From The Archives: Retaining Your Team

I picked up a bad head cold in SF this week. It’s rainy and cold there and that got the best of me. So I’m running a post from the archives and medicating myself instead of writing today.

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.

#employment#entrepreneurship#management#MBA Mondays

Comments (Archived):

  1. ErikSchwartz

    Everyone in SF has that same head cold right now.

  2. LE

    My wife and the kids take Umcka and swear by it. . You can get it at CVS and Rite Aid. I am posting the Amazon page so you can see the high reviews.…I typically stave off any symptoms by taking NyQuil at the hint of any problems. It’s a wonder drug to me.

  3. William Mougayar

    “A healthy company doesn’t churn more than five or ten percent of their employees every year.”Yup, If you’re under 5%, you’re golden.

    1. Adam Sher

      Where’d you read/hear that? – Never mind. You quoted the article. I’m just here to show the group that sometimes there are dumb questions.

  4. Danny Goodman

    Along the lines of compensation, totally spot on that equity doesn’t pay rent or food immediately. However, and based on recent experience, it’s most important that salaries are paid. And if the CEO can’t pay on time, he/she needs to clearly communicate that ahead of time and provide a plan to meet that obligation. It’s the most basic obligation. Because at the end of the day, no matter how great the vision, startups are a business not a hobby.

  5. PhilipSugar

    This is a topic near and dear to my heart.It is my first rule of management.I agree with everything. Everything.The only thing I would clarify is this “culture and fit”You can have a culture where a very diverse set of people can get along: old, young, boisterous, quiet, women, men, white, black, Indian, Asian.That can actually be your culture.I have young guys that wear shorts and t shirts that say “when I’m nodding I’m just pretending to pay attention” and older women that barely say a word. I have all religions.I will admit it was not always this way for me. It was different when I was young. I was dumb.I’ll give a funny story to end. Our largest employee a giant bearded man said he had to go home and open the pool for memorial day or his wife would kill him. Our smallest employee a tiny Indian guy sent the office a video with a huge man dancing around in a speedo and said we have you on webcam.The big man was so happy and said: “Now it’s on” We laughed. One of my rules is you never dish it out if you can’t take it. You respect people for who they are.

  6. Ana Milicevic

    This is a truly evergreen post.Feel better and keep that head cold out West. We have enough to deal with here w. the snow day.

  7. BillMcNeely

    Airborne the dissolving pills

  8. Twain Twain

    Get well soon. It’s … TORRENTIAL in SF.Here’s a sunny photo of SF to cheer you up.* https://uploads.disquscdn.c…Photo credit: Chic Traveler.

  9. Dan Epstein

    Feel better. Would love to hear about yesterday’s panel/conf when you’re 100%.

  10. creative group

    CONTRIBUTORS:OFF TOPIC ALERT:We have stated countless times that Jack Dorsey is an amazing and brilliant mind.We actually feel if he concentrated on running one company it will have a chance to do well. Jack Dorsey can not run two companies. Period.Twitter spiraling is much to late to be fixed. It will need to be acquired.The stock price would make anyone sick.An Activist Investor would be a great motivation for change. The current country club is doing no favors to shareholders. Just what is the current board actually doing?DISCLOSURE: NO HOLDINGS IN TWITTER.

  11. Ronnie Rendel

    Rainy SF is a real bummer, especially for a week straight. But at least you know CA needs the rain so can’t complain. Returned to NYC today for a much nastier version of the same weather pattern.

  12. pointsnfigures

    Everyone in Chicago has that or a nasty flu. Be well. You are correct in your points. Jerry Colonna does a good job with this and my friend Raman Chadha of does a program around this. I believe Anne Libby also does things with this.

  13. Susan Rubinsky

    Hope you feel better soon! I’ve been sick for over a week now. Take it easy and rest.

  14. ShanaC

    I’m a horrible person to ask about colds. I always end up needing to use an inhaler, otherwise I stay sick for weeks and sound like I actually have whooping cough. Apparently colds give me asthma and I’m amazed I’ve never had pneumonia from a cold lasting too long, staying in my chest too long, and my sheer stupidity at not realizing colds can trigger asthma.Generically, my advice would be to whine at gotham gal to make matzah ball soup.

  15. Sprugman

    What’s the calculation for churn? Number of employees who leave for any reason during a year / total number of employees in that year?

    1. Adam Sher

      I calculate the denominator as avg. annual head count. I include employees who are fired in the numerator.

  16. jason wright

    on employees and US companies, the term ‘transition (out)’ always brings a rye smile to my face. here in the UK we say it as it is, usually as ‘the sack’ and sometimes ‘the boot’. the US way of describing it sounds a little too Machiavellian, a little bit ‘cute’, and rather two-faced. i’ve never liked it.

  17. stevanpopo

    Great post, Fred – this really resonated with me today.On 6) how do you explain this to your portfolio founders? I’ve found that often the best startups underpay market value because they can (enough demand externally to work there). They can get away with it and people still want to work there. As you’ve said, for existing employees this is tough. Knowing you are underpaid is bad for one and it’s made even harder when constantly getting recruitment offers from elsewhere (which I’ve also found is common when you work for a particularly successful startup).How do you convince your CEOs paying above market rate is wise even when they don’t have to?

  18. K_Berger

    Fred, it seems that once posts are about a month old the comments are no longer available. I don’t remember that always being the case. Is that something new?

  19. daryn

    Reading back through the MBA Monday posts and some other classics in your archive, they all have seemingly stood the test of time.Are there any posts you remember where your guidance has changed over the past few years, either because the market has changed or your opinions have?

  20. Vasudev Ram

    Old saying: Treat a cold and it gets cured in 7 days, don’t treat it and it gets cured in a week.That aside, studies have shown that jala neti (a yoga technique, know you do yoga, so may know it already) helps with prevention at least. May help cure and will at least relieve symptoms.Would be a good idea to get someone who knows how to do it to show or tell you how. Also check with a doctor first.