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retention of employees is more difficult for a startup firm

Retention Of Employees Is More Difficult For A Startup Firm (New Update)

Retention of employees is more difficult for a startup firm nowadays, and it has been noted as one of the overall difficulties while running a startup by many startup firms. It’s no secret that startups can be difficult workplaces. It’s not just the long hours; it’s also the amount of work you’re expected to complete quickly. As a result, startups have an attrition rate of up to 25%. This is twice the industry average attrition rate of 13%.

Why is employee retention difficult?

Startups, which typically have small teams, may bear the brunt of workers abandoning their employment extremely early for various reasons. Entrepreneurs have identified a need for more patience and an extended hangover from an MNC environment as one of the main factors.

Absence in work-life balance

Most entrepreneurs have observed the negative effects of the startup culture’s increased demands for commitment and ownership from employees. People join startups from comfortable employment largely for self-worth, recognition, and the chance to help create a successful business enterprise. However, due to the lack of work-life balance, the fast-paced startup culture occasionally overwhelms the employees. According to Vishwas Shringi, CEO and Co-Founder of Voylla Fashions, the attrition rate is higher in entry-level positions since workers begin looking for better possibilities as soon as they acquire new abilities.

More choices

There are plenty of possibilities available in today’s crowded startup scene. Due to the availability of options, entrepreneurs frequently witness individuals making sudden changes. Once a startup gains market traction, its employees are available for hire by other businesses.

Some of the other reasons startups struggle retaining employees are fairly obvious:

  • Budgets for startups are smaller than for more established businesses. Staff may leave the company if a better offer comes because they need help to cope with wages and lure top talent.
  • These smaller budgets also translate into less alluring perks and reward packages. They might not be able to give remote workers equipment or have the same on-site amenities as “older” enterprises, including cafeterias or gyms.
  • Due to limited resources, new businesses might need help buying the best or most modern tools to support employees. Even something as simple as a platform for unified communications could fall under this category.
  • Startups frequently hire remote workers who are dispersed across the globe. These workers frequently use communication methods that don’t function as well as others’ methods. This can result in messy communications, which might quickly result in more serious issues.
  • Given the high failure rates of startups, job security can be a significant concern for many employees. It makes sense for them to look for a more secure position if they are concerned that the company won’t survive.

Why is retention important for startups, and What are the techniques for improving retention?

It is super important to retain your employees to reduce hiring costs and improve the work productivity of your startup. Here are some of the reasons and techniques to improve employee retention:

Reduce Hiring Costs by a Large Amount

It takes time and money to completely onboard new employees. The average cost per hire in the United States has gradually increased, rising to $4,400 in 2022. This number immediately grows dramatically if you work for a larger organization or corporation that brings on hundreds or thousands of new employees each year.

Even more expensive per hire are bad hires. When onboarding and other expenses are considered, each new employee who doesn’t work out can cost up to $15,000. Over just a few years, you will save tens of thousands of dollars if you can avoid regularly replacing existing personnel.

Create A Successful Training Methodology

Paying attention to how well instructions are given and how much knowledge is transferred during onboarding is crucial. When training new hires, you require skilled guides among your current workforce. With an appropriate mentor during the training phase, your new team members are more likely to make errors and need to catch up.

Establish a favourable work environment

One of the essential components for developing a productive workplace with contented workers is stability. For your current employees, it becomes practically hard to feel at home if the individuals surrounding them are continually changing. Customers won’t associate your company with anything specific without a strong workforce.

You can learn more about the working environment by asking your employees why they’ve decided to leave the organization and getting their comments. If it’s not only a better employment opportunity, they’re probably departing because they feel they need to be more appreciated. Finding the areas where your business needs to meet its employees’ needs promotes employee retention and a pleasant work environment.

Boost Your Credibility

Companies that consistently lose employees are viewed as failing internally and externally, especially if replacements come in slowly. Your staff members will start to feel uncertain. Job security will be questioned, which will cause more employees to quit for a business they believe to be more secure.

On the other side, a high staff retention rate is crucial and shows everyone that your business is worthwhile to work for. Celebrating your most established employees communicates to others that you also recognize their value. Your public persona needs to reflect that.

Strengthen Long-Term Productivity

A new employee’s productivity won’t reach its peak immediately when they start working for the organization. They must establish connections, comprehend your business’s working procedures, and develop their skill set through instruction and observation. Before they truly start demonstrating their abilities to you, it can take a year or two. Considering that, it is simple to understand how a steady stream of new workers could harm productivity over the long term.

Enhanced customer experiences

Expert assistance cannot be duplicated or replaced. Businesses with a strong customer focus frequently have departments of professionals who can assist clients with their issues or inquiries. The Genius Bar and Geek Squad at tech businesses like Apple and Best Buy offer clients easily accessible professional assistance. These client perks have helped their businesses build a good reputation, but the less expertise they have, the less effective they are. The experience of a customer needs to be higher in the absence of retention.


How do you retain people in startups?

Using techniques such as employee recognition culture, feedback process, stake offering, providing employee growth and taking exit surveys would help startups retain people.

Why is employee retention so low?

You may need an effective employee retention strategy, another factor contributing to low retention rates. You must do everything you can to maintain a staff member on board as soon as they indicate their desire to resign or transfer to another company.

Do companies care about employee retention?

Yes, most successful companies take employee retention seriously. It helps them build productivity and grow their business at a steady rate.

Is it cheaper to keep an employee or hire a new one?

Yes, until it is truly necessary, replacing a current employee with a new hire is always more expensive. Every firm will pay the price in monetary and nonmonetary dimensions.

What are the negative retention strategies?

When it is no longer economical for a firm to retain specific consumers and guarantee it is done appropriately, negative customer retention tactics are employed to discontinue client ties.


Your startup benefits from a retention-focused approach. A solid strategy for employee retention is a crucial part of a comprehensive workforce plan. Although it takes time and works to develop a good staff retention strategy, your startup will benefit from it.

Organizations that don’t prioritize employee retention and turnover reduction can incur significant losses, including the direct costs of recruiting and training new employees, lost productivity and knowledge, low morale among employees due to the poor customer and employee experiences, and a deteriorated workplace culture.

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