The crunch is on for small businesses requiring skilled labor. In recent years, a sudden burst of demand for qualified workers has caught many employers off guard, especially in multimedia and certain manufacturing industries, leaving them scrambling to fill seats and meet production demands.

Ironically, this shortage is exacerbated when the company in question is "hot" and expanding rapidly; for high-growth firms, finding skilled labor is now their most urgent issue, taking precedence over competition, access to capital or even taxes and government red tape. This labor shortage quickly becomes a bottleneck for the company, hindering further growth. One-sixth of the 30,000 small and medium-sized Southern California businesses responding to a recent poll complained that a lack of capable workers has been a severe constraint on their companies in the last year.

Such businesses have a tremendous need for skilled workers to meet burgeoning orders, yet are often unable to compete with large firms for those workers, simply because they don't have the economies of scale. Small businesses have disadvantages in more traditional kinds of benefits like health care, and are rarely able to offer packages comparable to their larger competitors. A company could remedy its labor shortage by offering higher salaries, for example. However, that's easier said than done, for it raises both cost and equity issues. Bringing on a new recruit at a higher rate could create morale problems among existing workers as well.

Specialty jobs, of course, are never easy to fill. However, with the nation's unemployment rate continuing to hover at its lowest in many years (4.5% in August), employers of all sorts are struggling not just to hire but also to keep good workers. The catch, of course, is how to accomplish this. Companies are attempting to address their labor turnover by increasing training, hiring more temporary employees, and trying to boost productivity by upgrading their equipment and programs. In a climate of downsizing and economic uncertainty, however, merely throwing money at these problems won't necessarily resolve them. What can a company do to inspire skilled and competent workers, win their dedication, and remain competitive?

While searching for a way to find and keep skilled workers, many companies are seriously examining incentive programs as a means to raise employee morale and increase their productivity levels. Jim Warren, owner of ShopWerks Software in Tualatin, Oregon and creator of an innovative employee incentive software program called PIP Plus, shares his views and solutions to this dilemma.

"In light of today's volatile economic situation, productive, satisfied workers are extremely important to a company's survival," Warren explains. "However, many companies don't have a concrete strategy to increase worker satisfaction. There has to be a constructive company-wide system for acknowledging and rewarding good performance, correcting weak performance, and building teamwork."

Warren asserts that companies don't give employees the necessary tools to enhance the skills the company desires from them. "Therefore, the employee is just left high and dry. If he doesn't figure it out on his own, pretty soon he just feels that the company doesn't care. Simply, you need to paint a brighter picture.

"An employer should have the employee asking himself, 'Would I enjoy working for that larger employer where I'm just punching a time clock? I wouldn't get any recognition. But I can get all of these extra things here. Plus, I can get more if I work a little bit harder.' The skilled person should be skilled enough to see that his own self-worth and happiness is what really counts," continues Warren.

"Basically, you need to give the skilled employee the feedback that tells him how he stands and is performing at all times," Warren explains. "Skilled workers do want to achieve. They have a desire to do well at their jobs, and they need recognition. An employer doesn't necessarily know how an employee is doing until something is wrong. It seems as though that most businesses only look at the bad parts, and never go around and pat people on the back for doing a good job.

"In the old days, the 50s & 60s, we had human technology. A journeyman machinist took pride in his creations. Now, with computer technology in the workplace, the skilled person doesn't necessarily have the ability to really perform. He's strapped by the computer. People want to get back to being creative-adding value. People seriously want to go to work and say, 'Hey, stand back and look what I did.' Not just see something go by on an assembly line and put a nut on it, for instance. You need to be able to add value to each employee and their process performance."

William Dennis, chief economist at the National Federation of Independent Businesses in Washington DC, echoes these sentiments: "The underlying problem is that skilled labor in manufacturing is not valued. People don't recognize skilled labor when they see it; they can't differentiate it from mass production."

So how do companies add value to employees and still increase profits? Through experience in his own company, Warren discovered that rewarding employees for work well done increases their satisfaction and productivity, and pays invaluable dividends in employee devotion as well as workplace harmony. He believes that a quality incentive program should:

• Set realistic goals.
• Set improvement goals and performance standards.
• Include employees and management in decision making, essential for empowerment and communication-building.
• Establish open communications on all worker and management levels.
• Clearly define how jobs will be measured and rewarded.
• Make a company-wide commitment to quality and honesty.
• Establish a supportive work environment.
• Recognize and treat employees as valuable assets.
• Reward individual effort and teamwork.
• Share the profits realized as incentive awards

According to Warren, when companies correctly apply motivational incentives, such as the PIP Plus program, monetary rewards are paid for with additional profits gained from increased productivity, not out of the company's coffers. "The increase in your employees' performance will pay for the program," says Warren.

"When you put PIP Plus in place, labor understands exactly what is expected of them, has a goal to reach within a time frame, and can also monitor results on a regular basis. Basically, the employer and employee are laying all the cards on the table. Everybody understands what is expected and what needs to be achieved. The PIP Plus program gives everybody that feedback so they can see exactly how things are progressing towards those key values or goals."