What Is the Proper Attrition Rate in Your Business?
When you think about the startups and the related business challenges, one aspect that comes to the forefront is the high attrition rate, especially at the mid-management level.
Salaries are high and work atmosphere challenging with lots of perks for employees. Then why is the attrition rate and the rate of people leaving these organizations sometimes as high as 20-25%?
What is that factor that astounding salary levels, Employee Stock Options and all other related perks are not able to sustain?
Why do individuals leave a start-up midway despite the promise of a better career?
One reason for this high attrition rate is often attributed to hiring technique. A Good example is a buzzing and ever expanding market like America:
Why are mid-level and junior level staff on the move with attrition rates crossing the 25% mark in many segments in this country?
USA has is the first largest startup economy. It also has got the dubious record of seeing 30% plus attrition rate in many of the commerce startups. It is needless to mention that this kind of steady outflow of staff cannot in any way spell good news for the company that is already under pressure.
After all, when attrition rates are low, it helps a consistent start-up delivery. It also maintains a standard of quality and above all, it creates a strong bond between the employees and a united workforce. But attrition rate continues to hurt the start-up ecosystem and don’t seem to show any signs of abetting.
So how can we prevent this? Would it help if we raise the salaries even higher? Would employees be convinced if they got more responsibilities or perhaps the management shared any aggressive growth plans that the company might have?
Role of Power Play in High Attrition Rate
Series of studies and research across industries indicate that one cardinal reason for rising attrition rate could perhaps be attributed to the highly competitive culture and aggressive environment in most start-ups.
The fact that a start-up’s growth is dependent on competing and excelling even established player in the field often rubs off on the employees as well in terms of the heat that they face while trying to prove their excellence and overall ability of excel and make a difference to the company’s bottom line.
The higher salaries and perks only go on to further exacerbate the pressure to perform on them. Often this proves to be the greatest undoing. Individuals are unable to accept the burden of this kind of pressure to perform and crack.
The easiest solution at that time often seems to lead to the exit route. The fact that most Junior and mid-level employees across startups are in their late twenties or early thirties make them even more intolerant about accepting or going ahead with this type of work pressure.
Not just that, the diverse culture of the startup is yet another aspect to ponder upon. Employees are often demotivated and the right talk to pep them up is crucial at this juncture.
Low Recruitment Quality Rise a High Attrition Rate
Studies also go on to show another major reason for this rising attrition rate is the direct fallout of entrepreneurial indulgence.
Often, expansion across the various verticals happen at a very fast pace, and recruitments happen at a breakneck speed. But later when the company realizes that they might have to close a few of these to make the venture financially sound, there is widespread job cut.
As a result of this action, employees also tend to be slightly more cautious and therefore move out the moment they come across a better offer.
Lack Of Ownership
Effective communication is what often seems to be in short supply in many start-ups.
What happens is the entrepreneur is not able to spell out the goals and motives of the firm very clear to the employees.
As a result, employees do not associate any emotional bonding with the firm. They are almost more than happy to get their pay packet ad ESOPs. However, the firm suffers as a result of this non-emotional association.
The onus for this often lies with the entrepreneur to come up with innovative ways to establish channels of communication with the employee.
If exit interviews are studied, it has been seen the rising attrition rates and lack of appropriate communication almost go hand in hand and many times employees leave a start-up anticipating a potential melt-down. In this case, even the best of employee incentives would never really facilitate a positive response.
The reason being the employee is clueless about the level of progress in the start-up’s journey and the way forward. Instead of putting too much emphasis on linking their growth with the company’s, they choose the simple way to exit in the hope of higher returns.
Lack Of Mentoring
The average age of the employees across most startups is in mid to let the twenties. This means their relative experience in dealing with life and problems is fairly limited.
As a result, they often need mentoring and hand-holding to lead them towards their goal. But most start-up founders are too busy managing the various aspects of the business and networking with potential investors.
The employee in this case often acts like a petulant child and craves for attention. Often the lack of appropriate mentoring programs deters them from their set path, and they then decide to switch companies.
Overall the rising attrition rate across start up is mainly as a result of
- Pressure to perform
- Lack of appropriate mentoring exercises
- Unable to take up challenges
The fact that they start drawing very high salaries at a very young age, often outprices their worth in the job market.
It also kind of acts negatively on individual ego and renders them incapable of handling rising challenges in the workplace. Unpredictability in the overall progress chart of their career coupled with a lack of structured organization in most start-ups also fan the rising attrition rates in this organization.
The entrepreneur has to work harder now to engage and empower the employee and establish a clear channel of constructive communication to keep the attrition rate as low as possible.