How can start-ups tackle attrition better?

With new emerging technologies and feasible innovations happening all around, the start-up gamut is growing phenomenally. Start-ups are fast becoming the core of a developing economy like India. There’s increased employment and enhanced scope of creative explorations and freedom. Start-ups are known for their dynamic work culture, often led by young honchos armed with knowledge, the passion for challenging set norms, and going beyond to embrace newer standards, methods, and processes.  

You don’t need to delve too deep to see that the start-up culture is quite different from that of a corporation. Most start-ups are smaller in size, have innovation at the center of their culture, are fast-paced, have an informal ambiance where employees at all levels are free to exchange their ideas. There’s scope to learn and grow, but it could all come at sacrificing work-life balance, multi-tasking, increased job responsibilities with considerably higher stress levels to overperform, and not much job security. Not just that, the perks at a startup may be comparably less attractive, and there is no set path for career progression. 

 

Start-ups and Attrition 

“In the Indian scenario, the attrition rate in start-ups is almost 50% to 80% – way higher than typical corporates where the rates hover around 20%.” 

One of the main reasons behind start-ups faltering globally is the high attrition rates. Mckinsey says that the Great Attrition is here, globally. As per estimates in the Indian scenario, the attrition rate in start-ups is almost 50% to 80% – way higher than typical corporates where the rates hover around 20%. As per a study by Analytics India published in 2022, start-ups have industry-high attrition rates of 43.7%, almost 1.7 times that of any domestic corporate company. This is even though start-ups offer better pay packages and growth opportunities! The Deloitte India’s 2020 Workforce and Increment Trends Survey had put India’s attrition in FY 2019-20 at 15%. 

In a report by Achievers Workforce Institute published in March 2021, the three common grounds for employees resigning and switching jobs are: 

1. Enhanced work-life balance 
2. Better pay packages 
3. Better benefits 

In response, an increasing number of organizations are offering flexible work schedules and remote working models. Employees, too, now expect their employers to offer opportunities aligned with their priorities and preferences. They prioritize wellness and health and want commitments from employers on this aspect. Any company unable to provide the same is facing turnover issues. For start-ups, the problem can worsen as many face financial woes and work culture-related instabilities ranging from poor working conditions to job security issues. 

Attrition weighs heavily on start-ups 

When employees leave an organization, the cost of turnover is estimated to be about six to nine times the employee’s monthly salary. A Centre of American Progress study puts the figures at about: 

• 213% for the senior and top management 
• 20% for middle management, and 
• 16% for junior-level positions. 

Some of the costs organizations need to pay due to attrition are: 

1. Cost of replacement – it takes almost ninety-four days to fill up a vacant post for highly skilled employees.  
2. Cost of hiring 
3. Cost of unfinished and pending tasks 
4. Cost of training 
5. Cost of separation  
6. Cost of team building 
7. Cost of engagement/ motivation 

Additional Resource: You can read more about the cost of employee turnover here.
 

Tackling the high attrition rate in start-ups  

In his book ‘Why Some Companies Make the Leap and Others Don’t’, writer Jim Collins points out that successful start-ups do not just get the right people on the bus; they also allocate the right seats. In other words, hiring the best talent is not the end of the journey, rather the beginning. Keeping people occupied with the proper role is the key to tackling attrition rates. 

So, what can you do being a start-up owner, CEO, or CXO to put a brake on attrition rates in your organization? Here are some practical tips: 

Set the right expectations during the hiring process 

Ambiguity is dangerous, and it can be instantly disengaging in job roles. Start-ups should avoid it at all costs. First things first, ensure that the new person onboard has a clear understanding of what to expect from the organization and what is expected of them. It could vary from briefing them about the company culture to work and performance-related expectations. The bottom line is – Do not keep your new employees in the dark or leave them to discover things independently.  

Working on the right HR practices from the beginning can be a great way to set sailing. For example, Bangalore-based Chumbak has a team of dedicated employees who scan resumes to understand applicants’ cultural bent of mind to fit candidates with the right mental fit. Similarly, other start-ups carry out detailed training for new employees to acclimatize with the company culture. US-based company Software Advice organizes “a day in the life” for recruits to see first-hand how things are in the workplace. 

Don’t wait too long to hire a People Officer 

A People Officer (PO) or an HR is someone who helps create the right environment so that employers are motivated and give their best, besides ensuring compliance. While start-ups usually do not delay appointing the CEO and the CFO, they make do with a junior staff for their HR requirements or try to manage it on their own without hiring an expert. 

In the book titled Talent Wins, the authors advocate hiring a Chief People Officer or the Chief Human Resource Officer at the earliest. Reason: While the other two posts manage the financial resources, the CPO is responsible for the human capital and must have a crucial leadership position like the two different positions. Talent acquisition, engagement and retention has gained as much importance as making corporate strategies. 

 

Balance the dynamic nature with some stability 

The dynamic nature of start-ups often makes things challenging for employees. There can be a sense of instability all around. It can tire employees, challenge their emotional quotient. Thus, there is a need to weave in elements of stability to keep their morale and confidence high. One viable option is investing in mental health programs. HR should assess department-wise attrition rates and address problems. Or maybe even offer Employee Stock Ownership Plans (ESOPs) to build confidence. 

 

Give priority to employee work-life balance 

The pandemic has changed various aspects of work. Flexible working is the need of the hour. And it can come in different and innovative forms. Hybrid work is one of them. Asynchronous communication is another. Many start-ups are also offering 4-day weeks worldwide. For example, Edify in California or 3D Issue in Ireland. Similarly, ProofHub India or RadixWeb India. Or Bangalore-based FinTech company Slice offers a three-day week to recruits while offering a lower salary of 80% of the market rate. It works for them and their new employees. 

 

Be transparent & embrace vulnerability 

Focus on building a transparent work culture. There is no shame in telling or sharing organizational vulnerabilities with your employees. Since start-ups are on a learning curve, it is good to take your employees with you and keep them abreast of the ups and downs. It helps foster a spirit of solidarity, belongingness, and oneness amongst employees and the management.  

Promote rewards & recognition 

Complementing and appreciating employees is crucial, not just for start-ups but for corporates too. You need to build a work culture that recognizes employees proactively. It strengthens the bond, keeping your employees more engaged with the workplace. It makes your employees feel more valued, building their happiness levels and emotional quotient. Social recognition platforms like LetsBuzz drives a culture of appreciation by facilitating peer-to-peer, social recognition. 

Conclusion 

Balancing the innovative, high-performing start-up environment with more balancing elements as mentioned above are critical in retaining employees. Else, the chances of burnout, losing interest, getting disengaged and subsequently, chances of employees moving on to a more balanced workplace is high.