I think the author misses one important factor in employee retention - work / life balance. If a start-up hires a bunch of employees, everyone will be tempted to trade work for life in favor of "rocketship growth". In essence, they believe in the mission of the company so much that they are willing to sacrifice their mission for themselves. Companies who are empathetic to employee needs stand a much better chance of retaining employees. If I work for a company that lets me choose the most fulfilling work, compensates me fairly for that good work, and gives me enough time off to re-generate, and actually seems to care for my well being, I'm more more apt to stay.
When I talk to ex-coworkers, the reasons they often cite for leaving are: 1) weren't empowered to achieve their career goals 2) weren't compensated relative to the value they felt they brought 3) worked on too many failed products and 4) burned out.
All 3 of your points are achieved if the startup is growing fast and its product is succeeding. It seems like you'll optimize employee retention by making sure the work is worthwhile, even if it's hard, rather than by making sure people don't do too much of it.
(I don't disagree with work/life balance in general, but I'm pointing out that your data supports Sam's point that you should give people generous equity for working on a product that's worthwhile, rather than your point that they shouldn't devote themselves 100% to the work.)
You're right, I do need to support my hypothesis with more data. Consider another data point:
My dad works for a government contractor where the profit / margins are fixed, so essentially a "limited" growth company. He's been employed for over 30 years.
Why has he stayed? Because he can work 40 hours a week. His pay is good (EOY bonus is tied to a project success). He holds a position of value (to him not just to the organization). In his career he has seen more product failures than successes, but his successes were large, and he uses the knowledge from each to consult other projects in the organization (eg, he feels valued).
My takeaway is to look at your career in totality - it goes beyond equity and a worthwhile project because in a long career, you'll have many worthwhile projects and many that are not. And for the vast majority of startups, equity is worthless. It also includes interaction with team members and how you want to shape your company's future, and how your company wants to shape yours.
Yes - people like to win. If the product succeeds, and the start-up is racing upwards, people will forgive a lot of other things.
I think on work/life balance, there are populations who care about this, and populations who don't. And this changes over time. When I was younger I was happy to throw my whole life into tough projects. Now that I have a family it's tougher to go "All in" with projects.
Some other things that should be considered in work-life balance are flextime, working remotely (even if just for one day of the week), and (paid) maternity/paternity leave. Many companies still don't offer any of these.
The big mistake everybody makes is thinking the issue is about hiring and retaining individual employees.
You don't want to "hire good employees" but you want to "create a great team". If an employee feels like he's part of a team where he can create more value than he could someplace else, it makes sense for him to stay. If he feel s like the team is holding him back, he ought to leave in a heartbeat.
It's said that "employees don't leave a company, they leave managers", and this is definitely true. One bad manager can cause employee retention problems that go on for years.
Indeed. I've been the happiest when I've felt a part of an obvious team, and the unhappiest when it was just individuals working on their todo lists. In a really large organization a team can be project-based. I'm not very sociable, but I definitely gain energy from "sharing a foxhole" with team mates, and looking back on something and saying "we did that."
I don't care about my todo list type projects other than to do a good job and keep my job.
In my experience the biggest retention issue is for an employer to deliver what was promised during the hiring process. Employers that are competing for talent are known to paint the picture of how they see their ideal instead of how things really are. This sets the new hire's expectations to an unreasonably high standard, and when those expectations aren't met they walk.
Being honest with potential hires and showing them both the good and the bad about what you have to offer may lose you a few good hires but will surely save you many more bad (short tenure) hires over time. As a recruiter, I hear the bait-and-switch cited by roughly 25-50% of job seekers that are leaving a company after a relatively short 0-3 year stint.
Most of the things baited and switched probably wouldn't be required to be put in writing or not, because they aren't legally binding anyway. Even if the legally binding things are put in writing, usually we're talking about at will employment anyway, so they could just fire you instead of making good on a 'promise'.
The types of things I'm talking about with bait and switch are related to what projects you will work on (say you will be put on Team X's sexy initiative, then on Day 1 told you that Team Y's maintenance isn't going well and your skills are needed there), what the future holds for the company (over-optimistic about funding promises, sales estimates, delivery dates, etc.), or how you will be able to progress.
Does the management team have a history of promoting from within or will they hire a former co-worker for the role you are in line for? Can you look at tangible past results and numbers as evidence.
It's not very likely to get these types of items in writing, and unless it's legally binding you don't have any remedy in most cases.
If you don't think your equity stake is going to be worth enough (company isn't growing fast) then it makes sense to jump to another company after your first vesting. You are collecting lottery tickets from a bunch of startups. And I find it ironic that everyone on the board is obsessed with money, but somehow it's bad form for employees!
Honestly, which company has a mission that motivates employees to stay despite lower pay and negligible equity? Khan Academy has a mission, the rest of SV is nonsense hoping to get lucky.
I'm pretty sure Tom Preston Warner (in particular) would disagree with you. He gave a great presentation to YC's Startup School a few years ago on the subject[1, 2].
GitHub has had one of the best jobs retaining people. Zach Holman disclosed some numbers recently[3] on his How GitHub (no longer) Works talk.
if something causes the bay area monopoly on startups to weaken in the near term, I expect it to be around retention challenges or costs.
We have a fundamental problem in Silicon Valley: there are not enough places for people to live in. This manifests itself in many ways (higher rent, higher salaries, higher turnover, etc) and is probably going to be a hard limit on how big the local tech industry can get. It's a certainty that other significant startup hubs will arise unless something changes.
Why oh why aren't more companies returning to the South Bay, specifically San Jose? Downtown SJ is tiny compared to San Francisco's. And there are plenty of tracts for office parks in the suburbs. Sure, all of the hip young hackers want someplace cool to go to, but it's only an hour away to the north.
Dating is absolutely horrible for men in the south bay. That 1 hour barrier puts many brakes on even getting a date with all the single women live in SF and the north east bay area. SF is where all the other young people are. The south bay is suburban families.
It's chicken and egg, innit? If there was an economic incentive for people to live in San Jose (say, the tech scene was revitalized from actual startups as opposed to the Adobe/Cisco/eBay/Yahoo!/IBM dinosaurs, and Pinger), then there would be greater demand for SJ to densify, and have attractions, and thus invite more young people to live there. But because young people don't want to live there as it is, companies are not going to move there. Infinite loop.
Even if you have a bunch of young people in one area, it doesn't mean they will mingle with the rest of the city. Stanford for example keeps within it's own bubble for the most part. There are PhD students who never even go to university street in Palo Alto for example. A Stanford alum I dated for a few months confirmed the same thing. It's only been relatively recently that many tech startups have been moving to SF. It used to be the south bay where many startups lived.
You live in SF/Berkley as a single person, you move down to the south bay to raise a family in stable suburbia with 'good schools' vs. the dice roll that is SF. That is the pattern. More tech companies and mostly male tech workers wont solve it. Downtown SJ is already a bit dense as it is.
What's an hour away from BMF with night life? The trip from SJ to SF may suck, especially with the Bay Area's appalling lack of a unified transportation system, but it'll still do in a pinch for SJ denizens to visit.
Well the data shows it's quite a lot, given the premium people are willing to pay for living in SF... Spending 2x5 hours (at least) per week stuck in traffic is worth quite a lot of money for many people.
I have zero interest in working in San Jose because I have zero interest in living anywhere within commuting distance of San Jose (no, an hour away is not within commuting distance).
Indeed. I moved away from Silly Valley about ten years ago, and I'm never going back (to live there).
- The public schools are mostly terrible (we'd have to put our kid in private school unless we got into one of the really good school districts).
- House prices are crazy.
- The environment is just . . . bad. I didn't know how much I missed actual weather until moving away (to Seattle, if you must know -- I don't mind the rain much at all).
About the only things I miss from the Bay Area are my friends, the year-round motorcycling, and the hard-core high tech culture (though there is a lot of that here in the Seattle area).
We have a fundamental problem in Silicon Valley: there are not enough places for people to live in.
Transportation is your problem, along with NIMBY regulations (fought-for by limousine liberal hypocrites) that prevent proper growth. Silicon Valley is not Manhattan, with its daytime population density of 170k per square mile. It should not be expensive and congested. It's just badly planned, with a lot of regulatory corruption keeping housing scarcer than it should be.
My g/f lives in outer Richmond and takes me over 50+ min for a bus to soma. Might as well live in Oakland...
Let's say you have a bus line with 40 stops. I wonder what it'd look like if you ran two lines with 20 stops each: you run same num of busses on same route, each bus just skips every other stop, alternating with the next bus.
Wait times at any given stop don't dramatically decrease in absolute sense. And if each stop takes 30 seconds, could shave 10 min off route.
Los Angeles is actually a much better place to live now for people in tech than the bay area. All the young people want to live in overpriced SF and the ones with families want to live in the south bay.
In LA the thriving tech community is all in west Los Angeles, where Venice is the hip San Francisco (but waaay cheaper) and Santa Monica / West LA has great homes (also much cheaper than say Palo Alto [if you exclude beach front]). And these 2 neighborhoods are 10-15 minute commute, very different than the hour commute between most of the south bay and SF.
I've lived in LA for ten years. Commuting anywhere can be a nightmare at any random hour of the day. Housing prices are amazing in comparison though -- a third as expensive as the Bay Area, I'd say (rental). They are building some new rail lines, but it's going to be a while... Great food too!
The author recommends having a mission so employees feel like they're working for a greater good. So is this why every job on Hacker News goes something like "Help us change the world of [industry]," where [industry] can be something as banal as t-shirt printing or pizza delivery? If you don't believe me, here are some examples from the jobs board:
Mobile Hacker? Come work with the team that's reinventing farming
SimplyInsured (YC W13) Is Hiring Hackers - Change Healthcare Forever
Homejoy is hiring hackers to change the home services industry
I guess the only way to get smart people to work 60 Hrs a week for low pay is to convince them they are changing the world somehow.
The prospect of changing something is often what attracted the founders to the idea in the first place. The most successful founders are not usually in it just for the money. If they were they'd have taken that $50 million acquisition offer on the way up.
In my (admittedly limited) experience, the main reason founders refuse acquisition offers is because they believe their startup has a great future and will be worth a lot more later. I don't think the thought process is ever, "Well, $50 million is great, but you know what? We're enjoying what we do so much that we'll turn it down even though that's the most we will realistically be able to get."
Or even more simply, their investors offer to let them to cash out a few million worth of shares as idiot insurance. This still doesn't really explain why a 22 year old Mark Zuckerberg had the cojones to turn down $1 billion. Very few people in the world would have done that.
While I agree with your premise, the didn't-take-early-offer-and-run seems doesn't provide strong enough evidence.
For a super successful startup (a la dropbox, stripe, etc.) -- why take only $50 million and leave the rest (possibly hundreds of millions) on the table? Especially with investors chewing their ears out about going for the home run. And, possibly, with an opportunity to cash out partially (a la Groupon, airbnb, etc.)
I don't think people really want to change the world.
I believe the phrase is a coded message along the lines of "we're the next Facebook!", an application or service that will radically change the landscape of {insert something here} and turn into a massive public company and insanely huge IPO.
That's what the mission is about. Since you can't guarantee success, you put the carrot at the end of the stick and it starts right here.
Yeah, that's another possibility. Or it could be coded for "we're the next Apple," after all the mythologizing that took place in the wake of Steve Job's death.
Oh good point, Apple had the "change the world" message long before anyone else. But any startup that came out today and said "we're the next Apple!" would probably not get much traction.
Sam recommends having a mission but never wrote "for the greater good". At worst one could accuse the founders of uninspired copywriting as they attempt to state what they are aiming to do, which is to make something people want, and more specifically to do that in a novel way. People want light, but it makes little sense for someone to compete with GE to make lightbulbs in the exact same way as GE--if one liked what GE was doing the time and money would be better spent working for and investing in GE.
And while they are low-margin business and not exciting, if someone were to genuinely find a new and useful take on tshirt printing or pizza delivery odds are the startup would be worthwhile. There are lots of tshirts printed and pizzas delivered.
>> where [industry] can be something as banal as t-shirt printing or pizza delivery? If you don't believe me, here are some examples from the jobs board:
Maybe I am misreading your post, but not a single one of the YC companies is solving a problem as easily mocked as "pizza delivery" (which, in reality, is really simplifying food acquisition to reallocate those hours to something more productive than waiting in line).
Healthcare and farming are two hugely important sectors. Home services are a major productivity win.
You're right. Compared to some other job ads I've seen, those at least focus on important industries.
I suppose I'm most skeptical about the claim that they are changing the world somehow. I can't believe that every startup is transforming an industry, or even trying to do so. Imagine some idealistic young hacker gung ho about disrupting farming, completely changing the way people grow food forever. And then on their first day, they realize they're job amounts to maintaining a mediocre iPhone app.
Now I don't doubt an iPhone app could make farmers' lives better. But how much are you gonna change farming? Maybe software can make farming a tad more data-driven or a tad more organized. But the way we grow food won't change because some YC startup wrote an app for it.
Yet clearly, startups want job candidates to believe they will change the world, or else they wouldn't put it in their ads. So what motivation could they have?
1. Like someone else mentioned, perhaps "changing the world" is code for "making lots of money." Could be.
2. My hypothesis: Startups use their "change the world" mission to justify low pay, long hours working conditions. People won't work under those conditions unless they believe they're working for a higher purpose.
3. Maybe delusional founders say "change the world" because they actually think their mobile/web-app/cloud crap will disrupt an industry. Sometimes that happens, but nobody should be foolish enough to think they know what it takes.
Sometimes people want to fix broken/corrupt/inefficient systems. I love airbnb, lyft, uber, and bitcoin because of the way they empower individuals and spit in the faces of the fat cat incumbents and government regulators.
I'd rather get to a wear a self-righteous smirk to work than make an extra $20k a year to put in my 401k.
You joke, but it's true. In general you shouldn't hire people until the company is already successful, i.e. people want what you're building faster than you can build it. If you do, you introduce a whole lot of other problems (having to pay them, having to convince them to pivot when you realize you're not succeeding, having to communicate the new company vision to them, having to keep them from getting disenchanted and bringing morale down) that you wouldn't have to deal with if you just didn't hire them in the first place.
I've found the biggest cause of failure of software projects (in general, not just startups) is staffing up too quickly. You really want to know what you're doing and have some idea how you'll get there before you bring other people on board.
One way to lose great employees is to run out of money to pay them. I've done this.. don't do this. I spend a lot of time thinking about how to get them back now that we are better capitalized but it is much more difficult than recruiting them in the first place, and maybe not realistic until a later stage.
The salary vs equity part is is very SV specific. On most of the planet, even in tech, there is no get-rich-quick VC fueled path to success. Most start-ups will only be successful in the long term, and "successful" in terms of being a profitable, sustainable small to mid-size company, not the next Facebook.
I.e., it will be equity that attracts mercenaries looking for a quick exit, and good salaries that will ensure long term loyalty.
* Automatically raise their pay every year. It doesn't necessarily need to keep up with market, but they need to know that they aren't being suckers by staying at the job.
this! I can't begin to tell you the number of bad managers I've seen offer the competitive pay rise only _after_ they've been given notice. that just drives home how completely you've been screwing me up until this point...
edit: ok, perhaps not screwing me. but if you know I can make significantly more elsewhere, you shouldn't act shocked when I take the opportunity...
Bingo. Companies should have (at least) two mechanisms for raising pay: a 1 to 3% (tied to some measure of inflation) increase everyone gets, and a variable rate tied to their performance/company success/etc.
don't constantly push to have your employees stay late
My favourite is 'flexible work hours' that always seems to stack in the company's favour. Work a 12-hour day yesterday? Go home an hour earlier today... if that.
Another important aspect about retaining good employees is to help them through their failures. The longer an employee stays at a company, the more likely it is that they will screw up. No one has a 100% track record. Good management teams recognize this, and should have plans to guide faltering employees back on the right track.
Failures should be seen as opportunities for improvement, not as opportunities for blame. A good way to start is by having teams accept responsibility for failures, not a single employee.
For example, if someone accidentally deleted a production database and there's no backup, they didn't screw up, the team screwed up for not having backups and for encouraging working in production.
Regarding the problem of losing in-house skills and experience, how about the notion of continuous hiring, in other words add another tech worker about every 3-4 months?
Then you have a rolling system where there's enough overlap that when employee #6 leaves, employee #9 or #10 can take up the slack pretty quickly.
I suppose it's not easy to "time" your hires because it's so hard to find the right fit, but if you can hire a reasonably good fit within a 2-3 week recruitment window then you can space them out.
The other advantage is that the earlier employees gradually get more staff to train and delegate the work to, so they will feel actively involved in relieving themselves of the 60-80 hour/week pressure and meanwhile their equity is continuing to build up.
I'm not a start-up founder (yet), so this may be fundamentally flawed thinking. Any comments?
Good startup founders are continously hiring once their product has some market acceptance. When a really good candidate shows up, they snatch them up, regardless of whether they have an immediate need or plan. This is why many startups that are "not hiring" technically are, they're just waiting for the right candidate to show up.
Only problem is that like any Poisson process, your good hires will not be evenly distributed. Sometimes you'll get bursts and sometimes there will be long dry spells.
This reminds me of the main points of Built to Last, mainly that you need well-defined, consistent cultural values that go beyond profit, growth, or perks. That will create buy-in from all stakeholders, from employees to shareholders to customers. There will always be a company with faster growth or cooler perks or higher pay, but no matter how big your company is, you can have the best sense of mission and strongest values.
My experience of loyalty is that often the important parts of it are in the differences people have. We all cluster around group norms, some group norms different than others - but they're large targets and any reasonably well run company will hit them. It's something they can get elsewhere, and so provides little incentive to stay.
Consequently people don't seem to quit companies, as long as the company isn't falling apart of course, as much as they quit bosses that don't take care of them. That are negligent - either through incompetence or absence - or abusive with respect to their needs.
If someone's leaving the company, it's often worthwhile to try and find out why - preferably talk to them a long time before they leave the company, so it never gets to that point. Try to find out what's going on in their lives, what their problems are, what they want to do, what they enjoy. Try to make sure you can offer that to them.
Some people want to feel like they're changing the world - that's your story group. Others want to learn to be better programmers. Others want a boss who can be flexible around their lives. Some people want to teach others. Some people just want days off for their kid's plays. Whatever their needs, most people seem to want to feel like they're important; like their opinions and their problems matter to you. Like they're not just another cog in the machine.
Things built on that sort of platform are a form of personal loyalty, that they can't easily get at other companies. They go to another company, they may talk to them about a mission, they'll probably be growing, they'll want to have a good team (whether they do or not's debatable - again, see people don't quit companies as much as managers...). But they won't have that relationship you've built. And their future bosses might be awful, it's a gamble for them - and it's not clear their winnings will be significant, at least provided you're not stiffing them on pay or something like that.
I wonder how you get people to believe in a mission if scepticism forms an inherent part of the culture. I‘m talking about the UK specifically. I feel like it would be very difficult to get the English guys and girls on my team to take our "mission" even remotely seriously.
Scepticism isn't the same as unwilling to believe. Usually just honesty, willingness to engage in dialogue, answer questions etc, will do it.
However, I have had experience working with Americans in the UK that sounds similar to what you might have experienced. In my experience, the "selling" of the mission has usually just been excessive enthusiasm on the American side with a hope that it will be contagious. To us, it all appears just a little fake.
The best example of British hiring PR is the mythical Shackleton ad: "Men wanted for hazardous journey. Low wages, bitter cold, long hours of complete darkness. Safe return doubtful. Honour and recognition in event of success."
Despite being a fake (no one found a actual newspaper reference [0]) it obviously resonated very well. And still resonates.
Another very important factor in retention not mentioned here is better understanding the aspirations of those people you're considering bringing on to your team.
A person's response to questions like, "What are you most interested in professionally?" and, "How do you see yourself developing career wise?" becomes a blueprint for what to do organizationally to retain them.
Sometimes the simplest approach is the best: Ask, "What do we need to do to retain you?" and then do that thing!
The problem is that candidates see "What are you most interested in professionally?" and "How do you see yourself developing career wise?" as questions with right or wrong answers that will get them hired. "Send someone highly trusted over to clean my house every week" could be a great thing that lets me concentrate more on the rest of my life, but saying it during an interview would paint me as weird.
You point out the obvious concern. It'd be nice if this information was available about candidates up-front... as an employer it's on the list of things you'd want to know about someone along with what primary skill-sets they have and roles they've been in.
The problem, of course, is that by advertising this information, candidates would basically be saying that they're not getting nurtured in this way by their current employer. It's would be a public notice that they're not that happy at work.
I was trying to avoid any sort of "pitch" in this comment thread, but you've set me up too nicely: My startup, Mighty Spring (https://www.mightyspring.com), makes a passive, anonymous job search platform. Candidates post this exact information: what interests them and their career goals, along with their qualifications, which employers browse and use to decide who to interview. The anonymity makes it possible for candidates to safely reveal this info to employers. Also, that this info is available up-front helps to increase employment market efficiency and expose candidate/employer matches that really are great fits for both sides.
We're currently in private beta, but send out invites regularly. Feel free to email me (addy in profile) if you've got any questions!
You either have a retention problem or you have a problem with your hiring process. If you're getting great people and enabling them to do awesome things, you'll always have other companies sniffing around.
Helping people stay in touch socially is important to humans. The engagement figures alone tell me that it's important (to them).
My parents and grandparents see more pics of my kids and feel more connected to their grandkids' random life experiences. That's important (to me and to them).
Jzw's point on narrowing your focus is worth mentioning here: http://www.jwz.org/doc/groupware.html Facebook isn't helping me there, but it's helping others, and that's important to them.
His point on terrible equity allocations is spot-on. If you're giving a dime and a half (0.15%) to your first employee engineer, at a valuation of $5 million, you're not going to get someone good.
If you account for equity at-valuation, bad people become cheaper if you're a startup but good people become more expensive (i.e. you'd have to offer $75k per year of equity to make up for a $40k salary drop).
That's not what I said (although the salary differences between good and bad engineers are small, in comparison to the differences of output).
A good, senior engineer (10-15 years experience) is typically going to get $150k at a large company and drop to $110k at a startup. But it would take at least $75k/year in equity, for a savvy person, for that drop to be worth it. A stock that is correlated to your employer should be worth less to you than one at zero correlation. Moreover, it's an illiquid stock. Furthermore, VCs are buying preferred stock while you have the common kind, and that can easily be a factor of 2 (or 4, or 8+) of difference in fair value.
When I talk to ex-coworkers, the reasons they often cite for leaving are: 1) weren't empowered to achieve their career goals 2) weren't compensated relative to the value they felt they brought 3) worked on too many failed products and 4) burned out.