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As the owner of a small service business, I understand on a daily basis that talent is what ultimately differentiates our business from our competitors. It’s a truism in business that, in the long run, a business looking to create long term value competes on two key aspects of the enterprise – intellectual property and human capital. While the former is important, this blog and the remainder of this series is intended to focus on the latter – how to compete for and retain the most talented people for your small business.
It used to be that a small business would have to struggle to compete for talent. However, the advancement of cloud technology and the ability to outsource non-core, overhead aspects of the business have enabled small businesses be more efficient and able to create a compelling Employee Value Proposition (EVP) that allows them to compete directly with larger competitors. These developments provide a small company with the benefits of a large business while retaining the energy and personal connection of a small business that so many highly talented people seek in an employer, thus allowing small businesses to compete on a more even playing field than ever before.
Small businesses are rapidly moving many functions into the cloud to reduce costs, enhance security and improve their ability to manage their business. By moving to the cloud, those businesses have less need to purchase and maintain equipment. In addition, the ability to store and share documents online increases productivity and flexibility, so that team members can access and share from any location where they can connect to the web. Security is enhanced because of the ability to limit access and backup the company’s data. Finally, a business is able to integrate their different cloud based programs – Client Relationship Management systems, Accounting/Bookkeeping systems, Human Resource platforms, and more – to allow the owner to streamline the administration of the business.
Outsourcing of necessary but non-core functions of your business helps reduce overall costs, and provides purchasing power not otherwise available to a small business, all the while enabling the small business owner to remain focused on the core business. The ability to outsource functions such as Digital Marketing, Payroll, Finance, and Legal helps reduce capital costs, increase efficiency, control labor costs, and reduce risk for the business. When one adds in the ability to work with a Professional Employer Organization (PEO), which provides group purchasing power for health care, retirement and other benefits formerly only available to a large company, suddenly a small business has the overhead capabilities of a much larger company. Taken together, the outsourcing of these functions further levels the playing field for the business against its competitors.
Talent has become scarce in certain skill sets, industries and geographies, and in many cases the gap in demand is expected to continue. In addition, many developed countries are experiencing declining birth rates, and unless people are replaced by immigration, those countries will also see additional increases in demand. In addition, the development of the contract or “gig” economy, with highly talented individuals who want to be able to control their work environment, means that employees are looking for opportunities that will fit with how they want to live their lives.
In a situation where demand is greater than supply, the balance of power shifts to the employee. In order to compete in such an environment and in order to manage labor costs, which include indirect costs related to employee turnover, i.e. finding, hiring, and training of staff, as well as knowledge of company history and systems, an employer wants to position themselves the employer of choice in a given industry or geography. In order to accomplish this positioning, a business needs to establish a compelling Employee Value Proposition (EVP). An EVP is more than simply measured by employee satisfaction. It incorporates what a high value employee seeks in a work environment and an employer, and matches that up with what the employer offers in terms of not just pay, but total compensation, benefits, work environment, development, company direction, mission, vision and other aspects of what it means to work for one company instead of another one.
While the initial priority in a business is to develop a compelling and differentiated value proposition to potential customers, once this is established, the ongoing priority for the company becomes creating and sustaining a compelling Employee Value Proposition (EVP). I contend that when such an EVP is established and maintained, the customer value proposition becomes an ongoing successful byproduct. In order to develop and maintain a strong EVP, business leaders continually need to focus on the critical questions regarding their current and potential employees
So an EVP becomes the distillation of what sets you apart as an employer. The employee is looking at what they will gain during the time period that they work with you, and what that work experience to going to provide for them in the long run that a competitor will not provide.