Small-business owner Gorham grabs a lobster out of tote during delivery of live lobsters at his shop the "Redhook Lobster Pound" in New York
Small-business owner Ralph Gorham grabs a lobster out of a tote during a delivery of live lobsters at his shop the "Redhook Lobster Pound" in New York December 16, 2010. Gorham and his partner Susan Povich are awaiting the tax cuts the U.S. Congress is poised to extend for two more years. Like many small entrepreneurs, Povich says the tax cuts will help but will not dictate her business plan. REUTERS

A pawnbroker running a book club to retain staff? Sounds like fiction, but that's one of the strategies employed by entrepreneur John Thedford to help keep his employees happy.

Thedford, owner of La Familia Pawn & Jewelry, a chain of high-end pawnbroker shops, deploys some unusual teambuilding practices, in addition to monetary incentives, to entice top workers to stick around. He's hoping they won't be sniffing out new jobs as a nationwide hiring freeze starts to thaw.

You have to hold them together with leadership and culture - constant training, said Thedford, who is bulking up beyond his current 250 staff, and expects to operate 40 stores throughout the Southeastern U.S. and Latin America by year's end.

Other small companies worried about retention should tune in.

Thedford, who wrote Smart Moves Management, previously built another pawnshop chain to nearly 70 stores before selling it for more than $100 million in 2008. He attributes much of his success to strong hiring and retention programs, rewarding top sellers with public praise and steady rates increases, noting his staff often earns twice as much as the competition.

We've had people who had been with us 12, 15 years, lots of tenure, he said.


Private sector companies added 187,000 jobs in January, according to initial data by payrolls processor ADP Employer Services. Government figures for January were expected to show a more modest increase.

With hiring on the rise, small firms that can't afford salary increases need to get more creative to retain core employees.

In small business it's more critical because you have fewer people, said Johnny Laurent, general manager of Sage North America, a supplier of business application software to small and mid-sized firms. He regularly works with companies on issues surrounding hiring and retention.

Before the recession, it was all about doing things faster. If that didn't work out, hire someone else, Laurent said. Now, to keep them, (you) have to engage employees with the vision so they own part of it.

That means clearly communicating the company mission and showing how each worker's contribution impacts results. It also requires busy entrepreneurs to reach beyond the comfort zone, taking time to be generous with praise and offer tangible benefits in lieu of financial compensation.

Flexible hours, time off and affordable, practical perks such as memberships at club stores and gyms are just some of the rewards that can help to offset the inability to provide salary increases, Laurent said.

Do something else that shows them that you now care about the whole person, he added.


In Tucson, Arizona, Deborah Munox-Chacon, owner of Sonoran Oasis Landscaping, has already seen success with such a strategy. Hamstrung by upstart local competition willing to undercut her bids, she has been unable to raise prices that would allow her to offer wage increases to her 13 employees.

Instead workers are provided with paid six-week agricultural training at the University of Arizona, where they hone their skills in pruning, planting and irrigation. Munox-Chacon also frequently picks up the tab on advanced training for her senior staff.

It makes them much more knowledgeable and confident immediately, she said, adding she recently hired a part-time worker to offer more flexibility to full-timers with scheduling challenges. She also provides bonuses whenever possible.

They've got families and kids, she said. I do try to be understanding.

At Horizons Companies IES, a small video production company based outside of Columbus, Ohio, owner Don Lee builds morale with a workplace ambience designed to foster the creative juices of his 30-member crew of shooters, animators, writers and the like.

There is a cookout replete with contests every week - even during inclement weather - as well as a mascot in the form of a cat named Louie. There's even an onsite community garden.

The spirit of the employee has to be strong to go that extra mile, said Lee, noting that some of his staff have been with the company since its founding nearly 30 years ago. We feed them, we entertain them. When somebody needs a comp day, flex time, a long lunch - we look the other away a lot.

Regardless of the tactics used, Laurent cautions small business owners to avoid frivolous money decisions.

If you're asking them to take a pay cut, you ought to (too), he said. If you say, we can't afford this, don't go throw a big party or show up in a new car.