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Top 4 Reasons Employees Leave Startups

Employee turnover is expensive at any business. For startups, the costs can be especially high: when your team is small, even one person leaving can upset the balance. If that person hasn’t documented everything they do, the impact is even bigger. And when you’re forced to spend your time interviewing, debating over candidates, and eventually onboarding, you put time-sensitive goals at risk.

The good news is that you can reduce turnover by making sure you’re not guilty of any of these four known retention-killers.

1. Insufficient Benefits

Now that unemployment is below 4%, employees can be more selective about which jobs they accept. That means they’re less willing to settle for a job with no benefits or with ones that aren’t competitive for their role or industry.

The benefits employees value most won’t surprise you: health insurance and retirement accounts. Offering these can help you stand out among small employers, many of whom still don’t offer anything: at companies with three to nine employees, just 40% offer health insurance, and in 10- to 24-person shops, only 66% do.

Another benefit employees value these days is flexibility. So even if you can’t compete on health benefits, giving employees the ability to work from anywhere could help keep your best talent in place.

(Note for small businesses/shameless plug: offering health insurance, retirement, and other benefits can be easier and more affordable than you think when you use a PEO. A good PEO will offer access to competitive and affordable benefits and provide the experienced HR professionals who handle administration, employee questions and ultimately create the kind of workplace culture that keeps top employees around.)

2. Lack of Transparency

About a quarter of employees don’t trust their employer. Almost half think their employer isn’t being transparent with them. But transparency among management leads to 30% better retention.

Tapping into the power of transparency doesn’t have to mean telling every employee about every detail of your business. It’s more about keeping them informed about anything that will impact their lives or their jobs.

So while you don’t have to share the nitty-gritty of your latest funding negotiations, you can provide updates on board meetings and let the team know when potential investors will be touring the office. That way, employees have a sense of what’s going on, they feel invested in the company, and they don’t worry about the security of their jobs.

3. No Clear Growth Path

If you’re not being deliberate about showing your team how they can grow at your business, they may think of their current position as a dead end. Luckily, offering a growth path doesn’t have to cost anything. In fact, you can let your employees lead the charge.

  • Ask them about their goals during regular check-ins (or make sure managers are doing this).
  • Encourage them to seek learning opportunities inside and outside your organization; connecting them with senior employees or offer to reimburse expenses related to conferences or seminars.
  • Work with your PEO or HR consultant to come up with ideas that help you offer on-going development opportunities for your employees.

There’s even a financial case for ensuring your team keeps learning new skills: companies that offer professional development see a 10 percent higher retention rate than those that don’t.

One more intriguing thing to consider: offering a path to growth could actually save you money on things like salary. That’s according to a study that found that Millennials (who now make up 35 percent of the workforce) would rather make $40,000 at a job they love than $100,000 at a job that bores them.

Translation: invest in training, save on turnover.

4. The Perception of “Constant Chaos”

Startups have to be flexible so they can pivot quickly as their needs change. That’s one of the great things about startups. But staying nimble also means there’s rarely time to develop the kinds of systems or processes that make things predictable and efficient.

While your employees are probably willing to put up with this in certain areas of the business (like sales pitches or product features, where you may be constantly learning and adjusting), they’ll likely be less tolerant of it elsewhere. The lesson here is: be organized in the areas that you’re able to control. For example, when it comes to starting a new job (onboarding) and setting up benefits, employees want to feel that they’re in the hands of someone knowledgeable who will help them pick the best health insurance or retirement plan.

From a pure retention standpoint, these processes also contribute to a calmer, more positive work environment. And workers are 40% less likely to think about a new position when they feel their work culture is positive.

Other Factors that Affect Retention

There’s one big retention factor we’ve ignored so far: hiring the right people in the first place. Taking the time to recruit candidates who are a match for your company and its values matters as much as anything else on this list. We’ll get into how to do this well in a future post.

A few other things to keep in mind about employee turnover and retention: sometimes, it’s beyond your control. People leave jobs for reasons that have nothing to do with the work environment, including...

  • A change in career goals.
  • A change in life phase and therefore the kind of work they want to do (e.g., parents may value flexibility whereas younger workers may value training).
  • Opportunities to pursue passion projects.
  • The desire to live somewhere else.

Approaching retention with a combination of best practices and individualized support will help ensure that your team stays with you – and stays happy – for the long haul.

Interested in improving retention at your business? Get in touch with us. We’d love to help.