Trending

The Road to IPO: Advice on IPO Readiness in Uncertain Times From Three-Time IPO Veteran Steffan Tomlinson

SUBSCRIBE
How to Retain Star Performers

How to Retain Star Performers

Strategies from HR pros

(This Q&A is part of a series of articles based on HR experts’ reactions to a report about employee retention that Founders Circle conducted along with them. For a different point of view, read “Let your employees go” our conversation with Patty McCord, the former HR head at Netflix and author of  Powerful: Building A Culture of Freedom and Responsibility. Also, our conversation on culture with VC and entrepreneur Chris Barbin offers a broader take on the idea of building an environment that fosters employee loyalty.) 

When Lori Boyd joined peer-to-peer car-sharing service Turo 18 months ago as vice president of people, she told her team she would partner with them to pursue their career goals—whether they involved staying with the company or not.

“I want you all to write down the three things that you want to be able to show on your resume by the end of the year,” Boyd remembers telling her staff. “I want to prepare you for your next role—if not here, then when you’re a star-quality applicant for that other position you’re applying for externally.” 

It may sound counter-intuitive, but managers who show genuine interest in their employees’ career goals and work on developing their skills, regardless of where those employees might end up, will foster loyalty and create a more attractive workplace, says Boyd, who previously worked for such tech powerhouses as Zendesk and Salesforce.

That focus on employees’ goals is a particularly important strategy at high-growth tech startups. A Founders Circle survey of HR leaders at 25 private growth-stage companies revealed that they suffered from a voluntary attrition rate of 25%, nearly twice the average 13% rate of the industry overall, as reported by LinkedIn.

The cost of high attrition is significant, if not always apparent, as high-growth companies tend to spend large portions of their HR budgets and leadership mindshare on recruiting. Some experts say the cost of losing an employee can range from tens of thousands of dollars to as much as double the employee’s annual salary. 

Regardless of the specific dollar figure, consider the challenge for a 100-person company that is on track to grow to 300 employees over the next two years. With an attrition rate of 25%, this company will have to recruit roughly 275 new people (not just 200) to meet its target. Shifting a portion of its HR budget to effective retention efforts—especially those focused on engineering and sales, which suffer from the highest attrition rates and are the most difficult to hire for in markets like Silicon Valley or New York—could result in significant savings.   

Recruiting is only half of the equation when it comes to solving attrition at work. Retaining good employees will not only preserve an organization’s share of knowledge and talent, but it will also lower the attrition rate and keep the organization healthy and profitable.

In follow-up interviews, HR execs from the companies surveyed and other experts were divided on the significance of high attrition. But nearly all considered it a critical problem when high-performing workers are among those departing. They even have a term for it: “regrettable attrition.” 

With lack of career growth cited as the top reason high performers leave, HR experts recommend a variety of strategies to keep those workers happy.

Keep them focused on critical projects

“My motto is that idle hands can be employee-retention’s devil,” says Katy Shields, vice president of people and places at VSCO, which makes a popular mobile photo-editing app. “If your people are not being continually challenged and growing they will be tempted to leave.” 

That’s why VSCO looks for innovative ways to keep employees engaged, she says. For instance, instead of annual performance reviews, the company undergoes bi-annual “talent reviews,” a process where leadership searches for ways to place the highest-performing workers in positions where they can help tackle the company’s biggest business challenges.

“If your people are learning through the work they do and the challenges they’re solving, you may not need a formal mentor program, which at VSCO we don’t have,” Shields says.

Train your managers

Of course, no retention strategy can succeed if workers don’t like the people they work for: The second most cited reason that top-performing workers bolt is because of an issue with a direct manager, according to the survey. That’s why effective manager training, which can take many forms, is imperative.

In tech, like in other industries, managers are often picked from the ranks of high-performing individual contributors but may lack leadership skills. A star designer, for instance, may get picked to lead a design team, says Jordan Mingo, a human resources executive at Stance Socks. “If we see that some of our less seasoned managers need assistance, we might connect them to an internal manager who leads a team really well,” he says.

Boyd says Turo, which grew from 170 to 330 employees during her tenure, is considering implementing management-training programs to cover the basics. But Boyd says good leadership—the kind that inspires workers and makes the most impact—must start at the top. 

Star performers remain loyal to employers over time primarily because they’re motivated, Boyd says. “They believe in the purpose and mission of the company and have confidence in the executive leaders. They see the impact that they’re having. You have to drive off of that.” 

Ask workers what they want

Personal, frequent, and deliberate communication between managers and the employees is also key. Companies and workers will both benefit from an environment that fosters open dialog—especially around career issues.  

“Individuals have to be able to articulate what they want because managers aren’t mind readers,” Boyd says. “I want mentorship. I want mentorship!’ Well, what kind of mentorship? Because it may be something that we can provide at the company or it may be two years away.” 

Another benefit to nurturing this type of communication is that it underscores management’s commitment to workers, says Shields. “If you can do those more deliberate types of conversations, people feel heard. They feel like they belong. They know we care about their growth.”

Be resourceful

Taking the time to focus on any of these strategies can be hard at a hyper-growth company, where HR execs are under pressure to keep up with ever-larger recruiting imperatives. “We always have limited resources,” says Boyd. That’s why a big job for HR execs is learning to triage with an intense focus on the needs of company leaders.

“We might see something as an HR leader that we think the company needs, but if the executive team comes with a request, or if the managers come with a request, it’s really about listening to them,” Boyd says. 

At the same time, they must make the case that investing in creating an environment that allows top performers to thrive will translate into real savings. “In the end that’s really what we’re here to do: to make the best possible environment for them to do their best work,” Boyd adds. If you manage to do that right, it will go a long way toward keeping your company on the road to success.

Founders Circle Capital Disclaimer: The information contained herein is provided for informational and discussion purposes only and is not, and may not be relied on in any manner, as a personal recommendation or as legal, regulatory, tax, accounting, valuation, or investment advice. Neither Founders Circle nor any related person (i) is acting as a fiduciary or financial or investment adviser to you or (ii) is providing any investment advice, opinion or other information in respect of whether any proposed sale of securities is prudent.

Related Blog Posts

sf_skyline_sunset

People Impacts of a Market Downturn

How CHROs are addressing hiring, retention and employee communication in 2022.
Global Workforce Expansion: Key Considerations and Leveraging PEOs vs. GEOs

Global Workforce Expansion: Strategies, Considerations, & Employment Models

What to know before hiring workers in another country.

The CRO Hiring Playbook

How to identify, hire, and onboard a Chief Revenue Officer that can lead revenue from growth-stage through IPO.