Why attrition at startups is on the higher side

Despite offering lucrative opportunities to new hires, Indian startups still struggle to retain talent. Here’s why

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Ask a newbie about the reason for joining a startup, and the most common answer would be that it’s exciting and thrilling to be part of a start-up’s journey. They also enjoy the flexibility and the informal work culture. Startups, on their part, also lure the newbies with exciting offers and perks.

However, this mutual love and admiration is very short lived. Industry estimates peg the attrition rates at startups between 50 and 80 per cent. Compare this with the attrition rate of a traditional, bigger or established company – even during ‘The Great Resignation’ the figure would hover around 20 per cent.

Though, when HRKatha spoke to a few startups, they were in denial about the high attrition saying that the industry estimates were on the higher side.

However, the truth remains unchanged.

“By joining startups, individuals get trapped into making a choice between the heart and the mind”

Emmanuel David, a senior HR leader and former director, TMTC

So what triggers people to leave startups, despite better pay scales, golden handshakes and opportunities for quicker promotion.

Many of those working in startups across multiple industries have reported instances of being overburdened with work and of unfavourable environments that are unconducive to long-term engagement.

Emmanuel David, a senior HR leader and former director, Tata Management Training Centre (TMTC), makes an interesting observation. “By joining startups, individuals get trapped into making a choice between the heart and the mind.”

“Startups are a classic situation where the mind and the heart won’t talk to each other. The mind gets seduced by the lucrative offers, but the heart or soul is dissatisfied by the culture there,” he adds.

David ponders over what is the reference point of developing a work culture in a start-up establishment. He believes that while some may have prior work experience, others would be relatively young in their professional careers. Hence, setting up norms for the establishment would come down to personal values, as an established reference would be absent.

David also says that while work culture may be a priority for some startups, an intervention from the investors may also be a factor in the founder’s inability to establish a hospitable work environment. He explains that startups may have to compromise in terms of certain aspects, which may be circumstantial.

Aiming to achieve too much too early?

Reetu Raina, CHRO, Quick Heal, opines that startups, especially after fund raising, are generally under pressure to achieve higher goals in shorter time periods. In such a scenario, extra work pressure is generally mounted on the employees, who then naturally find it difficult to balance their work and personal lives.

“Startups generally are always short of time. They want people to get on board quickly and get the work going. Therefore, they expose themselves to gaps in the people-planning process”

Reetu Raina, CHRO, Quick Heal

“Startups generally are always short of time. They want people to get on board quickly and get the work going. Therefore, they expose themselves to gaps in the people-planning process,” Raina explains.

Raina believes that the estimates of attrition rates ranging between 50 to 80 per cent are correct. However, when asked whether that number actually affects them, Raina says, “Of course, it does. Losing employees at a high rate is a loss to the company, irrespective of its stage. It takes at least three months for a new employee to properly learn the mechanisms of the company along with the work itself. If an employee quits any time before 8 months, it is still a loss to the company.”

Not open to employee feedback?

Vishal Shah, senior HR practitioner, who himself worked for one of the largest fintech companies, observes that work-life balance is definitely a major issue behind high attrition. He says that many changes take place in the direction of operation and rather too quickly. Startups are usually figuring out what will work and what will not in a highly dynamic work environment. Hence, employee relations may take a backseat.

He observes that while work-life is a big issue, empowerment of employees working at a senior level is also a big issue. According to him, as organisations grow, founders need to let go and professionals hired from outside must be empowered enough to drive a positive change in the company’s culture. That is something that many startups and their founders fail to address.

“Startups grow fast and get money from outside investments. They may think themselves to be really good and may not necessarily be open to employee feedback”

Vishal Shah, senior HR practitioner

“Startups grow fast and get money from outside investments. They may think themselves to be really good and may not necessarily be open to employee feedback,” says Shah.

He further points out that as attrition is high, by the time people understand the operations thoroughly, they may be gone. In practice, these companies get used to the higher attrition and manage to devise ways to work around it.

Shah further points out that startups may not have a long-term view. They do not necessarily aim for institutionalisation. Many startups get money through funding, are under pressure to grow fast due to the investments and list IPOs as soon as possible. “The mentality is to make money quickly and get out”, he explains.

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