As the battle for talent continues to heat up, startups and small businesses are competing for quality employees against big corporations that have serious advantages working in their favor. In this changing job market, how do smaller companies compete for and retain valuable workers?

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One option is to find ways to help employees invest in themselves as a kind of fringe benefit of employment. At my startup, Code School, we call this companywide policy of deliberate self-improvement "betterment," and it has become a central aspect of our culture.

Investing in employee self-improvement as a competitive advantage isn't just a platitude; it's backed by research. In its 2013 State of the American Workplace Report, Gallup revealed that employee engagement in the workplace can affect retention and even a company's bottom line. According to the study, millennials are the most likely of all the generations to say they will leave their jobs in the next 12 months if the job market improves.

However, companies that engage their employees can minimize the chances that they will leave. In fact, Gallup’s research described "opportunities to learn and grow" at companies as an important factor for millenials and members of Generation X deciding to stay with a company.

I have always believed that people want to be engaged at work, and one way to increase engagement is through policies that help employees nurture personal growth. At Code School, we do this by setting aside one day every month where we encourage our employees to work on anything that makes them better at their job. This could be exploring a new technology, learning a new language, reading a book, building a tool that helps the business or taking an online course.

Some of our employees use this time to work together to solve a problem and build rapport with one other. For example, a few have teamed up on a fitness-tracker project that has evolved into a cross-functional project involving team members from design, development, marketing and operations.

We also pay our employees to attend one local and one remote conference every year, and offer to pay for learning materials such as books, online courses and workshops.

All of this is designed to promote self-improvement and engagement at work, which impacts the bottom line. According to Gallup’s study, 70 percent of American workers are “not engaged” or else are “actively disengaged” at their jobs, costing U.S. companies $450 billion to $550 billion per year. An even more important statistic, I believe, is that only 22 percent of U.S. employees are engaged and thriving at work. As leaders, our job is to shift this number, which not only helps us keep good employees but also improves profitability of the business.

If inspired employees and higher profits aren't incentive enough for companies to pursue a culture of betterment, then perhaps competition is. Google famously initiated this way of thinking with its "20 Percent Policy," which resulted in some of the search company's most influential and profitable products, including Gmail and AdSense, among others. If a giant like Google thinks this kind of policy is important, then small business too should seriously consider the role of betterment and inspiration in building a lasting company culture.

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Regardless of your company's size, authenticity is the key to making a betterment policy really work. A policy focused on personal growth breaks down in implementation if the focus strays from the desire to improve your employees and your relationship with them.

The other benefits, such as new ideas and increased profits, will grow naturally. Whether it’s mastering a new coding language or learning to play the violin, employees who are are engaged and thriving in ways that matter to them personally, are more likely to maintain a strong work performance.

As adults, we often don't leave ourselves enough time to play and experiment. Betterment is everyone's opportunity to spend time trying something new or experiencing different things. Sometimes, this may lead to amazing new products that benefit the company, but more often it just leads to happier, more invested employees. Either way, you’ve created a company that job candidates seek and a place where talented workers want to stay.

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