Top 5 Ways to Manage Employee Attrition in Startups

Gagan Singh December 8, 2022

Founders of startups face many hurdles in getting their fledgling venture up and running. One of the most challenging aspects is recruiting and then retaining the key personnel required to create a winning team.

It is clear that early-stage startups are not in the position to compete with the higher salary levels or perks that larger, more established companies can offer. This means creativity is required.

Founders need to offer benefits to the team they are building that not only tempt employees to join the company but also give them strong reasons to remain.

We will shortly look at 5 top ways for founders to manage employee attrition because putting these initiatives in place will go a long way to ensuring employee permanency. That in turn will help you build the right team, one that grows from strength to strength as your startup progresses.

But before that, let’s set the scene by looking at:

What is Employee Attrition and why Startups Struggle With it?

Employee attrition is defined as a natural process whereby employees leave the workforce and are not immediately replaced.

There is no one opinion as to why startups have a tougher time than more established companies when it comes to retaining employees. However, there are some quite obvious reasons as to why.

Here are 6 of the most common:

  • Lower salaries: Early-stage companies do not have the funding available to compete with salaries offered by larger, more established companies.
  • Unproven business models: When starting out a startup's business model is unproven.
  • Unstable revenues: A startup's early revenues will fluctuate. This can lead to employee uncertainty about how the company will survive before revenues stabilize.
  • Missing resources: Not having the correct tools and resources available can lead to employee frustration and prevent them from performing tasks as efficiently as they would like.
  • Lack of work-life balance: During the early life of a startup it is a given that longer hours than normally would be expected are par for the course.
  • A different perspective: This relates to how passionate founders and paycheck-interested employees perceive the company's goals and progression.

The above factors and others mean that recruitment and retention of key employees are essential. Founders who put real effort into the recruitment and retention process of key employees will reap the rewards.

Not only is this a cost-effective initiative it means retention of highly valuable information and know-how from these employees is kept within your company.

The time and resource investment required to induct a new employee is something that founders cannot underestimate. Educating new employees on your company’s routines, processes, know-how, and organizational culture will take time out of an already hectic schedule.

On top of this, precious time and effort must be taken if you need to find a new colleague to replace the team member who has just left.

In short, every time a key employee leaves your company it will impact your bottom line.

Top 5 Ways to Manage Employee Attrition

While the above sets out the challenges founders face in employee retention there is also positive news.

This comes with putting in place initiatives to ensure you are managing employee attrition most effectively. To help you succeed in this goal here’s 5 highly effective ways to achieve that:

1. Retaining Employees Starts With Recruitment

Retain Employees with Recruitment

Founders must prioritize employee retention right from the off. This starts with your recruiting approach. Why? Because reasons for a key employee's resignation are often traced back to flaws in the recruitment process.

During interviews, founders need to temper their own enthusiasm. They need to avoid making big promises or statements that can backfire on them if they are not realistically achievable.

Another recruiting aspect to be aware of relates to a candidate's formal qualifications and/or prior experience. Many founders will benefit from choosing an employee who is flexible, willing to learn, and comes over with a positive ‘can-do’ attitude rather than a person who is set in their ways and feels their job responsibility should be limited to performing only position-related tasks.

2. Create an Inclusive Working Culture

Inclusive work culture

As a founder, the recruitment budget available will mean you are not over-blessed with employee numbers. But the colleagues you have can be used to mutual advantage. This is one advantage that startups have over larger, more established companies.

Your structure through necessity has a flat hierarchy. It should be light and nimble. With that in mind, founders can take advantage of an inclusive team by offering them involvement in the decision-making process.

This does not mean they will have control of your strategy and outcomes. What it does mean is that you are willing to listen to their ideas and initiatives. By achieving this your team members will feel wanted, appreciated, and respected.

The talent you recruit should be those who are driven by a desire to make your startup successful. They should be keen to make an impact and contribute to the difference your brand is intent on achieving in the business sector you are operating in. Employing such key members in this way is a real incentive for them to stay.

3. Continuous Team-Building Will Strengthen Bonds

Team building

During the early stages of your venture, a founder will need to wear many hats. This means you need to put together a team that can work independently but one that also works competently in a team environment. In that respect, when building your team think of it as a team sport.

By continuously investing in team-building you will be adding another key ingredient of success. However, there is a caveat, these team-building exercises need planning and thought to ensure they do not become dull or lame.

Your aim in that respect should be to keep things fun and light. Consider bringing your organizational culture and things your company stands for into these team-building sessions. 

Once again, creativity in planning will help. View these events as being key to helping your employees bond with each other in their own way. If your team gets to know each other as individuals as opposed to simply being work colleagues this should make it far easier for them to get along both workwise and socially.

The reason this form of team building is so crucial is that any tension within the team will harm your company’s progress. It is also likely to cause unnecessary waste of mental energy and a potential lack of focus. In the worst case, this could end up impacting employee retention.

4. Work-Life Balance

Work life balance

During the initial stages of a startup’s life, there will be periods when long days and perhaps weekend working hours are a necessity to meet milestones. Those key employees who have signed up to be part of this journey should be very well aware and prepared for that.

However, as a proactive founder, you should also ensure that for any excessive periods worked that these employees are given time off in lieu. This will be seen as a reward and will also allow them to mentally and physically relax. The result will be employees who return to work with fresh minds and renewed energy.

Founders can also look at a hybrid work schedule for employees and decide if this is a work angle that could produce productivity benefits. Through this, you could decide when employees should work remotely or from the office while still prioritizing your organization's goals.

Everyone is different. Some team members prefer an office environment, others are more effective when working from home. Getting the balance right is a benefit that will help increase individual and collective employees' working environment satisfaction. That, in turn, will encourage them to stay with your company.

5. Recruiting Key Employees who Have “Skin in the Game”

Taking Ownership

While the above initiatives are all highly effective in managing employee attrition there is one standout way to retain key employees. That is bringing onboard key employees who have skin in the game.

Any key employee who has equity in the company or is prepared to invest their own money in a startup, is showing they have a belief that the company will grow and prosper. Just as importantly, this action has a significant appeal to investors. It is clearly showing existing and potential investors that the startup executives involved share a stake in the company’s success.

Skin in the game (or inside ownership) is conveying positivity that the company in question is being managed by like-minded individuals who have a share in the company.

It is also clear that rather than an executive simply talking up the prospects of a company they are working for, the best confidence vote in that respect is putting their own money on the line just as they are expecting outside investors to do.

Take Advantage of Valuable Know-How

The issue of employee retention for startups is far more important than for any other type of business. This is because founders cannot afford to lose those crucial team players who make their company shine.

As a smart startup founder, you will be aware that retaining key employees is something that can make or break your venture's success. This means hiring the right type of employee is something that must be focused on from the get-go.

To help you along this route WOWS Global is ready and willing to assist. Our highly experienced team has insider knowledge of how successful startups can achieve the milestones needed to grow and prosper.

We have built a digital ecosystem that is designed to bring all elements of a startup's needs together in one place.Be it Cap Table Management, ESOP set-up, Virtual Data Room or Investor Matching, WOWS Global has built an integrated set of solutions that caters to a wide requirements of a modern day startups. 

WOWS fully understands that every startup is unique and that individual needs must be met for your company to prosper. If you are a founder looking to maximize your company’s structure, and growth, and be advised on how to most effectively retain key employees we are ready to assist.

For further information and an initial no-obligation discussion on exactly what WOWS can offer you, please do not hesitate to contact us at:

contact@wowsglobal.com