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7 Ways to Improve Employee Retention in Startups

Written by Judit Alvarez

on April 22, 2022

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Judit Alvarez

7 Ways to Improve Employee Retention in Startups

Having a great team is one of the most important things for startups. Investors require a solid team, because it accounts for the very success of most startups.

However, finding a “winning team” can be difficult and retaining those stars, even more so. This is especially true for young startups. In the early stage you cannot compete with the salary levels or perks of bigger corporations so you have to offer something else. 

For startups, the topic of employee retention is more important than for any other type of business, because you cannot afford to lose your most valuable asset: The winning team players that make your company shine.

Let’s discuss why startups struggle with employee retention and seven effective strategies you can use to boost yours.

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Why Startups Struggle With Retaining Employees

There are differing opinions on why startups have a harder time, than other companies, retaining employees. The disadvantages are fairly obvious; Lower salaries, unproven business models, unstable revenues and missing resources. Paying salaries at the level of enormous corporations is plain unrealistic. More notably, Startups can’t afford to hand out attractive perks and bonus packages. 

Other reasons could be a lack of work-life balance, as a result of long working hours and unbalanced workloads. Finally a difference of perspective between the passionate entrepreneurial founders and paycheck-interested employees might add to the employee turnover.

The Real Cost of Employee Turnover 

Every company should care about employee retention. Putting efforts to increase it is one of the most cost-effective actions a startup’s leadership can take. If employee retention is lacking, a person quitting their job can cost a company 2.5 monthly salaries. Not to mention an immense loss of valuable information and know-how. 

The time and resources invested into training a new employee to understand the routines, processes, know-how and organizational culture of a company, runs up your costs. Every time a member leaves your team, it hurts your bottom line.

Then there is the additional cost associated with finding a new colleague to replace the old one. These days finding people for tech startups such as DevOps engineers, software developers etc. can be particularly challenging. In summary, you want to retain your employees in almost any circumstance. So how do you do it?

recruiting

1. Retention starts with recruiting.

It might be surprising to some, but if you want to prioritize employee retention in your startup, you must start in the recruiting stage. Reasons for resignation can often be traced back to flaws made early in the recruitment process. An example could be big promises and statements made in the job-posts or interviews. If you can’t keep your promises it will backfire on you.  

Hiring the right candidate is also an important factor that impacts retention from the-get-go. Sometimes emphasis could perhaps be put less on a candidate’s formal qualifications or prior experience, and more on other values such as their flexibility, willingness to learn and attitude. If you want more on this topic look for The 10 Perfect First Hires for Your Start-up. 

2. Offer Participation and Involve Your Employees in Decision Making.

As a startup you have to work with what you’ve got. Applicants looking for work at a startup are typically not looking for the biggest paychecks. They are more than likely excited and passionate about the company’s mission and vision

One way in which startups have an advantage compared to corporations is the flat hierarchies. As a startup, you can offer your employees involvement in decision-making. This doesn’t mean that they will control the strategy and outcome, it just means that you listen to them and ask for their input on important company decisions. Letting your employees know that they play an important role makes them feel appreciated and respected. 

Startup talent is usually driven by the desire and opportunity to make an impact. Involving your employees gives them an incentive to stay, because they want to contribute to the difference your company is making.

  

teambuilding

3. Invest in ongoing team-building and strengthening.

Building a great startup is a team sport. As a founder, there are many tasks and responsibilities you need to handle. Therefore having an independent team that works well together is a key ingredient for success. That’s why you should continuously invest in team-building.

However, keep in mind that team-building exercises can sometimes feel boring, dull or lame to the employees, so try to keep it fun and light. Also consider taking your organisational culture into account, you might want to be creative and spice it up a bit.

Team-building will help your employees bond and get to know each other as individuals and not just their work role, which makes it easier to get along. This is critical, since tension in the team will not only lead to unnecessary waste of mental energy and lack of focus, but in the end might hurt your retention. 

As a general rule team-building exercises should take place outside of your office and may ideally have an entire day dedicated to them. What you want to do is take people out of their daily routine so the experience can be more profound and long lasting.

4. Build organizational culture from day one.

Organisational culture is not something that only concerns mid or large-sized corporations. It is just as much for startups. You might not have considered it but your startup already has an organisational culture! Every company has a culture and unless you take care of it and steer the direction, chances are your company culture may not lead to success.

Some of the biggest company success stories started with startups that had unique and enticing company cultures – bursting with startup spirit. Have you heard about the legendary “Wear Your Pajamas To Work Day” at Google? Believe it or not, this once unconventional idea has caught on so well today that every year, hundreds of companies and thousands of employees celebrate “National Wear Your Pajamas To Work Day” on April 16th.

As a founder, it is you and your style of work that (un)consciously creates and determines your company’s culture. Be honest and open about your culture and work environment. This way you will attract employees with your working style, who can thrive in this and help build onto the culture in the direction you desire. This also helps you weed out applicants who prefer a different kind of work environment, and might not fit in with your company’s culture. And in the end your retention rate will be better.

5. Give Them Time Off & Work-Life-Balance. 

Employment law, of course, gives guidelines as to how many holidays per year your employees are entitled to. But you need to go a step beyond that. In a startup, days and weeks can get long, sometimes working on weekends may be necessary to meet milestones. If your employees have signed up for a startup journey, chances are that their sleeping schedule is probably a tiny bit on it’s head. They will appreciate it if they have enough time off to relax mentally and physically. This will in turn benefit you, as they will have fresh minds and a renewed excitement for their work once they are back. 

Another important component is the work-life balance. Especially if your employees have family or other commitments. This may on occasion mean that they might want to work from home, so a hybrid work schedule can be a great asset for them. Time off and work-life balance are factors that can help increase your employee’s satisfaction with their workplace, which encourages them to stay.

opportunity to grow

6. Offer Learning and Growth Opportunities.

According to the classical “hierarchy of needs” formulated by 20th-century psychologist Abraham Maslow, the highest needs human beings have are needs to grow. While it is not possible that every human being can actualize themselves in their jobs (nor should it be a goal), you should aim to enable your employees to grow with their work but also as people. The best way to do this is by providing attractive learning and growth opportunities.

How can you provide this? 

One way is to offer your employees training and educational courses. However, this can be costly and supersede the limited budgets that most startups typically have. A great alternative is cheaper courses that can be found online. Some of the most prestigious universities in the world offer decently priced E-learning, and may have a course or two that could be relevant to your employee.

You can encourage such training by combining its completion with a potential increase in income. For the more creative startup entrepreneurs out there, there are also other great ways of providing team members with growth opportunities. One of these can be to regulate a monthly or biweekly TED talk with inspirational content that you or one of your team members find to be helpful. You could also share an inspirational talk that you’ve seen with your employees. You may even want to normalize this procedure with and between your team members. For example, you could encourage one of your employees to present a short TED-Talk, every second Friday, that they have come across and that has inspired them. This is not just an opportunity for you and your team to learn, but it also promotes sharing and communication between your team members.

Promoting your employee’s individual development and structuring work in a way that encourages them to learn new skills and knowledge, will help fulfill their need to grow. This is an incentive for them to stay in your company.

7. If everything fails conduct exit interviews 

When you lose an employee they are usually out the door in a second and your focus is on finding a replacement. You are a startup, so going for in-depth exit interviews may feel a bit over -the-top. Yet, offboarding interviews offer valuable insight into the reasons why your employee decided to quit. Once they have resigned, they can be completely honest with you and that is information you do not want to miss. So take the time, and have that short and slightly uncomfortable talk with your resignee. Find out if there is something you can improve for the rest of your team, to avoid anyone else leaving.

Showcase your startup to attract the right talent

Employee retention, the conclusion

Employee retention is a big challenge for many startups, but it is very important to focus on. Hence, it must be observed and managed from your “first hire” or “first day”. Implement these best practices and steps: think retention into recruitment, involve employees in decision-making, invest in team-building, nurture your company culture, give time off and promote work-life-balance, offer learning and growth opportunities, and finally learn from offboarding. You must also always be attuned to and see what works best for your company. Every startup and culture is unique, and some of these tips may work better for you and your team, while some feel less fitting.

This was our two cents on the topic of employee retention in startups, and we hope you got some value from the read. Good luck on building a strong retention in your startup!

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