation and also emphasize unique benefits like work-from-anywhere or sabbaticals.
To win over the best candidates, businesses need experienced, knowledgeable and connected recruitment teams. Small businesses need to be realistic about the size of their HR team and consider bringing in outside help when necessary. Outsourcing recruitment to a recruiting agency or a professional employer organization (PEO), which can assist with more comprehensive solutions, is an option for not only understaffed HR departments but also ones that need extra support in this tight labor market. When deciding whether outside help is in the budget, be sure to account for the cost of an open position or length of time to hire in addition to all the other considerations associated with recruitment efforts.
Focus on employee retention
Worker retention also deserves consideration for 2023 planning. Culture influences workers to keep their jobs, but culture cannot make up for lack of competitive compensation. Startups may see high turnover in their first few years as the business defines itself and its culture. Should employees resign, exit interviews are a great opportunity for HR to hear a candid perspective on the employee experience. This feedback can prove invaluable for leaders when determining their retention strategy and areas of improvement.
Small businesses should also try to find room in the budget to stay competitive with compensation. Pew found in July 2022 that 60 percent of workers who left their job for a new role earned more afterward. Annual raises can help retain workers but may not be sufficient in themselves. Research fair market salary and try to bring compensation in line as much as possible. If a highly valued employee brings a higher offer to the table, evaluate the cost of matching the offer with the cost of a new hire. In many cases, raising that employee’s salary will save the company money overall, prevent a drop in productivity and preserve morale.
While it is uncertain what lies ahead for businesses in 2023, leaders can prepare to face staffing challenges by choosing the best talent and creating a culture that shows employees that they are valued.
Karen Leal is a performance specialist with Houston-based Insperity, a provider of human resources offering a suite of scalable HR solutions available in the marketplace.