Small Business Lessons from Boeing's Strike

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It's easy to reward workers during good times. Bump up salaries, throw in bonuses and add perks like company cars or lavish holiday parties.

But when the economy tanks and every dollar counts, it's hard to justify spending money on anything other than payroll and basic benefits. How far can you cut before employees start making for the door?

It's a balance many companies are trying to navigate these days, from multinational corporations to mom-and-pop retail stores. As businesses try to get lean, cost-cutting is inevitable. It also can lead to sinking morale or outright rebellion.

That's the case at Boeing (STOCK QUOTE: BA), where more than 20,000 machinists went on strike for eight weeks. The strike ended Nov. 2. The machinists got to keep their jobs (and start collecting a regular paycheck again), while Boeing can assure customers they're back to filling orders.

Employee-employer negotiations tend to be tricky, and in the current economy, it would seem employers have the upper hand. If workers walk out, there are plenty of other people anxious for a job, right?

Maybe so. But losing experienced workers comes with its own, less obvious costs.

"For the average small business, it takes about 1 ½ to 2 ½ of a worker's salary to replace them," says compensation consultant Bob Cartwright, a member of the Society for Human Resource Management and president of Intelligent Compensation LLC.

For a company such as Boeing, replacing skilled machinists would have meant an enormous outlay of time and money. Clearly, it was in the company's best interest to make a good-faith offer by agreeing to a number of union demands. Boeing will give raises of 15% over four years, higher pension payments, and a promise to maintain the current employee health care coverage.

Small businesses often can't afford to make such concessions. They're being forced to cut back on health care or discontinue coverage completely. And forget raises. Giving workers even cost-of-living increases is a no-go for many owners.

So how do you keep employees motivated when times are tight? The good news is that it doesn't take big bucks, Cartwright says.

"A big piece of the puzzle is recognition," he says. "Walk the floors and show an interest in the people who work there. Say 'thank you' for a job well done."

When it comes to more tangible perks, use gift or gas cards as spot rewards for those who make an extra effort or exceed expectations. Rewards that promote time with family or friends are more meaningful, Cartwright says. "Tell them to take the afternoon off and give them a gift card for free pizza," he suggests. "For someone working for $14 or $15 an hour, getting a $50 restaurant card is a big chunk of change."

Time off is another low-cost incentive. Because small businesses tend to be more flexible, giving workers an afternoon or day off can be done informally as a reward for reaching goals or putting in extra time on a project.

Employee recognition isn't just about feeling warm and fuzzy. It may be the key to surviving the current economy. Trim costs all you want, but customers will stay away if they see sagging morale and a staff that has mentally checked out. A thriving team environment can be what sets your company apart.

"It's all about building relationships and maintaining them," Cartwright says. "The workers have to want to be there. When cash is tight, the culture is what keeps an organization together."

Boeing is a $35 billion company. For small-business owners, the dollars at stake are comparatively miniscule. But the issue of employee stability is no less vital. Keeping your workforce stable and content may be the only way to navigate the uncertainty ahead.

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