Maximizing Employee Retention in the High-Tech World

The High Price of Employee Turnover in Startups

In the fast-paced world of startups, it can be easy to get caught up in the race to create shareholder value, raise more capital, reach an exit, or achieve the next milestone. But in the process, we often become numb to what's happening both to ourselves and our businesses. One of the biggest challenges that startups face is high employee turnover. In pre-COVID San Francisco, it was not uncommon for startups to lose one-third of their staff each year. With the shift to remote work and recent salary inflation, this problem has likely spread to startups in other regions as well.

There are several factors driving high turnover in the tech industry, including the laws of supply and demand, as well as intense competition for the best talent among startups that have raised massive amounts of capital. As a CEO coach, I believe it's crucial for the CEO to grow at least as fast as the business. For example, if the business is doubling each year, then the CEO must also double their leadership capabilities each year. The same goes for all staff members. A marketing manager who excels one year may not do so the next if they don't continue to grow and evolve along with the needs of the business.

While it's acceptable to part ways with employees who can't keep up, what's more concerning is when employees who are performing well and have room to grow choose to leave for greener pastures. Companies often categorize these departures into "regretted" and "non-regretted," with the latter being less of a concern. However, I believe this is misguided.

It takes a lot of time and money to hire and onboard new employees, and salaries are often the biggest expense for a company. So why would we tolerate having someone in a role where we don't care if they leave? This sends a message to everyone else in that role or who interacts regularly with that person that good is good enough.

In order to minimize turnover of great employees and create a culture of excellence, every person in a company should be great for their role. Every time an employee leaves, it should be regretted and hurt. While it's not realistic to expect zero departures, it's important to focus on minimizing turnover of great employees, which will impact all aspects of people practices. Rather than waiting until an employee announces they have an offer, there should be a roadmap for their career trajectory, including promotions, new skills, pay raises, and more.

It's worth asking yourself: What is our rate of employee departures? How does it break down between "regretted" vs. "non-regretted?" What is the collective annual salary of those who leave? How much did we spend to recruit them? And, most importantly, what can we do to lower both regretted and non-regretted turnover?

To create a strong culture of employee development, growth, and retention, it's essential to make changes across the entire company. Every employee departure should matter, and if they don't, then it's time to do some self-reflection and work to improve.

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