Employee Attrition – Should Startups be worried about?

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[Guest post by Sanjay Anandaram, entrepreneur turned investor.]

I received am email from the CEO of a company that had just lost a few employees. These ex-employees had apparently started a competing company. Here’s an extract from the CEO’s mail:

” Why does this happen? Another example is Wipro. there are so many ex-Wiproites with their own companies now. I also know of an education institute called Vignan in Guntur, Andhra Pradesh. Today there are at least 10 similar sized institutes, which are started by ex-Vignan staff.

• Does it happen because employees don’t get to grow in their companies? But this may not be true in Wipro?
• Does it happen because employees have seen the 360 degree of running a company and are now confident?
• Is it good for the companies?
• Should we take measures to stop this happen to us?”

Well, people leave their jobs for multiple reasons – emotional, professional, social and economic.
What do employees seek in a job in the first place? Various studies have been conducted that generally converge on the following needs of employees: opportunities for responsibility and challenge as well as to develop themselves professionally. Career opportunities for growth are therefore critical. Of course, the pay has to be fair but buying people’s “loyalty” through high salaries is not necessary or even good for the company or the employee.

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This in turn means that the company must be grow in order to provide opportunities for its employees. Career development opportunities are also critical in that they help employees enhance their capabilities and marketability.
Training and counseling are therefore important inputs that need to be provided. Leadership needs to constantly communicate with their employees in a transparent manner, develop trust and confidence through the framing of fair and friendly policies and more importantly in their honest practice without compromising company productivity and performance expectations.
These could range from having flexible working schedules to policies that support education enhancement to health benefits to even dress codes and time-off for self and family affairs.  But communicate what? Communicate the company’s culture, goals, performance, and plans. Enlist employee involvement in problem solving, in securing feedback and getting suggestions. More importantly, the feedback and suggestions need to be acknowledged and acted upon in an honest manner.

There are many companies that seem to regularly lose management talent but yet continue to grow. The secret lies in the ability of these companies to create top class management talent across various tiers of the company. They provide both career advancement as well as career development opportunities.
But why then do people leave? People leave when they perceive that the sound background and experience they’ve acquired can be better monetized outside the walls their current company. When they wish to be the masters of their own destiny through the pursuit of entrepreneurial ambitions. When opportunities for career advancement are no longer visible. When a company starts to lose its connection with its people. Mentoring, counseling and development of employees therefore need to happen on a continuous basis across the company by all managers.

Now, should companies prevent the leaving of all employees? Of course, losing a trained employee is a loss to any company; however, it is a good practice to let go off people who just don’t seem to fit with a company’s culture and value system or who just can’t seem to deliver in spite of opportunities and chances provided. But what of the others who wish to leave?

I don’t believe it is worthwhile to force an employee to stay if his/her mind is made up. On the other hand, when good employees move, they stay in touch with their former colleagues. Employees don’t necessarily join competitors but leave to join customer companies, suppliers and partners. These relationships help in establishing new business possibilities in sales, outsourcing contracts and even M & A. According to an article in the May 2008 Sloan Management Review “Rethinking the War for Talent” the authors say “.social capital created by the movement of employees across companies can be a key source of competitive advantage.”

What do you think?