Last December, Michael Mogill required his five employees to work through the holidays because he was eager to keep growing his young video-production company. He didn't throw a party or give out year-end bonuses.
But while his clients were satisfied, the 27-year-old founder of Crisp Video Group in Atlanta says it was clear that his staffers felt burned. By springtime, all of them quit. "They just didn't like to be in a company that valued the work and nothing else," says Mr. Mogill. "It was a huge lesson for me."
The first-time entrepreneur, who expects revenues to top $1 million this year, has since rebuilt his team and is taking a new approach to managing people, especially during the winter holidays. "We now have staff outings when we hit our goals and we're giving out
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For startups, navigating the holidays can be tricky. Many feel a need to stay fully staffed to maintain sales momentum, especially if it is their industry's busiest time of year. They also typically can't afford to give employees fat year-end bonuses or throw lavish parties.
But figuring out a way to have both a productive and festive workplace is essential for retaining your people, who are among a business owner's most critical assets, says Joseph R. Weintraub, a management professor at Babson College in Wellesley, Mass.
"The No. 1 mistake is underestimating the symbolic value of the holiday season," he says. "Not acknowledging it is a problem. It sends a negative message."
You don't have to spend a lot to show you're grateful for your team's efforts throughout the year, adds Mr. Weintraub. A simple gesture such as a handwritten, personalized holiday card, coupled with a low-key social gathering, can signal you care.
Expect to be too busy serving customers to celebrate in December? Let your staff know you plan to do something in January or later—and follow through.
When planning a get-together, talk to your team ahead of time about whether they'd like to invite their significant others, suggests David Lewis, president of OperationsInc, a human-resources outsourcing firm in Norwalk, Conn. Some may find it stressful to bring a spouse or partner into a work setting. Others may not have anyone to bring.
Another tip from Mr. Lewis: Don't force your staff to take their vacations during the week between Christmas and New Year's if it's a slow time for your business. "How do you explain that to an employee who wants to take a two-week honeymoon in the summer?" he says.
If you aren't sure what business will be like during the holidays, ask your industry peers. Ryan Shank says he regrets not doing that last December. He had his employees work through the holidays because "I didn't want to lose a week of selling," says the 25-year-old founder of Mhelpdesk.com in Dulles, Va.
But it turned out that the company's target customers—plumbers, electricians and other service professionals—typically don't work the week between Christmas and New Year's, and some indicated that they didn't appreciate getting sales pitches from his staffers during that time.
"Everyone pounded the phones like we normally do and everyone was hitting a brick wall," says Mr. Shank. "It killed morale."
Some business owners like to give employees gifts in lieu of a party or bonus. If you go this route, be sure to pick items that your team will actually enjoy, and not low-value tchotchkes or work-related tokens.
Kristopher Jones admits he did a lousy job playing Santa Claus last December when he gave his employees personal-development CDs and workbooks by self-help guru Tony Robbins. It was the first holiday season in which his Web-marketing firm had a sizable staff, and he thought the gifts, valued at about $400 apiece, were a great way to thank everyone for their hard work.
"I'm a huge Tony Robbins fan," says the 37-year-old founder of ReferLocal.com in Wilkes-Barre, Pa.
It was clear that his 16 staffers weren't impressed with the gifts, some of which still gather dust, unopened, on employee desks. Says Mr. Jones: "The gifts were apparently more about me."