Are You A Holiday Scrooge?

Small business owners are spreading less cheer this holiday season.

Before you rush out to purchase those last-minute holiday hams or dole out those bonuses, you may want to consider what other small business owners are doing this year to show their gratitude toward employees, clients and customers. According to recent surveys, they are tightening their purse strings this holiday season and many are looking for alternatives to fruitcakes and bonus checks.

Employees May be Singing the Holiday Blues
The majority of small business owners (70 percent) intend to thank staff this year, but that number is down considerably from 77 percent in 2006, according to the OPEN from American Express Small Business Monitor, a semi-annual survey of business owners.

Only 43 percent of owners intend to hand out gifts compared to 53 percent in 2006. Likewise, bosses aren’t feeling as festive and only 44 percent are planning on throwing office parties, which is down 10 percent from last year.

Alice Bredin, a small business advisor with OPEN from American Express, is somewhat perplexed by the decline of those planning to give time off to their employees (44 percent compared to 55 percent last year). “Even when spending is down, the gift of time is an easy way to thank staff without breaking the bank,” says Bredin. “And with improving customer service top of mind, it becomes that much more important to take steps to retain valued employees.”

Other expressions of gratitude include year-end bonuses (43 percent vs. 47 percent last year) and raises (28 percent vs. 30 percent). However, this dip doesn’t necessarily mean that a scrooge mentality is setting in. Instead, many businesses are looking to alternative reward systems. In general, performance-based bonus plans — those tied to the company's bottom line — seem to be gaining, with up to 70 percent of employers offering them in some regions.

"The majority of companies have realized that only through performance-based awards can an organization effectively motivate and reward employees for helping achieve their goals,” says Ken Abosch, a consulting business leader for Hewitt Associates. “Variable pay plans, as opposed to holiday bonuses, clearly connect employees to company performance," They also enable business owners to avoid entitlement issues and potential employee animosity about monetary fairness.

Gestures of Client Appreciation Are Waning
“Guilty!” is what two-thirds of those surveyed by American Express say they would feel if they didn’t show their appreciation to clients/customers and employees—yet only 59 percent plan to buy client gifts this year compared to 70 percent in 2006, according to the OPEN survey. Ironically, those who are feeling generous toward clients and customers, plan to spend nearly $1,500, which is 28 percent more than previous years.

“Small business owners who are giving holiday gifts to clients seem to have mastered an important lesson—you get back what you give,” says Bredin. “Keeping a legacy alive means running a growth-centric business and investing wisely, not only in customers but in staff as well.”

The most popular client gift choice is cards and calendars, followed by gift cards, fruit and food baskets, company-branded items, donations to charities, flowers and plants and wine or liquor.

“Many small business owners are similarly focused on clients and customers as a means to growth,” says Bredin. “Client gift-giving during the holiday season can be an effective marketing tool—but is most effective when it is the culmination of a year’s worth of exceptional customer service and relationship development.”

Most small business owners are positive about the future economy and growth, but many agree that rising interest rates and the downturn in the housing market have had a negative effect on their business, says Bredin, “Given this dichotomy, small business owners are spending carefully.”

Gift-Giving Tips
SurePayroll president, Michael Alter, offers the following tips to small business owners for holiday gift-giving to employees, customers and vendors:

• Providing significant holiday gifts to employees is not always essential or possible, but making sure to think of employees by sending a card or small gift is an easy and inexpensive way to show you appreciate them. If you want to keep the gifts impersonal, consider providing logo goods like sweatshirts, jackets or vests, or food items such as variety gift baskets. If buying personal gifts, be sure to spend equally on each individual to avoid sending an erroneous message about an employee's worth to the company.


• While it is always nice to receive gifts, you shouldn't expect employees to give them to you, even if you have given gifts or thrown a holiday party. It doesn't mean they don't appreciate it, but might have different viewpoints or means for providing gifts.


• Sending gifts to customers can be a selfless gesture, but it’s probably not a good idea to go overboard, or the gift might come across as a bribe for more business. If you do not know the customers well, select an impersonal gift, and under the $50 mark. Food items and gift baskets are a safe bet. “I don't recommend sending logo merchandise alone, as it could be viewed as free advertising, rather than a gesture of appreciation.” If you know customers well, pick a gift that reflects their personal interests and shows you've been listening to them.


• It is not always necessary to wait until December to give holiday gifts. If an employee has done a particularly good job, or you are especially appreciative of a customer or vendor, send a bonus or gift any time. It is unlikely they will appreciate it any less if it’s not received at the end of the year.