Communication, recognition, and inclusion will help your company retain its most powerful asset.

It might seem strange to think about employee retention given the economic challenges we have been facing. Many business owners and managers have been spending a big chunk of their time on reducing expenses, downsizing operations, and — unfortunately for some — laying off employees. But in such a climate, working on employee retention is more important than ever.

Market downturns force us to examine every aspect of our businesses to identify any number of “non-essentials” — perks that we had enjoyed during prosperous times. (It’s amazing to me all the non-essential “things” we identify when we are forced by external circumstances to significantly tighten our belts.) When doing this examination, you need to also focus on keeping your best employees and protecting the company for their benefit.

Why?

During the rest of 2009 and into 2010, we should be defining success in terms of preparing for the future so our companies are ready to capitalize on the inevitable opportunities that will surface when the economy recovers. This requires retaining our very best employees and keeping them motivated and interested in the long-term success of our companies. As a leader, you must do this in spite of the conflicting messages that are sent when downsizing, reducing expenses, and “hunkering down.”

As you consider how to retain your key employees during these challenging times, I encourage you to think about a few things:

Keep on Communicating

Communication is always important, particularly right now. When you take steps to reduce expenses and/or lay off workers, you absolutely must spend time with your key employees clearly articulating your thinking. Explain the thought process, logic, and rationale for why you did what you did, and explain the implications. Left to their own devices, most people will assign negative reasons to business decisions. Don’t allow that opportunity. Instead, actively communicate to key employees what is going on, why it’s going on, and what it means for them. If you really are protecting the company for the best employees, then tell them! They will appreciate being included, and many of them will recognize that there are greater opportunities ahead for them as a result.

Involve Key Employees in the Process

Involve your top people in the strategic decision-making process, especially when it comes to getting in front of economic challenges. I know of a company that chose to do just that — they convened a group of key employees to collectively examine the business. Ultimately, they decided together what actions to take regarding expenses and employee reduction. This process received a heightened level of buy-in on the part of key employees and created positive peer pressure to dig deeper to find more creative cost-cutting ideas. When the changes were implemented, they were broadly understood and supported because there was a built-in communication network to take the message into the company.

Consider Non-Financial Rewards

Giving non-financial rewards isn’t a new concept, but it’s worth reconsidering. The economy is pressuring businesses to maintain or lower payroll costs, and most companies are unable to use compensation as a reward (unless, of course, they have reduced salaries, and just maintaining compensation levels for key employees could be viewed as a reward).

Consequently, non-financial rewards mean more. Focus especially on thoughtful rewards such as responsibility, opportunity, recognition and praise, and inclusion in the decision-making process. Are you out in your business thanking your team for their efforts? Are you letting them know, frequently, what is happening in the business and marketplace? Are you asking them for advice on situations and/or challenges? When one of your team members goes above and beyond, or is exceptionally creative with ideas of strategic importance, are you recognizing them?

It’s easy in times like these to get overly concerned with managing your business, focusing on the details, and adopting a “bunker” mentality. Keep in mind that your employees — and in particular your best employees — are the company. They need encouragement, honest feedback, and specific thanks and praise right now.

All the things I’ve mentioned revolve around interpersonal relationships. Make sure you and your key managers are spending significant time on those relationships. Employees will fully invest themselves in an organization when they feel valued and respected, and when they believe leaders sincerely care about their success. It can be tempting to think about your employees in terms of “They should be thankful they have a job” or “I know we are struggling, but where else could they go?” The reality is that your best employees are thankful that they have a job, but they will not be satisfied with just having a job — they want to be part of something important. Furthermore, they can and do go elsewhere, even in tough times. We all know who our best employees are, and our competitors usually do as well. We are always at risk of losing them — in good times and bad. Now more than ever, you and your management team should focus on employee retention because your top employees are your most powerful assets now and in the future.

Paul Grunau is the chief operating officer of APi Group Inc., a billion dollar holding company for more than 32 independent construction and construction-related businesses with 9,000 employees in over 150 locations. Paul is a graduate of Brown University, where he received a bachelor’s in economics. He completed his master’s of management degree from the Kellogg School of Management at Northwestern University.