The startup world stands out for many reasons, but one statistic outshines them all. A recent LinkedIn study found that small and mid-sized businesses have a turnover of 12%, while the overall average is 10.6%, and big enterprises have 9.9%. However, this number can be as high as 54% in the startup world. While that number might shock people, it's important to understand how it can change our way of working.
There's no denying that running a startup is challenging. While the world marvels at the glitzy successes and remarkable innovations, few, if any, venture into the shadows to understand the challenge of keeping these companies afloat.
Many, if not all, startup ideas are born in the most unexpected places. They come from the sparks that visionaries have had. These pioneers embrace the entrepreneurial spirit, leaving behind the safety of conventional career paths for the boundless possibilities of their startups. With passion as their compass, they embark on an arduous journey filled with highs and lows that can make or break them. The numbers don't help the cause, as it's well-documented that 90% of startups won't survive the five-year mark. It's a challenging journey.
Founders need people on their side, but we're not talking about anyone. Startups often face uncertainty, fierce competition, and the looming specter of failure. The workload is demanding, stretching the limits of human endurance. Sleepless nights, tight budgets, and the weight of constant decision-making casts a long shadow on these daring souls. It is a relentless battle, fought not just with external adversaries but also against internal doubts and fears.
Everyone within a startup, from the CEO to developers to interns, must grasp that times are ever-changing and that unpredictability is part of the game.
I'll dive deeper into one role that's crucial for most startups, and that is software engineers. These professionals had the privilege of being highly coveted. In fact, they're often considered the backbone of a company, and people have usually associated the role with high pay. Still, no one would've predicted how the pandemic changed things. Several companies went from having a turnover rate of 10% a year to around 10% a month, forcing them to rethink how to hire engineers.
Even if the pandemic has subsided, the problem persists in many regions, one of the most affected being Africa and, more specifically, Nigeria. Although investment in the country has significantly increased, accounting for 35% of the continent’s funding, startups don’t have it as easy as a journey as one might expect. The opposite is happening: startups are having trouble finding people, and it's not just about developers.
With a high turnover ratio, startups are faced with a problem. There's a vast need for talent, but nobody to fill those positions. While the recruitment process might be rigorous, most CEOs and hiring personnel run into the same challenge that we've mentioned before: people need to be up to the task, and that's because working at a startup is challenging.
"Organized chaos is what a startup is — you're looking for people who are not afraid of chaos," Samuel Okwuada told Rest Of World in 2022, and he's right. There's no way of predicting what can happen tomorrow, but that doesn't mean there aren't solutions. In fact, the key to keeping employees might be in the very nature of startups.
Though every company is different, there are some strategies that startups can apply to ensure that turnover stays relatively low. One of the most important aspects is balancing a hectic pace and purpose-driven cultures, creating environments that foster camaraderie, passion, and a shared vision.
Growth is an essential part of a startup, as one of the main keys to a startup's existence is to grow to a point where it can either exit through an IPO or finally sustain itself and become a successful business. The same should apply to employees. Growth is not just about financial success but also personal and professional development. Startups should create pathways for their employees to grow alongside the company. Companies that successfully battle turnover offer mentorship, learning opportunities, and room to explore diverse roles.
It's also important to remember that startups can fail on a small or large scale. So, there's no need to avoid the idea of failure. After all, it's an inevitable companion on the startup journey. Still, startups must learn to embrace it as a stepping stone to success. It's what comes from taking risks.
Then, there’s artificial intelligence, which has seen impressive growth in recent months and has become a powerful tool for retention. One study found that 52% of recent resignations could have been prevented, and that's where AI comes into play.
One of the most significant ways AI has helped is by finding the best candidate for the job, but it goes beyond that. HR Signal is a startup that uses algorithms and AI to boldly predict who will quit next. The company was born out of the same necessity that has plagued other startups: a lack of talent. So, the founders at HR Signal decided to build an algorithm that first targeted under-promoted and under-recognized employees to calibrate whether these people were likely to quit.
The company has benchmarked 50,000 job positions and has gained funding from big names, such as Aaron Grossman and Gammite Ventures. What's fascinating is that, though the company uses AI, it still focuses on prime core values in startups: motivation, growth, and values.
While turnover may lurk in the shadows, or in plain sight, with some cases being as high as 54%, startups have proven their tenacity in the face of adversity. They are driven by passion and an unyielding determination to bring their visions to life. The startup world may have the highest turnover rate, but it also holds the potential for boundless growth, unparalleled innovation, and a sense of fulfillment. It's there that the solution to the turnover problem lies.
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