For most businesses, attracting and retaining top talent right now is more difficult than ever in recent memory. A quick stroll down Main Street in most towns will demonstrate that businesses everywhere are hiring. And while the Main Street stroll traditionally includes businesses like restaurants and stores with their low-wage jobs, even the smallest amount of research shows that employers are having a hard time hiring staff.
The overall labor market bears this out — according to the Bureau of Labor Statistics, the jobless rate for November 2022 was only 3.7%. Furthermore, the labor participation rate was only slightly lower than pre-pandemic levels.
What does this mean for startup executives? Because a lot of American workers like stability, many of them prefer well-established businesses. Add the latest BLS numbers into the equation, and you’ll quickly see why hiring and retention are automatically challenging for a fast-growing startup.
How can a start-up company’s management team boost the chances of attracting and retaining top talent? Read on to find out.
Current unemployment and turnover trends in startup businesses
While most businesses struggle to hire top talent in a competitive labor market, employee retention is a bigger challenge for fast-growing startups. A recent survey by Founder’s Circle found that while turnover rates in well-established businesses in the tech industry average 13%, the rate for fast-growing startups is much higher at around 25%. In other words, startups have a higher turnover rate and an average employee tenure of around two years.
While it’s easy to blame rising wages and aggressive recruitment efforts by the competition for a high turnover rate, there are a lot more factors that determine when or if an employee leaves your company. Understanding these trends and how to address them will help your business retain top talent for the long term.
Enhance your hiring process
Both attracting top talent and keeping it starts with the recruitment process. Remember, the goal is not just to hire someone who will perform a job short-term. Rather, the idea of hiring is ultimately to build a team. To build a team, you want to employ a quality-over-quantity approach to your recruitment. You also want to hire people who have the greatest chance of staying with your company in the first place.
There are several ways that you can achieve better hiring.
- Be upfront about your company’s values and culture. Ultimately, you want to attract candidates who are a good match.
- Write accurate and specific job descriptions. Ideally, you want the parties who will truly love to apply and people who are a poor fit to self-select out of the process. The earlier this happens, the less time you’ll waste sorting through subpar candidates.
- Advertise salary and benefits. We see a lot of that on Main Street these days, so why aren’t we doing that for more upscale jobs? At the end of the day, candidates want to make sure that their material needs will be met, and if another competitor is more transparent, they may not apply.
- Use smart interviewing techniques. It’s always ideal to get the right candidate for your role the first time. With a careful interviewing process, it’ll be easier for both you and the candidate to ensure that your job is the right match for the candidate and vice versa.
- Set expectations. This way, you minimize the chance of a new employee walking into your workplace and feeling like they’ve been fooled. This is not only bad practice from a PR standpoint, but it’ll quickly cost you thousands in extra costs.
- Consider their track record. People job-hop for many different reasons, from needing to improve their salary and benefits all the way to having trouble keeping a job. When you see a candidate like this, you want to consider whether or not this person is likely to stay at your company. Of course, sometimes the answer is clearly yes, so consider this factor on a case-by-case basis.
While even the best recruitment process will attract people who aren’t likely to stay long-term you can at least increase your chances of success with these techniques.
Represent yourself as an employer of choice
Top-quality jobs attract top-quality talent. Clearly, you don’t want to puff up your business to the point that people will think you’re lying to them. But it’s always a good idea to showcase what’s awesome about your company. Making yourself into an employer of choice involves building a positive corporate culture where people love to work. This gets around quickly either way, and with a good reputation, you’ll get more applications from quality candidates.
Follow a structured onboarding process, and make expectations clear from the beginning
Once you’ve extended an offer and the candidate has accepted it, it’s time to onboard your new employee. The best way to do this is in a structured environment where the employee knows what’s expected of them. One reason this is critical is that the onboarding process is an important introduction to your company and the job that each person has started.
Similarly, practice the doctrine of no surprises. While it’s impossible to predict every outcome, it’s important to build trust with your employees by making sure that they know what to expect in certain circumstances. This includes both the contents of your employee handbook and the finer points of department-specific operations.
Help new team members get acquainted
Being new to an organization is tough, even in the best-case scenario. That’s why teachers and workshop leaders have used icebreakers for years. The practice lets people get to know each other and feel comfortable working together.
Similarly, when your new employees start work, it’s important for them to forge relationships with their teams. To help with this process, have your managers welcome their new employee by introducing them to other members of the team. Then, key team members should meet with the newcomer one on one. This way, your new hire will feel more connected to the team and better oriented to your company.
Implement a structured performance review process
Employees want to know how you view their performance and how you think that they can improve it. At the same time, they want the process to be fair so that a manager who simply does not like them will have more trouble giving poor reviews merely on that basis or favoring certain employees by giving them a break that they don’t deserve. To avoid both pitfalls, have a structured review system that lets managers be honest and upfront.
Employees who feel undervalued, harassed, or treated unfairly are far more likely to leave the company.
Make your culture inclusive, positive, and transparent
While we talk about racial, cultural, and gender-based diversity all the time, it’s something else to make diverse candidates and employees truly feel valued. To change this, celebrate your staff to make everybody feel welcome.
Likewise, it’s critical for companies to have a positive work environment if they are to meet today’s labor market. Nobody likes a horrible boss who rules by fear, interferes with family time, or makes decisions that affect employees without consulting them. Similarly, a culture of workplace bullying by peers and management alike makes people want to leave your company. Keep in mind that having an especially hostile work environment can also lead to lawsuits.
There’s a saying that people don’t leave jobs; they leave managers and coworkers. But experience consistently shows that top talent stays for people, too.
Provide professional growth opportunities to your team members
Another way to minimize turnover is by providing professional development. That’s because people who learn new things at their job and stay knowledgeable about industry trends, tend to be less likely to leave.
Providing professional development doesn’t have to be expensive. Consider buying your staff access to an online learning platform like LinkedIn Learning, especially for professional-level staff. And don’t forget that entry-level employers who provide tuition reimbursement have an easier time with retention and recruit better people because these candidates often want to advance their careers.
With that said, your growth opportunities can be internal, as well. Many quality companies offer optional staff training and seminars that teach new skills and help staff do their jobs better. Almost as importantly, these opportunities show staff that you value them enough to help them become better employees.
Provide opportunities for promotions
The opportunity to “grow with the company” is especially valuable for top talent. Not only will career growth potential help you recruit the best candidates, but it’ll also encourage existing staff to stay. Existing employees are often the top talent for a management position, because they know how your company works better than an outsider would. Institutional knowledge is important for retention and profitability alike.
In addition, people don’t like working at “dead end jobs.” If a professional level employee realizes they aren’t going to advance, they’ll likely update their resume. Or worse, start circulating that resume to your competitors and talent recruiters.
Sometimes you’ll also find that staff doesn’t want to get “promoted,” but they’d love to do something different for a while. In this case, a lateral move into another department lets your employee change their job without leaving the company.
Best of all, you don’t end up replacing two employees rather than one.
Keep your team unified
One of the worst things for retention is a team that fights, or that has people with their own agendas. While there’s no way to avoid personality differences or variations of opinion, it’s important that everyone works together. Otherwise, your top talent will leave for a better team at your competitor and leave you with the next best talent.
Besides keeping a team from developing conflicts or divisions, make your employees feel like they are all an essential part of a well-performing team. If everyone works together for a common goal and has a well-defined role, then your team will be much more efficient. Likewise, positive relationships with other members of the team will make staff more likely to stay at the company and reduce turnover.
Being on the leadership team of a startup isn’t easy. Besides the competition for funding and business development pressures, staff turnover is a major problem for most startups. Fortunately, if you have a positive work environment, a hiring process that identifies top talent that will work best for your company, and foster professional growth, you’ll differentiate yourself from the competition.