Perhaps you’ve heard that you need on-site nap pods and free cappuccinos to have any hope of retaining your employees these days. If you’re a small to medium-sized company, you might be wondering how you can possibly afford these kinds of perks. Here’s the truth: expensive perks, while nice, are not a silver bullet for employee engagement and retention challenges.

I’ve worked on hundreds of placements over the years, and I’ve seen what works and what doesn’t in terms of employee engagement. No matter how much free sushi you hand out, there’s no substitute for offering rewarding work and opportunities to develop and grow.

How do you ensure that your employees are feeling challenged and fulfilled by their work? It starts by understanding the skills sets of all of your employees and where they can grow over time. Here’s my blueprint for creating a work environment that brings out the best in employees:

Understand the current and future skills gaps at your organization

Too often I see companies make hires based only on the skills they need right now. The thinking goes something like this: “Our payroll administrator has left, therefore we need to hire someone with payroll expertise.” But to truly future-proof your team, you need to have a holistic understanding of the skills in your organization, now and in the future.

Start at the senior level. What skills are you currently missing? Who is likely to leave in the next five years? When that person leaves, do you have a replacement on the bench? If the successor doesn’t have all of the necessary skills yet, which skills are missing and how can you develop those? Once you’ve thought through senior positions, map out all of the lower levels of your organization in the same way.

Understand the strengths and skills of your new hires

When interviewing a new hire, don’t just think about how well the person would fulfill the requirements of the open role. Try to get a sense of the candidate’s aptitudes, passions, and interests, as well as past experience that might not be directly relevant to the new role but strengthen her long-term leadership potential at your company. Where does this candidate want to be in five years? What does she want to learn? What projects excite her? The goal is to gain an understanding of the candidate’s full potential as well as her current skill set. Armed with this information, you can place her in a role that will not only challenge her now but also develop her leadership potential.

Promote internally to fill senior roles

When you’ve correctly executed the first step in this process, you’ll understand what skills gaps are going to become evident in your organization over time. You’ll be able to develop the skills you’ll need in the future in the employees you have now so that they can be promoted to more senior roles. In an ideal world, your company would only ever need to hire entry and mid-level employees.

The benefits of internal mobility are well known. When you promote from within, you save the costs of onboarding, the cost of an expensive senior level search, and the loss of productivity while the role is open. Internal hires are also more likely to be successful and less likely to be laid off. Most importantly, promoting your best talent will give them the opportunity for professional development and fulfillment at your company so that they won’t have to look outside to reach the next level in their career.

Growth and development are at the top of Maslow’s hierarchy of needs. By planning out a career path for employees in your company that includes room for them to learn new skills, you’re not just giving them a nice perk, you’re helping them to achieve self-actualization. That beats massage coupons and foosball tables any day.

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