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Losing employees can affect morale. (Photo: Unsplash)
Losing employees can affect morale. (Photo: Unsplash)

According to the Society for Human Resource Management (SHRM), it costs the average company at least 6 months of salary to replace an employee. Advertising the open position, devoting time to interviews, on-boarding the new hire—all these represent significant investments of time and money.

Worse, every departed employee takes with them an irreplaceable cache of cultural and institutional resources. This adds a considerable morale cost to employee turnover that, in ways we can’t fully calculate, compounds the expense of employee turnover. In light of all this, human resources professionals are right to concentrate on maximizing retention as much as possible.

When it comes to employee retention, family businesses lead the way. According to the Harvard Business Review, the average turnover at a non-family firm is 11% per year. Family firms, however, churn only 9% of their workforce. How do we account for this significant disparity? As Nicolas Kachaner, George Stalk, and Alain Bloch suggest, this heightened retention can be attributed to family businesses’ tendency to foster “a culture of commitment and purpose, avoiding layoffs during downturns, promoting from within, and investing in people.”

Three factors stand out here: culture, commitment/purpose, and loyalty. Family businesses are often strong on culture, especially in comparison with their non-family-owned counterparts. This deep sense of culture is birthed in every family business’s origin story: Grandpa started the company out in his woodshop; Grandma launched the first product out of her dirt-floor kitchen; and so on. These stories cultivate a gravitas that only deepens as the company persists over time. Especially in the presence of family heirs, that sense of gravity can eventually develop into a force that not only attracts new talent to the business but inspires old employees to remain.

Any old culture, of course, won’t do. As Kachaner, Stalk, and Bloch specify, family businesses retain employees by creating a culture of commitment and purpose. According to Gallup, only about a third of Americans are engaged at work. The rest are either passively disengaged (50%) or, worse, actively working to sabotage the company from within (17%). In fighting back this corporate epidemic, wise leaders have learned that employees need more than a parking spot and paycheck. They need a work environment where passion and purpose collide. They need to see how their work fits within a larger a whole—within the business and without. Family businesses, with all their tradition and pervasive family ethos, offer this sense of holistic purpose in a visceral way that most nonfamily owned firms cannot match.

Finally, family businesses tend to value, protect, and develop their employees more vehemently than non-family owned firms. As research shows, family businesses are reluctant to lay off employees during a downturn, apt to promote from within, and invested in employee training and development.  This is what allows family businesses to outperform their peers in retention without having to resort to financial incentives.

These three factors—culture, purpose, and loyalty—offer a compelling trio of wisdom in retention that any business could learn from. For family businesses, in particular, they represent a deep vein of unique resources to be mined and exploited. Here are three tips to help family businesses do just that:

1. Use Legacy to Feed Culture

Drink deeply from the well of family tradition to highlight your leaders’ connection to the company’s legacy. Without sacrificing your company’s attitude toward innovation, keep the company’s story in full view. Every new development, product launch, or marketing shift needs to trace back to that pervasive family ethos as its cultural starting point. Document and share key milestones that will eventually become woven into the fabric of your company’s history.

2. Show Employees Where They Fit in Big Picture

If they want to convert tradition into employee retention, family businesses need to draw each employee into the larger story. Connect employees with the bigger picture. Help them see who they are in the grand scheme of things, and they’ll commit to helping you realize that vision.

3. Remember that Loyalty Begets Loyalty

Value your employees, and they’ll value your organization. Invest in them, and they’ll invest in you. Protect them from the vagaries of the financial market, and they’ll protect you from the demands of an increasingly competitive labor market.

Culture, commitment/purpose, and loyalty—these are the factors that help family businesses retain more employees than their nonfamily-owned counterparts. While the former are better positioned to capitalize on these “baked-in” features of family business, there is no reason why the latter could not do likewise. No matter who runs the company, organizations thrive when they create a culture where committed employees can clearly understand their purpose and honor it with their loyalty.

Rochelle Clarke is the Founder and CEO of Succession Strength, Inc, a company that helps family businesses and entrepreneurs master communication and prepare for smooth successions. 

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