MBA Mondays: Retaining Your Employees
I hate to see employees leave our portfolio companies for many reasons, among them the loss of continuity and camaraderie and the knowledge of how hard everyone will have to work to replace them. Many people see churn of employees in and out of companies as a given and build a recruiting machine to deal with this reality. While building a recruiting machine is necessary in any case, I prefer to see our portfolio companies focus on building retention into their mission and culture and reducing churn as much as humanly possible.
There isn't one secret method to retain employees but there are a few things that make a big difference.
1) Communication – the single greatest contributor to low morale is lack of communication. Employees need to know where the company is headed, what they can do to help get there, and why. You cannot overcommunicate with your team. Best practices include frequent one on ones between the managers and their team members, regular (weekly?) all hands meetings, quick standup meetings on a regular basis for the teams to communicate with each other, and a CEO who is out and about and available and not stuck in his/her office.
2) Getting the hiring process right – a lot of churn results from bad hiring. The employee is asked to leave because they are not up to the job. Or the employee leaves on their own because they don't enjoy the job. Either way, this was a screwup on the company's part. They got the hiring process wrong. The last MBA Mondays post (two weeks ago) was about best hiring practices. Focus on getting those right and you will make less hiring mistakes and experience less churn.
3) Culture and Fit – Employees leave because they don't feel like they fit in. Maybe they don't. Or maybe they just don't know that they do fit in. Another post in this series on People was about Culture and Fit. You must spend time working on culture, hiring for it, and creating an environment that people are happy working in. This is important stuff.
4) Promote from within. Create a career path for your most talented people. The best people are driven. They want to do more, develop, and earn more. If you are always hiring management from outside of the company, people will get the message that they need to leave to move up. Don't make that mistake. Hire from within whenever possible. Take that chance on the talented person who you think is great but maybe not yet ready. Work with them to get them ready and then give them the opportunity and then help them succeed in the position. Go outside only when you truly cannot fill the position from within.
5) Assess yourself, your team, and your company. We have discussed various feedback approaches here before. There is a lot of discomfort with annual 360 feedback processes out there. There is a growing movement toward continuous feedback systems. Whatever the process you use, you must give your team the ability to deliver feedback in a safe way and get feedback that they can internalize and act upon. You must tie feedback to development goals. Feedback alone will not be enough. Build a culture where people are allowed to make mistakes, get feedback, and grow from them. I have seen this approach work many times. It helps build companies where churn rates are extremely low.
6) Pay your team well. The startup world is full of companies where the cash compensation levels are lower than market. This results from the view that the big equity grants people get when they join more than makes up for it. There are a few problems with this point of view. First, the big option grants are usually limited to the first five or ten employees and the big management positions. And second, people can't use options to pay their rent/mortgage, send their kids to school, and go on a summer vacation with the family. Figure out what "market salaries" are for all the positions in your company and always be sure you are paying "market" or ideally above market for your employees. And review your team's compensation regularly and give out raises regularly. This stuff matters a lot. Most everyone is financially motivated at some level and if you don't show an interest in your team's compensation, they won't share an interest in yours (which is tied to the success of your company).
I believe these six things (communicate, hire well, culture matters, career paths, assessment, and compensation) are the key to retention. You must focus on all of them. Just doing one of them well will not help. Measure your employee churn and see if you can improve it over time. A healthy company doesn't churn more than five or ten percent of their employees every year. And you need to be healthy to succeed over the long run.
Great list & areas to focus on. Couple of additional points:- Employees might leave because the startup isn’t moving fast enough. That’s why it’s so important to keep progressing, raising money, exceeding milestones, getting market recognition, etc. – all good things to make employees feel they are part of the success. – Do take employees feedback/suggestions into consideration. That’s a tough one because they can be sometimes wrong or out of line in the priority sequence, so you have to pick and choose. – Do provide quick & immediate feedback when employees accomplish great things & do it publicly and often.
yes, communication is not just listening but also acting on some of what you hear
100%on top of quick daily standups, weekly all hands, and and an open door ‘grab me whenever you want to talk policy,’ we do quarterly individual reviews and really get people to open upwhat’s interesting is how even in an individual setting, everyone points out the same 1-2 issues and they love to see when we actually take the time to make the change
that is why assessment was a great point in your post Fred. Also, companies that create a culture where everyone is encouraged to share their thoughts and ideas end up doing well. As William mentioned, you can’t adopt or accept all the ideas but having an open system to exchange these type of thoughts is terrific for the culture
Having in mind the cost of recruiting helps a lot when thinking about retention. Just as with clients. Much better/cheaper to be proactive and care about who you already have than to be reactive to attract someone when desperate.
Outstanding post. So important. Thinking about this real hard as I’m about to start a company.
IMHO these may not be applicable for your initial hires…. hire your clones … rather ‘find’ your clones and get started.Welcome to the party and enjoy the roller coaster ride 🙂
Came across this blog post awhile ago from Kevin Gibbs: http://www.kevgibbs.com/201… . Very similar to above, and was able to identify with it strongly.
I love the four words he uses
Great article. Thx
I liked these – although I thought something different when I first saw the “family” attribute – I’ve always felt that each employee has to have a solid support foundation outside of the job – that is typically your family. We always said “family comes first” – not that our company wasn’t a family, but your actual family is the priority, and the job is secondary.
The rules are very different on different phase of the company … just starting, produce, scaling, stabilize, maintain.Compensation is the most important thing in maintain phase and it is the least important stuff in start/produce phase.If you are a startup …there are lots of employees (human beings) who are ready to take risks with the founders … identify those rock stars… compensate well their intellectual hunger … and enjoy your journey.
Terrific list and something we all need to be reminded of.If you pay what the job is worth in the market then hiring the right people at the right stage is critical, not before.One question: For early teams in getting the product built stage and alpha/beta rollout, any guidelines for comp/equity mix for that 3-5 member team, including the founders? Some can handle the lack of market comp, some can’t usually.
Cash comp should not be the main thing for that early group. Pay as little cash as they can make it on and give them a meaningful equity grant. I don’t like to think in percentage points when doing employee equity but for the first five hires, you should
Kasi – not sure if I agree. Maturity of a company changes some of the emphasis perhaps in the recruitment discussion but i think the golden rules apply through out from start up to established business. As a founder -if you want to limit churn rate in a team it starts with the founders deciding to build a culture that as part of every day business, values open communication, measures performance and appreciates, recognizes and rewards the team for things done well. This needs to be reinforced through policy and practice.If you pay market or slightly above market rates for compensation, then it comes down to hiring folks that fit your business culture, believe in the mission, how well goals, achievements, mistakes and results are communicated regularly and how the environment /culture is built. Once you got this started then to keep churn rates low then you have to understand its only sustainable through process, policy and practice and maintaining business momentum.As an unfunded or bootstrapped startup it can be incredibly difficult to do this, but it has to be the aim to get to this point as quickly as possible, otherwise you are decreasing the half life of your company significantly and massively increase the risk for all involved. Certainly in later stage companies compensation can be a dominant part of recruitment discussion – but its not what limits a team’s churn rate. Hence why i think the golden rules above apply across the company lifecycle.
@6e8c439c6ed83e6a3e5c8d1aecdbd68c:disqus .I am not disputing the golden rules … What i mean is that the golden rules are not as such applicable at various stages. It needs to be polished to fit the stages.At start-up stage you need all your employees 100% as rock-stars and at maintain stage 70% of your employees needs to be medicare players (to maintain and have stability).I can quote examples by name … Some companies with 20,000 employees … don’t concentrate on top level performer and lower most performance. (top 10% and bottom 10%)… because bottom 10 are useless and top 10 you cannot keep them …
If there is one area in which I sound like a broken record, it is with regard to retention. When I hear the term “War for Talent” referring merely to recruiting and hiring I want to yell that the real war for talent is fought in retaining employees. Recruiting top talent can be a battle but the war is much bigger than this.And retention, as Fred points out, begins with the hiring process. It is a much different process — a much more careful process — when you are recruiting for the long-term rather than just trying to fill a job.A lot of my vehemence around retention comes from hearing every day why people are willing to consider leaving their current job for a new one.I ask early In the conversation with a prospective job candidate, why he or she is willing to talk to me. Something I have heard so often that it no longer surprises me, is that the seeds of discontent were planted early in the person’s time with the company. Often it is because something that was told to them in the interview (the job description for instance) was not true or something promised was not delivered. Typically, not due to deception, but to carelessness — and the interview process being disconnected from reality. #1 and #5 on Fred’s list go a long way toward taking care of that.I love this post BTW. My original comment was so long that I put it on my own blog as a post. Believe it or not this is the shortened version.
Great points Donna
Aren’t you the one that coined the phrase…’hire to retain’.I attribute that savvy statement and thought to you!
Not certain whether I coined it, but I’m sure I’ve said it.Thanks for listening. :-)Hope you had a great birthday celebration with your mom!
Thnx Donna!Yes,,,the celebration was fun indeed.
Naked hiring is key!Companies follow a bunch of rules about how to hide the truth when hiring. When you start out that way how can you have any confusion about why people don’t stay?Here’s the perfect naked job ad:We need people to work hard to make us money! Apply within.
we’re overusing the naked metaphor. really.
That is actually “well-dressed” posing as naked.More clever than naked.
Words are fun!
I love that term Naked Hiring, if only it was something we could actually do. I look to hire people who are not only good at what they do and enjoy it, but have the personality that fits within our organization. It’s worked out great, we haven’t had any turn over in a year now.I also think the communication is key, you must talk with your people constantly and care about them, their weekends, their family, kids, etc. It makes a huge difference coming to work knowing that the your boss really cares about you.
“A lot of my vehemence around retention comes from hearing every day why people are willing to consider leaving their current job for a new one.”Is that what is called the … “Hearing it from Horse’s mouth”? 🙂
Please share the link to your blog post too… 😉
A blog which is now searchable by gawk.it, I might add. ;)@nquigley:disqus shared my blog link above. (Thanks, Nate.)
That search system is spreading to all corners of the web isn’t it?Now we just gotta get it plugged in as the ‘official search’ of hirethoughts… 😉
gawk.it is the search on my blog too. basically all the cool people have their blog search powered by gawk.it. people who don’t probably aren’t that cool.
Haha. Nice one. Kevin should upvote that from every one of his devices and IP addresses. 😉
hrm…is there a limit to the number of up-votes I can do? Might be time to find out! 😉
A little script might do nicely, eh? 😉
the disqus api limits you to about 1,000 calls per hour, per app…but as far as I can tell, you can register as many ‘apps’ as you like…so a ‘not so cool’ hacker could def. wreak some havoc on the ‘liking’ if they really wanted to (at least until the disqus team got around to blacklisting them)…Or you could go the ‘old-school’ way and write a scraping script that just up-votes a ka-zillion times…run it from a botnet and get away with it for a pretty long time…Of course I don’t think there’s actually much of an advantage to gaming likes yet…but I’m sure there are a few ‘others’ out there with the scripts in hand just waiting for there to be… 😉
You ARE cool, Kid.This might come in handy some day:”If it’s cool enough for Kid Mercury, it’s too cool for you.”
i just finished reading that book by jon spoelstra. quick read. it was pretty good, i got the motivational high off it. probably going to check out some of this other stuff. thanks for the tip!
Cool! Glad you liked it as well…I think marketing outrageously is my overall favorite, but I really enjoyed all of his stuff…wonder how much of that stuff his son uses in his coaching? 😉
Donna that is a great point about overselling in the interview.I always tell people take the job for the money you are going to make, the experience you are going to gain, and the people you are going to work with. Options are icing on the cake if everything goes well so everybody shares in the windfall.If you tell people you are going to get bought out or IPO for a ton of money in two years, you better do that or expect people to leave.
At least you hope they will leave, rather than stick around feeling betrayed. A sense of betrayal whether real or imagined is toxic. I understand the tendency to oversell. By nature, I am a persuader so I have to be on guard that I am not overdoing it. In recruiting for a startup, I want to get a prospective candidate (especially one that I am having to “sell” on the opportunity) in front of the founder as quickly as possible because there is magic in a founder’s vision and passion that I don’t want to pretend that I can be a substitute for (although I am a pretty good opening act). But then that has to be tempered with some of the harsher realities that you eventually have to throw into the mix as part of the interviewing process (which actually seems to sell the candidate even more because they are so grateful for the candor). And beyond that, gaining a sense of what actually motivates the person and why they are joining the company — what they are hoping will happen. I know I am preaching to the choir with you, Phil.
I am grounded in La La Land – though it’s how I stay focused on my vision. I do understand and am aware of people who are very much grounded in the present, and the associated requirements for survival – because I too often end up there feel the same concerns.I will admit I skimmed over #5 initially, though in the past two weeks I’ve been having to give and receive feedback, and I’m starting to be proud of how I handled the situation; It turned out to be a growing experience for both sides. I was uncertain of my approach, though it feels great now.Now I just have to make sure I allot enough time to manage people that I need, not overbook / overwhelm myself with too much at once; Something I did non-stop last summer and burned me out.
“At least you hope they will leave” that is an even better point.Like all things I learned this the hard way. I had a co-founder who I learned a ton from. He had a passion and he could paint a vision. We were doing well but had some disgruntled employees as I looked into it on exit interviews and reviews I realized it was because he oversold. People thought they were going to rocket to the top and cash out options. When they didn’t they felt betrayed. That also is a good word to use.
Setting expectations, anywhere in life, is so very important. It’s how everyone is guided, and it ends up being the difference between feeling comfortable and at home – versus feeling betrayed, let down, disappointed.Even in the yoga class structure, a good instructor will be setting the intent at the beginning of the class, which will set your expectations, and your comfort in the space will depend on if what was said at the beginning matches the experience you had.I do believe it would be miscommunication, and not deception, that is the issue in most cases – it can be very hard to always remember to say the same script, with feeling, over and over again; That is why it is called a yoga teaching practice – it takes lots of repetition to improve your skills, communication being the most important when guiding a room full of 40 individuals, all at different skill levels themselves.On the other side, I would hope employees early on would become aware of any expectations that aren’t being met, whether through misconception or other, and so they can be remedied quickly if possible, and so that someone isn’t dwelling in discontent for long.Edit: I a few words
Check your twitter!
Deleted — responded to wrong comment.
Apologies – I was busy being productive doing other things + was on a different Twitter account. 🙂 Following now!
Miscommunication is part of it, for certain. Lack of awareness is another — which is why item #5 in Fred’s post is key. Certainly, in a startup situation, there are unknowns and you have to hire people who have a tolerance for uncertainty. But uncertainty is different than lack of awareness. And there needs to be a distinction between present reality and future reality — well, really, it’s vision, but for the entrepreneur it may as well be reality because it is very real in his or her mind. I am wired that way too.
yup. Walk into an HR office of a large, publicly traded company during a period of high turnover and low replacement. They are all saying the same thing they did 3 months before setting up the current disaster. ‘hire to retain’ is hiring to build, not hiring to run an operation at status quo
This, of course, will mean that I need to read your blog!! Really, cool, Donna.
Good to see you here, sister dear. Thanks for checking out my “other world.” I can see that you checked in from Facebook because you still have Dad as your avatar from Father’s Day. Haha.
War for talent fought in retention is a great insight Donna. I liked the slightly longer version on your blog too :-)http://hirethoughts.blogspo…
Thanks, Nate, and for posting the link.
so how do you set expectations well?
Sexy green mod tag!
that’s new. :/
I love it! I’ll take it from you if you don’t like it! 😛
Bookmarking your longer version for the train ride home this evening 😀
I’m a big fan of #4. Nothing (in my experience) is more likely to make an employee feel valued than helping them develop, training them to reach the next level of expertise. If you promote from within, then there’s far less need for them to look externally to further their careers, and it means you can bring in an external hire (if necessary) to replace the person you just promoted. That hire should be easier, cheaper and see that they have a path to advance down.I would urge anyone seeing training as a *cost* to think about offsetting that against the cost of a top-tier external hire, and bringing that hire up to speed.
I will hopefully leave my company (not a startup) as soon as possible. One of the reasons is Fred’s #1 – lack of communication. The CEO is not comfortable with public speaking, possibly because English is not his first language. Other VPs handle mandatory appearances such as analyst calls. Is there a best practice to deal with this issue? (No, the CEO isn’t going anywhere. The board consists of his friends.)
I would add one more key attribute – empowerment. Employees can feel like owners if you treat them as such. Let them make decisions, make (and learn) from mistakes, figure out tough trade-offs – just like you have to do as a founder/CEO. This has the side benefit of giving them the leadership skills they need so you can promote from within with confidence.
To #5 – are there any continual assessment tools that you recommend for your portfolio companies?
no, but i should do a post and solicit suggestions. great idea.
hey man! [channeling The Dude] you owe us a post on education reform! 🙂 🙂 🙂
would love to see a rough (anonymous data) example of startup salaries, as well as raises (by % perhaps) through the first couple rounds of financing…have had a couple friends call recently to say “i’m raising money… do i get to pay myself now? how much?” and other founders are always looking for salary advice for new hires…while we’ve gotten it ‘right enough’ to attract a great team, we’re certainly not experts
Great topic.Nothing out there that I can see.Will change place to place as it just costs more to live here than let’s say Austin.
If you know the cost-of-living differential for a geographic area (which should be easy to find) sometimes you can just apply that to national survey data. This won’t give you hard and fast data, but a ballpark idea. And most surveys are broken down by regions.The exception would be jobs that are influenced by marketplace dynamics beyond COL.. For instance, the pay in tech hubs is going to be higher for tech jobs based on competitive factors that supersede the geographic COL differentials.But this doesn’t solve the problem for startup specific info.
Then their is just scarcity by area.Some places just have holes for certain types of work…UX, graphic design and so on.Actually scales of comp is never the question. Finding a match with quality individuals is.
Here is one: https://compstudy.com/Although the focus is on executive level so won’t necessarily help you to price your entire team. If you participate then you get the results for free — otherwise about $1500. The are currently collecting data for 2012. You might be able to find someone who has the 2011 copy and will loan it to you.
cool. thanks Donna
Great list. I would add:- praise: huge motivator, and too often either ignored or used in place of other key things on your list (both disasters)- supported freedom: pincus summed this up best with “make everyone the CEO of their job” — i.e. providing a mix of freedom, responsibility and challenge, with mentorship and support.- collaboration: break down silos and get more cross-functional communication and execution going. Good for team and performance.If you feel valued, are learning, and have loyalty to brothers and sisters at arms, it is hard to leave anyplace
great additions giff. several others have made the “praise” comment. it is so important.
On assessment — while some assessment tools are better than others, what matters is your willingness and ability to give people feedback. It’s a necessary part of a working relationship, and it’s the key to developing people’s skills. No assessment tool will create this relationship. You’ve got to do it yourself, one conversation at a time.If it’s uncomfortable, practice. (Take an improv class, get a coach, practice with a trusted colleague/significant other/mentor/your mom/etc.)When you hold back on feedback, most people don’t see your discomfort: it’s often “read” as indifference or dishonesty.(edited to fix funky formatting…)
great advice Anne!
I’ve have multiple people tell me to take improv classes. Every single one says it really improved their communication style, so +1 for mentioning!
“Yes, and” is key. Thanks, Shana!
Really good point about how people perceive the withholding of feedback.
If you look @BostonVC David Skok at Matrix VC has a great series on churn and related value metrics for SaaS investments http://forentrepreneurs.comI guess SaaS type metric tools could very easily be adapted to HR since LTV , organic growth and “Colleague Acquisition Cost” are equally relevant.It would be very interesting to conduct stage of growth cohort analysis for say Facebook and see if we could identify where the real value is built and at what stage – -It could also inform valuation as a process.One problem as Orwell would have it- All animals are born equal – but some are more equal than others”
Employee ChurnReally have not thought of the use of the term “Churn” w/ Employees, Normally I use w/ sales/ customers.Equally important to use w/ Employees
“When building or rebuilding a company you should spent 40% of your time on the people process, I don’t mean formal interviews, but really getting to know your people… after building the company, 20% will suffice on the people process.When I go on a plant visit, which I do 3 and 4 times a year for each plant, I sit down with the plant manager to talk about their people, then I walk around and spend some time saying hello to everyone in the plan, then I take the plant through a presentation for 30 minutes about where we we’re headed as a company, and then take questions for an hour (based on how much people talk I know whether the manager’s creating an open environment), then I sit back down with the manager to give her my impressions and we settle on some new agreements, I then write a formal letter to her within 24 hours confirming those agreements, as well as a personal thank you note to tell her something like “Good job today, production is not up to standards, and you have to work on it, but otherwise things are great.” (that way no one is going home mad if we had a tough conversation). This is my modus operandi – I do this 3 and 4 times a year for every plant we manage.” –Larry Bossidy, Execution, The Discipline of Getting Things Done.
.Nuts and bolts, blocking and tackling line management.Two other observations:Focus groupsEmployee Satisfaction Survey — discuss the results..
JLM, you come to mind when I read Bossidy’s stuff. As you mention, management is more the nuts and bolts of being there for your people than anything else.In regards to a survey, Bob Sutton, Stanford Management professor, would recommend 2 questions in particular: “When your employees leave a conversation with you, do they feel motivated and encourage, even if it’s a tough talk?” and “Does your manager create a stable and predictable environment, especially in times of uncertainty?” (Fred exhibits this quality through being consistent and level-headed)Simple stuff – but damn its hard not to get in the way of yourself – what happens is you start focusing outside your circle of influence, and start trying to change people, etc. – when that happens, you need to get back to the nuts and bolts.
.A good — anonymous — survey is an attempt to see the back of your own head, the blind spot you cannot see.Ask the tough questions:”If you were the President, what are three things you would do immediately?”Seek but never be afraid of the truth. You cannot improve if you do not actively seek criticism.Do the best you can and take a break. It will all still be there tom’w morning..
I think doing surveys in order to get anonymous more critical feedback is good – however at larger companies they end up being just weird because the questions wont be specific enough for our situation.
.You have to subdivide your audience.I conduct an anonymous Board Survey annually and I always learn something from those other 5 persons who actually need the cloak of anonymity to be able to speak their minds. It is funny.Use a subset of managers or some other useful subdivision that allows you to get real feedback..
How do you deal with situations where not every developer or designer is right for management, but you want to create a career path for them?
There is always a Technical career path … developer, senior developer, Leader, Architect, VP-Eng etc.,..if she/he is not a people’s person stop her/him at Architect or Principal-Scientist if he/she deserves.
chief architect, cto, something like that. but you can only have one or two of them.
This post could not have come at a better time for us. We are right now around 60-70 people in my company and I was thinking “How to move employee satisfaction to the next level?” i.e. “How to retain them?”We (Founders) identified following points in our bi-weekly meeting:1. Hire only and only “A” people. “A” people likes to work “A” people.2. Let go people who are not “Culture Fit” and thus not performing well.3. Convey the mission of the company. Belief and Zeal has to come down from the leaders.4. Sounds silly but give them lot of “t-shirts”! I think our developer should be wearing one or the other Digicorp t-shirt at least 2-3 days a week.5. Celebrate small victories6. Implement Scrum in all projects7. Weekly projects updatesMore or less we are trying to do what you have suggested here. And I am proud that we could come up with these points before your post. :)Thank you for providing us the light when we needed it the most! You have always been an inspiration.
celebrate small victories is a big one.
Yup taken from “Getting Real” by 37Signals.
Excellent post. Couldn’t agree more. Especially that ‘the single greatest contributor to low morale is lack of communication’ and that in a startup – or any business – there is no such thing as overcommunication. Biggest mistake management/leadership/founders/anyone can make is to think ‘The rest of them don’t need to know this’ or to keep knowledge/information to themselves in the misguided belief that that is a source of power.
*Warning #TooMuchInformation Warning*I have a rule – when I wake up in the morning needing the bathroom – I go immediately – It minimizes ever growing discomfort and then I am either awake or it is easier to continue my beauty sleep which is *essential* if you ever played rugby!I took this rule from my experiences at companies where I was not happy. I learned that if I even contemplated a move then move I must – its too late to get fired up again. This is a result of companies who are re-active rather than pro-active.Biggest mistake is to wait for more evidence – whether cowardice on my part, or lack of awareness – It was always a fail.My bathroom rule may also serve me well later in life 🙂
You should re- watch ‘Freinds’ Series to understand the ‘beauty’ … with joey tribbian & Jeff Goldblum …. just extending the analogy for fun :-).
Testing something 123?
“…a lot of churn results from bad hiring. The employee is asked to leave because they are not up to the job.” Very true!
Great post, Fred. One that I would add to the list would be “focus on your employees’ self-esteem”.One trend that I’ve seen is that employees leave companies, for the most part, for one of three reasons:1. They don’t think they’re great at what they’re doing2. They don’t feel like what they’re doing is important3. They don’t feel appreciated for what they’re doingSmart, ambitious people want to be winners. They want to be awesome at what they do, they want to be doing work that is meaningful and impactful and they want to feel appreciated for it. If an employee feels this way, it’s very unlikely that they’ll leave. But with so much going on, busy managers often forget about these things. It’s critical for managers to stop and recognize when an employee is good at something. Verbalize it, don’t just think it. Tell them they’re awesome. Say thank you. Show appreciation.Everybody gets insecure at some point, even top performers. I remember Mike Krzyzewski, Duke’s basketball coach, explaining that once or twice a year he calls his best player into his office to tell him how much he’s appreciated. This kid is in SportsIllustrated and on ESPN and is the most popular kid on campus, but as Coach Ksays, everybody gets insecure. And when they do, results suffer.It’s management’s job to create an environment where people feel awesome. They feel like they’re good at what they do, they’re doing important work and they’re appreciated by their company. When you have these three things in place,you’ll see your retention numbers soar.As Jack Welch used to say, self-esteem is the fuel that powers great companies.
great comment. everyone wants to be loved!
I think this is where the point about assessment is important. Continuous assessment even if it is negative helps steer the employee toward the proper path. A few praises every once in a while (when deserved) is also important and keeps the self-esteem high.
Smart, ambitious people want to be winners. They want to be awesome at what they do, they want to be doing work that is meaningful and impactful and they want to feel appreciated for it.Of course there is also Marge or Dave in accounting who just want to collect a paycheck and have a cigarette during their break as well. Not everyone in a company can or is a winner. If companies have winners in all positions they have some unique advantage in attracting all sorts of talent that a typical company can’t match.Along the same lines I always wondered what makes someone qualified to be a cleaning person at the whitehouse but only have risen to be a cleaning person at the whitehouse.Edit: Actually the reason is because working at the whitehouse is goldenhandcuffs as most of the staff is there through multiple presidencies (according to “It’s good to be President” that I recently watched ..)
I agree completely. If they’re not good, don’t tell them they’re good. I think my point is that you need to be super sincere and super candid. If an employee is good at something, tell them. If they’re appreciated, tell them. This builds loyalty, confidence and self-esteem, which I believe directly reduces turnover and increases performance.
“If they’re not good, don’t tell them they’re good.”And of course “Steve” was legend for telling people that weren’t good they sucked. (Like jumping the grand canyon though that’s probably something that very few people can pull off.)
.Let me pick just a little chicken bone on this issue.A really clever leader can coax a spectacular performance out of a person. Clever being the operative word.When I was a cadet at VMI, I was notoriously not interested in what passed for among cadets as “military” bearing — no close haircut, no shined shoes.I was a damn good student of military science and tactics but that was soldiering — not cadeting. I liked weapons and the kit of soldiering. Rugged, outdoor stuff.I was however, having been raised on Army posts — reveille being the first tune I ever heard — into soldiering.As we went off to summer camp, the Commandant called me into his office and said to me: “JLM, don’t embarass VMI this summer at summer camp.” He then summarily dismissed me. I was thoroughly pissed. Like nuclear fuel pissed.Of course, I was being played like a Stradivarius — a damn fiddle.All summer long that sentence echoed in my head and at the end of the summer I was #1 amongst all the cadets. In everything.We had been trained by the 101st ABN so this was no mean feat.As we returned to VMI, our summer camp standing was posted in the Jackson Arch for all to see. As I looked at my #1 standing, the Commandant slipped in behind me put his hand on my shoulder and whispered in my ear — “I knew you could do it.”I saluted him and he smiled knowingly and he walked off leaving me to know that I had learned something about myself and he had taught it to me. He had given me a lesson that I would remember forever.This was probably my first real indoctrination into the art of leadership — getting the performance that was always in there. But bringing it to the top.Never again did I expect to be anything other than the #1 graduate of any military school I ever attended.And, believe me, I had been played so hard, so sharp, so finely that even I have to chuckle with 40 years distance.A wickedly clever Colonel who had coaxed a performance out of otherwise completely uninspired cadet..
I’ve worked with + made friends with folks in finance. They get *very* excited when I start asking them accounting and finance questions for my hair brained idea of the day.
Good point. Yesterday in fact PSEG was doing a power repair which would cut the electric to our whole complex. I went over and spoke with the crew foreman to find out what they were doing and why and how long the repair would take. He was quite excited that someone took an interest in what he did.
If you run marketing or sales finance is part of your team. The better you market to them the more they share the successes and failures along the way as their own as well.
Yup, those that stay are good at it. Just need to incentivize the finance system better to do what finance systems are suppose to do.
It is far easier though to back-fill the standard 9-5 Accounts Payable Manager though than the aspirational Market Research professional who wants to open up your next 10 million dolllar product line and is self-motivated to put in the hours to get there.
I think what I’m about to write comes from a bias of having good retention mechanisms in place;I imagine there’s only so much you can do to retain employees. They have to want to be there, and their life will evolve and being in the city or environment they are currently in may not suite how they’ve grown as a person. I can seeI think the best starting point for retention is finding people who share the passion in working on a problem you’re trying to solve; Not that this is easy, though it’s a good way to break the ice and find out if they will lose interest quickly or not.Company culture and atmosphere, including retention mechanisms, will play a role in how comfortable someone feels as well.
Will we get to the point where we can discretise hiring more efficiently. For example: Have early stage companies collaborate with later stage ans /or mature companies. Have employees work across companies if done right would yield synergies for the employees and the the companies.
I’m not so sure – how would you manage security, and data hygiene?
Use predesignated corporate pools.
Can you expound?As an employer, I’d be worried that loose lips might complete an aphorism. Or possibly that I’d have a group of half-committed employees.As an employee, I’d be worried that I was doing two jobs for one wage.
Interesting idea. Early in my working life I was seconded to another company under the same parent. It was actually a valuable experience and lead to cross-pollination of ideas.
@fredwilson:disqus I really love your MBA Mondays series. It is a great start to Monday mornings and always seems to drum up some very interesting conversations and insight.I can relate to some of these points from my job before working for a startup. I worked for the New Orleans Hornets which was pretty fun and there are a lot of great people there, but I didn’t feel appreciated due to a lack of positive communication. There was plenty of neutral or even negative communication but rarely positive.I am intrigued by the hiring process and @donnawhite:disqus ‘s points and @mattamyers:disqus as well. Obviously when you are hiring talent, you want to put your best foot forward as a company and I think that it is way too easy to oversell your company and set unrealistic expectations. Am I off base here?Happy Monday everyone!!
I think it likely has to be a two-way street. You have to find what excites you about work, just as much as the company has to foster and support you in doing so, to facilitate such an environment.Also, the employee could have unrealistic expectations just merely by hype they’ve heard about a company too, or it could be from a ‘well-crafted’ job request you read somewhere.Everything will be much better off if you put feelers out, test the waters, and then support the hell out of a person in the environment once they feel comfortable, find their place, etc.. Putting too many resources initially, and thus perhaps too high of expectations, will lead to at minimum a higher potential of a disappointed [email protected] just made a blog post relating to expections, http://davidfeldt.tumblr.co… – it’s a good read.
Good points. I suspect all too often those recruiting see new hires, even pretty senior ones, as simply a commodity/resource needed at that point in time – and when HR is driving the process (often in amazing autonomy) there is even more danger of that.How often do we hear of someone being hired only to be laid off weeks/months later because the company was in fact in a period of decline/cash flow issues, but HR simply followed through on hiring for roles defined as being open – like a replenishment of inventory/stock control. Archaic.A new hire at any level is a mutual investment and massive commitment – it’s your company and people’s lives we are talking about. It’s not re-stocking the office supplies cupboard.
That scenario sounds like departments being heavily out of sync..I agree with the end sentiment as well, and I love everyone on AVC when they mention, like @JLM:disqus, that they realize and deeply hold the responsibility for those people that they’ve hired.
the greatest single time-suck for a CEO is a bad hire. Get it right up front – be painstaking in the assessment.the time-suck spreads quickly with a bad hire – manager time, CFO time (HR function), potentially lawyer time, emotional time and so on. Its deadly.The rest of freds points only really matter if no.2 is done correctly.
Which is why I will NEVER understand the casual approach so many (vast majority) leaders put into the hiring process.
I applaud the goal of building talent from within.Retaining the best people, in my view is heavily influenced by the caliber of Leadership throughout the organization. The Project Oxygen study at Google a few years back showed that employee performance was impacted directly by the Leadership capabilities of their boss. While a CEO or Founder may be a great visionary, most employees interact more regularly with other Leaders in the organization so strengthening the Leadership bench is important.I have found that a commitment to developing Leadership talent at all levels improves retention significantly.
fwiw, would mix these in..*) challenging and * impactful * work. Some employees need to be given this, others need to be given the freedom to create this out of thin air.*) as part of #4 I would add “a technical, non-management career path”
NY Times ran a cover story in the Sunday Paper about Apple. Below is the link but that doesn’t fully show the cover story slant. On the cover was a comparison between the pay of Apple employees and Costco employees (you can see the comparison on the web story if you click the slide show). Apple employees average 11.91 per hour with $5,647 per square foot in sales vs. Costco employees who make $13.87 per hour with $918 per sf in sales. The implication of course in placing this on the front page of the NYT like this is to make Apple employees and everyone think that Apple is doing something wrong. Of course the article has balance and multiple “to be sure” statements to qualify the differences of the two situations. But the impact of the first paragraph as only one example can’t be missed. Apple employees (and the public) will clearly feel that they are being taken advantage of and should be paid more by this rich successful company. The seeds of discontent are laid down. An apple employee quoted in the 2nd paragraph says sheepishly:“I was earning $11.25 an hour,” he said. “Part of me was thinking, ‘This is great. I’m an Apple fan, the store is doing really well.’ But when you look at the amount of money the company is making and then you look at your paycheck, it’s kind of tough.”http://www.nytimes.com/2012…So what we have here is a situation where people can be very happy in their jobs regardless of pay and then all the sudden start to feel unhappy by comparison. This happened to CEO’s after pay disclosure was required. It’s more or less a “keeping up with the Joneses” type response that people have when compared to the fortune of others.It would be typical for the NY Times liberal bias to run a story like this (which of course sells papers and I find interesting in a train wreck kind of way I have to admit). I mean you can make plenty of money hauling trash if you want or working as a toll taker or in Alaska on an Oil rig. Apple is able to pay those rates because of the environment they have created as well as their image. Most importantly also supply and demand. They can pay those wages because more people want to work there then there are positions to fill.Apple of course got wind of this story and last week raised the pay of it’s workers prophetically in advance of the print story.
I think I remember reading about the CEO pay disclosure stuff in Dan Ariely’s book “predictably irrationale” … it completely changed my mind on pay disclosure practices and provided little lesson on price anchors.
i am always up for apple bashing but my understanding of the story — which is admittedly limited — is that apple actually pays more than many other companies with similar staff. for instance i wonder what best buy or radio shack pays their employees? also apple employees get discounts on apple products and, of much greater importance, apple shares. i wonder how big the discount is? but if they create a culture where it is easy for employees to become shareholders, however small of a portion they may have, i think there is something to be said for that.
Well as it goes “All the papers had to say was that Marilyn was found in the nude.”A general rule with people is that they don’t have the ability to evaluate an situation objectively or fairly. That is why trials take so long. Details matter.As you know everything isn’t financial. I get paid the same to write comments here as I do anywhere else. I comment here because it’s a better place to be for what I am paid.The article does point out the intangibles (and yes you are correct about the discounts etc at Apple).In general of course the other difference is the customers at an Apple store (vs. BestBuy or Radio Shack). As a group these customers (not individual customers who could of course be “Walmart” grade) are nicer to be around. There is something to be said about that as well.Same goes for Starbucks vs. McDonalds. Having coffee in McDonalds at a table is simply not the same as having it at Starbucks as far as the average customer base.”i wonder how big the discount is?” An ex relative works there. I believe it’s about 25%. Typically when they have to clear things out of the channel for new products they give the employees a chance to buy for friends and family.By the way if you haven’t watched it watch Bush’s war on Frontline.http://video.pbs.org/video/…(It’s two parts. You will like it.)
Right, LE, it’s 25%, plus now there is an additional $500 discount on Macs and $250 off on iPads. http://9to5mac.com/2012/06/…
Apple has created how many jobs through their retail stores…30,000 mostly in the US.And at rates that within the category are competitive.I see this as an achievement of note, not something to pound them on.Pound me on this if you’d like ;))Making jobs that people are happy to work at is a good thing by any standard.
my 3 adds:1. don’t oversell – under promise and over deliver2. challenge them on a daily basis. – people want to be creative, do better and help create the future. it’s not money most people are looking for. constantly challenge them and help them learn ongoing. 3. trust as a policy – trust people and if you can’t, don’t have them on your team. it allows them flexibility to go get their kids from daycare and work later, work from home, come in at 10 bc of traffic or whatever they need and in return they work harder for you, stay longer and help build your team and culture.
“Build projects around motivated individuals. Give them the environment and support they need, and trust them to get the job done.” ~Principles behind the Agile Manifestohttp://agilemanifesto.org/p…
Most appalling ‘advice’ I ever got when I was in a period/role of doing a lot of hiring, from a legacy middle-manager at the same company at that time… “Never hire someone better than you.”I jest not.And I suspect it is still pretty endemic in some environments.
Probably universal in most larger cos.
How do you fit in perks and benefits? Things like free lunch, gym membership, commuter benefits, etc, especially here in SF/Silicon Valley, are becoming pretty standard in startups. Not having them would be just like paying lower than market salaries in my opinion.
I’ve worked in a number of startups, or fast growing companies outside of tech and they suffer from systemic churn. But to speak about these issues to them is pointless. It either takes people that have worked and have experience, or outside investors to pressure them, because it takes experience to understand the short and long term value of employee retention and development.
I especially love your last point as it is the most practical. Startups falsely lure folks with stock grants and expect employees to take a significant pay cut. A few months down the line, the employee realizes he is getting under paid and decides to look else where. This especially happens in poorly funded startups or in startups that are not backed by tier-1 VC’s. This is a huge factor in employee churn.
I found the ‘pay market salary’ the most interesting note here. Makes total sense to me.
A boss knows how it’s done, a leader shows how its done. Lead by example, respect is earned, not demanded.
I don’t like to disagree with Fred, however I’ve found some fairly counter-intuitive insights at Xtreme Labs (http://bit.ly/LlWi9z) on the first 2 points.From Fred’s list (agree with the rest):1) Agree with most of it except for the (too-frequent?) 1:1’s. I’ve done this all throughout my career and the real important convo’s happened because my manager was around and it wasn’t during our scheduled 1:1 time. The rest is bang on.2) Interviews are a horrible predicator of performance. Perhaps Fred could have gone deeper on his thoughts here, but you need to hire either lots of interns to test-drive them (we have 60), or have a model which allows you to evaluate folks for a few months and then get them out of they are not a fit.Mainly we follow the Dan Pink philosophy on motivation (and hence retention):His awesome video is here: http://bit.ly/LM1iH21) Mastery: becoming really good at something. In our case, since we Pair Program (http://tcrn.ch/OlGBGF), working closely with someone really smart gets you instant feedback and likely trains you on things in new technology (in our case) faster than you could on your own or alone in your cube.2) Autonomy: being able to not be micro-managed and have the room to do it your way. We have an extremely flat hierarchy (I have over 100 direct reports). Using a combination of light-weight systems and tools, folks are able to ship code every week w/o the overburden of meetings and heavy process.3) Purpose: contributing to something bigger than yourself. The mobile apps we build get d/led onto millions and millions of devices. How’s that for impact 🙂
The only people that you want to leave your company are the ones you want to leave.If you are firing on all aspects of your plan then exits should be your choice.
The interesting thing about startup companies is sometimes there are people who are geared for very early stage startups, whereas others want to work for bigger companies or well funded companies. At least two people contacted me who wanted to work for me well before two of your well funded startup companies hired them, but weren’t able to work for me because they knew they would get a better offer from a series A or greater funded startup. The unfortunate thing, as a small startup, we were not able to afford the salary this person would get at your portfolio company. So, as an entrepreneur, I’ve kept my eye on these people, and have seen them do excellent work at your portfolio companies. The fact they are interested in working for well funded companies in the startup ecosphere, and not public company is a good indicator, they would be a good fit if my company were able to offer the salary they wanted. It’s only a motivation for an entrepreneur to work harder to hopefully make it to a point they can raise the funding like your portfolio companies have done so successfully.Now, let’s say my startup were to raise funding, and they remember contacting me before and they reach out to me later. If they were a success at your portfolio company, then it’s a good indicator they are most likely a great employee. There’s nothing a newly funded company can do, but consider to hire them after they’ve done great work at the previous company. They may want to leave to try something new, help out a new company. It’s not that we want them to leave your portfolio company, it’s possibly because they’ve reached a point where they’ve done a great job at the previous one. Realize that entrepreneurs with the newer startups are always trying to make their way!It’s inevitable that some employees will move on to something new, even if they enjoy the work. It has nothing to do with you not doing a good job of retaining them, they may want to work on a new project, solve a new problem, etc.Now, let’s say you have 2 portfolio companies, one employee leaves one to go to the next. Essentially, you’re retaining an employee within your portfolio companies. This could be an interesting way to look at it. I’m wondering if VC firms ever contract employees to work at multiple portfolio companies.
.Metaphorically employee retention is all about keeping everyone seated in front of YOUR campfire. It is really very simple and you know it already.The most precious resource — and the cheapest in many ways — is the boss’s time. It is the glue which cements every — every — relationship in the company. It is what every individual competes to attract and it is a currency. Spread it around like you were a drunken Bernanke. Print that currency in the basement and distribute it widely and wildly.First, you have to have a damn campfire. You have to have a place where only those who are invited — perhaps solely by the virtue of having accepted employment — are present. It has to be by invitation because that invitation is also a commitment.There is a reason why young Army officers swear an oath to protect and defend the Nation from all enemies — foreign and domestic. It is the invitation to the campfire. It is a tribal ritual. When they pound those jump wings into your chest and draw blood, you will never willingly give them back. Ever.You have to talk to your people about the business, the economy, the company, the vision/mission/values, yourself and most importantly — THEM.I have a monthly birthday party at which every birthday honoree has to give a speech about any topic they desire — to hear that most precious sound, their own voices. And then everyone has to tell everybody something about themselves that has happened — good or bad. Strap in tight because the stuff you will learn will rock your world.Conduct an anonymous company survey, compile the results and then brief the company on it. Then make some damn changes based upon it. Tell everyone you are doing just that and do it with a smile.Take your folks out to lunch and chat them up like they were the Queen of Freakin’ England. Press them, cajole them, tell a joke and then let them talk, talk, talk and ask you about anything. Take the accountants out for Mexican food and let them ask you anything.Today I took our Social Media guy and our Tx Regional Mgr out for Mexican food. It was fabulous. While we seemingly talked about almost nothing, I was really getting the RM to train and familiarize the SM guy about operational considerations.[Note: I am particularly fond of any strategy which entails eating Tex-Mex but who said life had to be a drag?]Praise in writing and chew ass verbally. Never, ever chew anyone’s butt in writing. It will be like giving a tattoo. It will never go away. And, you really don’t want that.Be the kind of leader and positive force such that when you say — “That was not your best work” or “I am disappointed because it does not show how good you can really be” people begin to cry.Never, ever assail the dignity of any person by raising your voice or using profanity. If you should, apologize immediately.Express wild eyed amazement and wonderment when you learn something. Don’t be a smug tight ass who can never admit — hmmm, I really don’t know everything.Have a company retreat with some weird thing but not so weird that people are afraid to participate. Make it fun.Memorialize your triumphs, celebrations and touchstones in pictures. Get a big leather book and look at it whenever the company gathers together. Let folks talk about what each picture means — that IS the campfire.Engage, Maverick..
“I am Disappointed.”When that matters to someone, you have their respect.
I would love to see your turnover numbers. I am going to guess that they are low.Your last sentence is the crux. Engagement. A culture of engagement is a hard one to leave.
.If you want longevity, then you will have to celebrate and value longevity.Memorialize every year of longevity and you will get more of the same..
Great topic and awesome advice from Fred and AVC community on employee retention.Here is the best way I know how to retain talent:1. Have a mission worthy of the best talent getting up every morning excited to come to work.2. Only hire people that are truly (not fake) excited about the mission and willing to run through walls for making it happen.3. Take care of them (and their families) well while they are giving everything they have got to make the mission real.
From Reddit: “My boss, from 6500 miles away, decided everyone should be done working at 2pm every day. Anyone is welcome to stay later if they have a deadline or project to hit, and most people do stay until 4-5 but productivity has absolutely skyrocketed since then. It’s amazing how people will work their asses off for 4-5 hours if they know they can leave once they are done compared to dragging their feet for 8-9 hours just trying to make it through.”Love that startups are notorious for out of the box culture. Google is a great example as well, and hopefully by continuing to measure and publish findings freely their fringe ideas will become mainstream.
I can’t think of a more fitting topic than retention in this current job market. The amount of time, money and effort that is being spent to hire the right people in this overly competitive market is incredible. There is nothing worse than spending months trying to recruit a stellar developer, top sales performer, product manager etc to have them leave 6 months or a year later for something “better”. I think that #3 plays an incredible role in retention. Culture is such an important piece of any company, but being able to say what your culture is and what it means to work for your company is hard. There is a great Techstars alum working on this very issue in Boulder. (www.roundpegg.com) There tag line is “Scientifically Ensure Every Employee You Hire, Develop and Engage Fits your Culture”
Good Slide deck from Jeff Lawson @Jeffiel re: scaling company culture. Talks about Rituals @ slides 8 & 9 Worth a quick scanhttp://www.slideshare.net/t…
1 – The lack of strategic transparency (promoting vision as well as explaining decisions) leads people to wonder why suddenly we are focusing on A vs. B and if not handled properly inevitably leads to the conclusion that management is clueless.Getting people involved is even better, in my opinion keeping them informed is only part A, part B is tapping into their talents to help form the vision and decision making process, which honestly is a lot harder to manage and I don’t quite have it right yet myself.3 – One of the best places I ever worked was because of the culture the guy in charge created for the teams (and he went on to start a successful billion plus company)4 – I have fallen into this trap myself, having someone in a key position that want’s to move on/up is never friction-less and all too easy to just keep them were they are at. It’s a messy balance between cannibalizing a team that works and potentially losing the performer entirely, and yeah it can kill morale completely, especially if you bring in outside talent that is just one step below where that person currently is.6 – Well I agree, but resources at hand and determining the length of your runway before liftoff sometimes makes that less of a retention option. I do agree though that everyone has a financial expiration date for any particular job that they are in, and failing to notice and or deal with it regularly (when you can) is a good recipe for a sudden exit.
Promoting from within and paying well are definitely things that create an environment in which people feel they are valued members of a team. People want to know there is room to grow within the company and that they’re valued enough to get paid what they’re worth. Those two things combined with hiring for culture fit are sure to increase the likelihood that the employee will stick around for the long haul.
Thanks Fred, it’s good to keep seeing this focus on people, and from a VC ! I would say you pointed many of the best practices in retention.But we need to remember that HR and talent management practices were invented because they were needed, at a time when the technology did not allow for the rich and real time relations that they allow today. As I start-up, I would focus more on the desired result of the retention best practice than on the way that practice is implemented today. There is so much potential for HR reinvention today …
Nice post about MBA i like it.
i prefer a high deductible plan + a health care savings account funded by the company. its less expensive for the company and better for the employee.
I wouldn’t buy a low-deductible plan for myself (MUCH prefer high-deductible and saving the savings), why would I buy one for others?
I tend to agree with you Charlie – however I actually have a high deductible plan myself ..and it works pretty good. The real trick is get the deductible set correctly – I think it should be sliding scale based on pay. For our family our deductible is around $3200 a year ..which is pretty decent ..but I work for a BigCo. Before when I worked at a startup the deductable was >5K !.The other perplexing thing about high deductible plans …is “what happens to a new employee who enters the system on day one and has no money in their account” ..from what I can tell they are out of pocket. I think there needs to be some protection there .. not a lot of people have 3-5K just sitting around ready to dump into an emergency room visit.
I would say you are not the norm. I agree with you by the way, but if you are focused on this from the typical employee’s mindset, Charlie’s perspective comes across as more “care-taking” and of higher value to the vast majority of employees.
Surely there’s value in employees that don’t see me as “caretaker”, no? 🙂
.This shows how challenging the issue of health care and health insurance — two very different things mind you — really is.Here are two smart as shit experienced business guys who do not agree on a subject that is really devoid of sentiment or emotion.How can us dullards in the hinterlands ever figure it out?Really, there is a lesson here that even us simpletons can learn.Luckily we have a bunch of guys and gals in black robes to guide us this week..
My daughter works at a startup and was offered an assorted menu of options from which to choose. She has medical, dental, vision, life insurance from insurers she selected – each from providers and with deductibles she chose based on her patterns. Plus a type of HSA option was provided to supplement the support of deductibles if desired. (In her case, the latter was not of use because of the way it functions, but may be good for some.) The company pays 100% and she chose fairly low deductibles (from $75 on dental to $600 on medical). Dental includes free cleaning, and vision includes annual eye exams and new glasses or contacts if needed (glasses might be bi-annually).This is the type of package we budget for in our project.
what, why the different because of companies.Healthcare, something got to give.
The obstacle that startups typically encounter to offer a wide range of benefits like this is that each plan can involve enrollment choices and documentation, integration with payroll, funds transmittal, COBRA etc. The paperwork is a hassle and startups don’t have the internal admin resources to handle all that. An increasingly common path for putting a package like that together is to engage a Professional Employer Organization (PEO) to handle it all on an outsourced basis and ideally – totally online.The best PEOs for a startup will also have a deep client list of other startups so they can mine the overall data base and provide meaningful guidance to the management team on things like salary levels, company policies and practices appropriate for the startup’s industry, stage of development and geography.
Martin, that is precisely the approach her company and ours are taking. The fee for doing so is reasonable, especially as one considers the overhead of doing it all in-house. Large companies can devote a segment of HR resources to it, but startups need to concentrate on delivering their product and service, while still providing for employees.Edit: I realized I was preaching to the choir in this reply. 😉
I think (but don’t know for certain) that the bigger company with a larger group can get a better rate ..and hence have a “high deductible plan” with a lower deductible. When I was at the startup I actually reviewed the plans that were available to us — and getting a plan with a lower deductible meant that the company would effectible paying the difference – which was additional cash burn.
Hi Dale – does the PEO allow the group to be larger ..and presumably get a better rate? (or ..I dunno – maybe the size doesn’t matter). Or does the PEO just reduce the expense overhead for all of the participating companies?
Andy, circumstances vary, but generally administration costs per employee go down as the number of employees increase, i.e. 1-5, 6-10, 11-19, 20-49, etc. There are many factors that contribute to the overall costs of the employee benefits, including average age of the team, number, etc. A PEO is especially helpful if your team is distributed, as they can provide benefits appropriate for each state for example.I suspect that @martinbabinec:disqus can give far better details than I, but in my case I called several PEOs and discussed our scenario to get a handle on the costs so that we could project operating expenses more accurately.I did find an opportunity for improvement on the part of the PEOs in the area of helping with cost projections prior to being ready for a true bid. They should provide some typical sample situations for startups which are preparing to raise funding, but ultimately I was able to talk to sales personnel and do the “if this, then that” sort of thing to get cost estimates. They should be providing a variety of hypothetical company scenarios with associated plans and costs to save everyone time, but I didn’t find such a thing.
I’m not sure if I read your question correctly or not, Andy. PEOs are most often more attractive to small and medium-sized companies. Large companies can setup in-house people to manage such things and I think you’ll find more and more large companies self-insuring at least for part of their benefits packages.
Thanks Dales – you answered my question.
I would rather have opportunities abound. Then I can make loads of cash and buy whatever plan I like.Give a man a fish and you feed him for a day… Give a man a world full of fish and he has the opportunity to eat for life.