7 Ways to Improve Employee Retention in Startups

7 Ways to Improve Employee Retention in Startups



Finding great employees is not enough. You also need to keep and retain them. It is already hard enough to find great and committed team players, but keeping them can be even harder. Especially as a young startup. If you are just starting out, you typically cannot compete on salary or perks with the big corporates out there. At the same time, it is an amazing and committed team that accounts for the largest part of a startup’s success.Hence, for startups, the topic of retaining top and motivated employees is even more important than for any other type of business. As a young startup, you simply cannot afford to lose the most valuable asset: your winning team players that make up your company. In this article, we are going to discuss seven effective strategies you can use to increase every year attention in your starter.

Why Startups Struggle With Retaining Employees

Why do startups have a harder time retaining employees than other companies? Some reasons are obvious, others less. It is clear that when it comes to money and salaries, startups typically don’t have the upper hand. Resources are scarce, business models sometimes not even proven yet and stable revenues not in sight. Under these circumstances, it is not realistic to pay salaries at a level similar to big corporations that earn consistent revenues and have pockets full of cash. Moreover, startups can’t really afford to have attractive perks and bonus packages. Other reasons can include a lack of work-life-balance as a result of long working hours and unbalanced workloads or working on weekends, or a difference in attitude between passionate entrepreneurs and paycheck-interested employees (though hiring them was the issue in that case). [caption id="attachment_461" align="alignnone" width="1024"]

Cost of employee turnover

Source ( AmericanProgress )[/caption]

The Real Cost of Employee Turnover

For starters, any company should care about employee retention because it saves an enormous amount of money. If retention is lacking, employee turnover ensues, and a person quitting their job can cost up to 2.5 monthly salaries until a new person has been hired. The costs are probably even higher when you take into account other factors: each employee leaving your company means a loss of valuable know-how and information.This is especially true about implicit knowledge that your employee has learnt on the job and isn’t documented anywhere in your documents or CRM. Another important factor is, of course, the time and resources invested into training an employee that is no longer on your team. And the time it takes for a new team member to come up to speed and contribute significantly. Even the greatest talent isn't typically a great performer from day one. No surprise there, how should they be? They don't know the company's customs, routines, processes, and organizational culture yet.Then there are of course the costs associated with finding a new employee to replace the old employee with. After all, these hiring costs are caused by the old one leaving. Hiring costs encompass such elements as plus opportunity cost for the time it takes until a new employee has been found and joins the team. Remember that finding staff commonly needed in tech startups, like devops, software engineers, etc. can be particularly challenging. Put simply, you don’t have to care about employees to want to care about them. Even if you’re all about costs, you want to retain your employees under almost any circumstance. It’s well worth it. So how do you do it?

Retention starts with recruiting.

It might sound strange, but if you want to boost employee retention in your startup, your efforts must already start in the recruiting stage. Put differently, many times the reasons for a resignation can be traced back to flaws and errors made in the recruiting process. For example, a big reason for disappointment and subsequent resignation may be big promises and statements made in job advertisements that turn out to be far from reality. Yes, put your best foot forward and highlight what makes your company great. But don't promise what you can't keep - it is only going to backfire. It has been said that "every addition to the truth subtracts from it." Also, be sure to screen for the right candidates. This may be less about their formal qualifications or prior experience but about there flexibility, and willingness to learn. In fact, look for The 10 Perfect First Hires for Your Start-up.

Offer Participation and Involve Your Employees in Decision Making.

As a startup, you have to work with what you’ve got. One way in which startups have an advantage compared to corporations is that they have flat hierarchies and can hence offer employees to participate and be involved in decision-making. That does not mean that you totally delegate important decisions to your team members. However, it does mean that you listen to them and ask them for their input on important company decisions. Especially if the team member has been with you from the very early stages, they probably know more about the field than you do (yes, that can be hard to admit!). Feeling that they are being listened to and that their opinion matters to the company’s leadership can make your employees feel appreciated and respected. Employees that join startups are typically not those looking for the biggest paycheck but excited by and passionate about the company's mission and vision. They are driven by the desire and the opportunity to have an impact. So having them participate and being involved in decision-making gives them a sense of significance and allows them to feel that they are contributing to the difference your company is making.  

Invest ongoingly into team building and strengthening.

As important as startup founders are, building a great startup company is a team sports. In your role as founder, there are simply so many tasks and responsibilities you need to handle that having an excellent and self-coordinating team is a prerequisite for success. The stronger the team spirit in your workforce, the more powerful its ability to achieve and succeed.Hence, you should ongoingly invest into team building. Be careful though about how you go about it. Too often team building exercises have been boring, dull or lame. Everybody is tired of the “Trust Fall” and rope pulling (just to prove the point “we are stronger together”). Keep it fun and light. Or - taking into account your organizational culture - you might want to be creative and spice it up a bit. Also, as a general rule team building exercises should take place outside of your office and may ideally have an entire day dedicated to them. If your team is in a different context for a distinct time frame, the experience will be more profound and lasting instead of getting lost in the everyday office trance.

Build organizational culture from day one.

Yes, you heard me right! I said “organizational culture”! No, against a common myth, this is not something that only concerns mid- or large-sized corporations. It concerns startups at least as much if not even more. Why is that? Well, here’s a fact: you might not have considered it so far, but your startup already has an organizational culture! Every organization has a culture. Unless it is consciously designed, maintained and steered, chances are it may not be a very positive or success-promoting one. As a founder, it is you, and your style of work that (un)consciously creates and determines an organization's culture. You will attract employees in tune with your way of work, but equally, you will see of talent that prefers a different way of work. Some of the biggest company success stories started out with startups that had unique and enticing company cultures filled with the famous startup spirit. Have you heard about the legendary “Wear Your Pyjamas To Work Day” at Google?Believe it or not, this once unconventional idea has caught on so well that every year, hundreds of companies and with them, thousands of employees celebrate this annual occasion on April 16th.

remote work

Give Them Time Off & Work-Life-Balance.

Employment law, of course, gives guidelines as to how many days of leave per year your employees are entitled to. But you need to go one step beyond that. In a startup, days and weeks can get long, sometimes working on weekends may be necessary in order to meet milestones or pivot on a previous learning.If your employees have signed up for a startup journey, chances are they don’t have the 9-5 mentality anyway. However, they will appreciate if they have enough time off to relax mentally and physically. This will in turn also profit you as the employer as they have fresh minds and enthusiasm to come back to work.Another important component here is work-life-balance. Especially if your employees have family or other commitments, they might want to work from home in some situations as possible to better coordinate with their loved ones and errands. E.g., you could consider giving them 1-2 days of home office per week – consumable as to previous arrangement.  

Offer Learning and Growth Opportunities.

If you are familiar with the classical hierarchy of needs formulated by 20th century psychologist Abraham Maslow, then you will also remember that the highest needs all human beings have is a need to grow and actualise themselves. While it is not necessarily possible that every human being can actualise themselves in their job (nor should it be a goal), you should definitely aim to enable your employees to become more and grow in their job. The best way to do this is by providing attractive learning and growth opportunities. How can you provide such? One obvious way is, of course, to offer them training and educational courses. However, such training can be costly and go against the limited budgets that most startups typically have. Yet, training does not need to be so expensive. When you think of online and e-learning courses offered by some of the most prestigious universities in the world, there may be one or the other relevant course for your employee. You can encourage such training by combining its completion with a potential increase in income. However, for creative startup entrepreneurs, there are also other great ways of providing team members with growth opportunities. One, for example, is to institutionalize a monthly or biweekly TED talk with inspirational content that you or one of your team members found helpful. But if you have seen an inspirational talk, why not share it with your employees? You may even want to institutionalise this procedure with and between your team members. For example, you could introduce that every second Friday one of your employees should shortly present a TED-Talk that they have come across and that has inspired them. This is not just an opportunity for your and for you and your team to learn, but it also promotes sharing and communication between your team members.

Conduct exit interviews to identify reasons for employee turnover.

You are a startup, so going for in-depth exit interviews may feel like going overboard. Yet, there is a reason exit interviews have established themselves in middle- and large-sized corporations: they offer valuable insight into reasons and motives an employee decided to quit. You don’t want to formalize it as much as in bigger companies. But some structure helps to make sure you are not overlooking any of the really essential questions.Some questions you should definitely ask are:

  • What did you really like about working in our company?
  • What would make this company a better place to work?
  • To what extent is the reason for you leaving us the recruiting/job interview? For example, through false promises, a false description of the job?
  • Would you recommend a friend to apply to us, or rather not? Why?
  • How would you describe our culture and what would you have liked to see differently in this context?
  • What tips would you like to give us to improve employee retention?

Some questions you may want to ask - given that you know the employee well enough and can be confident of receiving an at least “honest-enough” answer are:

  • We want to learn from your resignation. What can we improve and how?
  • What positive memories will you have of our company?
  • And which will be the most negative and disappointing memory?

Also, be careful however not to ask certain questions that would cross personal or ethical boundaries. Such items include asking for specific reasons an employee decided to quit, asking an employee to reconsider their decision or trying to formulate conditions under which the employee might reevaluate their decision. Note also of course, that there may be legal rules that prohibit you from asking certain questions.  


Employee retention is a big challenge for many startups. Yet, it is even more important than for any other type of company. Hence, it must be observed and managed from “hire one” (or “day one”). Implement these best practices and steps. However, also always be attuned and see what works best for your company. Every startup and culture is unique, and some of these ways may work even better for you than others.