February 10, 2020

The Secret to Employee Retention for Startups


The Secret to Employee Retention? Turnover in the tech industry is sky-high at 13.2 percent. This is the highest of any industry, including retail. 

Sadly, tech industry leaders don’t offer startups much to model in the way of happy employees. Apple has the highest median tenure, just two years. They lead Amazon and Google, where the average tenure is one year. 

The cost of replacing an employee can amount to between 50 and 125 percent of a person’s salary. And, whereas the tech giants can handle the incredible expense of turnover, it can be detrimental for smaller startup companies. 

So, what is a SaaS startup to do? 

Consider freelancers or contractors. 

For a time-strapped startup owner, the idea of having more full-time employees might seem appealing. Having full-time employees gives you more control of their schedule and training, and allows you to dictate that a person can’t work for others. 

But, full-time employees are not always the best choice. They are an investment, requiring benefits and payroll taxes, that shouldn’t be taken lightly.

Freelancers and contractors instead work on a project-by-project basis. This gives business owners the luxury of selecting someone with a specialized skill set for the exact task at hand, without the huge overhead bill. And, that person can be located anywhere

Workers and employers alike are newly finding themselves navigating the contractor world, with a variety of easy-to-use platforms for finding the right contractor, including ToptalFiverr and Upwork

The bottom line: Carefully assess your business needs for full-time employees or contractors and leverage a combination of both.

Hire for culture fit. 

Small start-ups are up close and personal. Even so, especially when it comes to considering a new employee, it can be tempting to think of a professional relationship as one-dimensional and as such, hire strictly for skill. 

Nothing could be further from the truth, however. We are all multi-dimensional, and personal connections and friendships at work make employees less likely to leave. These personal connections require culture fit, even amongst contract workers and freelance employees.

What to do? From your company’s description on your website to a job posting, be clear about your company’s values and more importantly, how they translate to a specific role. In the interviewing process, ask how a prospective employee would handle certain situations. 

The Secret to Employee Retention? Remember, you can train for skills, but you can’t make a person fit. So, spend lots of energy finding the right person. 

Onboard new full-time employees effectively. 

Everyone seems to remember their first day on a new job. Were they left with a training manual and a computer to fend for themselves? Or, did they meet a great team of new faces, get a taste of ongoing projects, and dive into a first assignment? 

Even so, often business owners—in all the to-dos and must-dos of the day— forget this. For them, the finish line might seem like it was making the hire, not onboarding.  

For this reason, be careful to consider the first day crucial for new employees. Transitioning to a new full-time role is not without risk, and employers should make it their job to help new employees feel like they made the right choice. 

Offer autonomy. 

Yikes, work from home? Flexible hours…what? We have officially crossed into a new era in the working world and these perks are the new norm. And, for good reason. When employees are empowered to exercise more control over their work life, they tend to be happier.  Not only does it improve morale and productivity, a sense of autonomy fosters ownership

Autonomy, however, can be broader than work hours, personal needs, or flex hours. Ritz-Carlton, for example, gives employees a budget of up to $2,000 per guest per day to delight guests at the employee’s discretion. It gives them the power to delight. 

While start-ups don’t have that cash to blow, the principal remains: allow and encourage your staff to do their jobs as best as they can by empowering them to practice their personal judgement, as is appropriate. Let them problem-solve through an issue with co-workers or take extra time to delight a customer. Then, recognize their hard work and performance.

Talk about conflict resolution. 

While it’s good to smile and get along, big decisions at a start-up can mean big disagreements that are hard to move past. 

Location Labs, a mobile app developer, boasts a 95% employee retention rate.  It attributes this partly to its “disagree and commit” culture. Disagree and commit is a management principle that encourages the team to disagree on important decisions and then requires that the team unify once a decision is made. This not only gives everyone a true opportunity to voice their point of view, it also requires that everyone join together to achieve a stated goal once decided upon. 

For start-ups with a small team, addressing conflict resolution head-on can be pivotal to success. 

Small startups can be great employers that are ripe with opportunity for the right people. But, sweat equity is required and things can get messy on the road to success. Once you hire the right people, make ongoing efforts to keep them.

The Secret to Employee Retention? If you can get employees excited about their work from day one, empower them to grow, and help them through inevitable work-related conflict, your startup will stand a greater chance of retaining employees that contribute to your company’s success.