
Employee Retention - mlinsey
http://blog.samaltman.com/employee-retention
======
physcab
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.

~~~
nostrademons
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.)

~~~
physcab
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.

------
PaulHoule
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.

~~~
a3n
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.

------
fecak
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.

~~~
hkmurakami
One thing I never understand about the bait and switch is how employees don't
get everything in writing :(

~~~
fecak
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.

------
silverlake
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.

~~~
DanielRibeiro
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.

[1] video:
[http://www.justin.tv/startupschool/b/272031754](http://www.justin.tv/startupschool/b/272031754)

[2] Writeup [http://tom.preston-werner.com/2010/10/18/optimize-for-
happin...](http://tom.preston-werner.com/2010/10/18/optimize-for-
happiness.html)

[3] [http://www.infoq.com/presentations/github-
evolution](http://www.infoq.com/presentations/github-evolution)

------
johnrob
_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.

~~~
michaelochurch
_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.

~~~
gdubs
The risk is turning Silicon Valley into Los Angeles.

~~~
slashCJ
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.

~~~
gdubs
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!

------
normloman
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.

~~~
pg
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.

~~~
enraged_camel
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."

~~~
staunch
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.

~~~
pmp6701
He didn't turn it down, according to Andreesen Yahoo reduced the offer with
the financial crisis to $200m
[http://management.fortune.cnn.com/2013/11/21/marc-
andreessen...](http://management.fortune.cnn.com/2013/11/21/marc-andreessen/)

~~~
pg
By, not to.

------
joezydeco
_The second good retention strategy is rocketship growth._

Wow, the answer was right there under our noses all along! You guys out there
losing employees, it's because you're not successful! Fix that!

~~~
nostrademons
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.

------
dsugarman
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.

------
bowlofpetunias
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.

------
tarpden
I think these basics are most important:

* don't constantly push to have your employees stay late

* if you need your employees to travel, while they're away don't pressure them to work more than their usual work day.

* don't disrespect and be a jerk to your employees

* provide reasonable sick and vacation benefits

~~~
danielweber
* 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.

~~~
patmcc
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.

------
j2d3
Do people really pay $250k to engineers right out of college, or is that an
exaggeration?

~~~
onedev
Facebook's new grad package for 2013: ~100k base (higher for Master's
students) + 100k signing + 100k in RSUs (sometimes higher).

------
indigent
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.

~~~
reledi
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.

------
blisterpeanuts
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?

~~~
nostrademons
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.

------
bsirkia
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.

------
pyrrhotech
what startups are offering $250k salaries fresh out of college? In fact, what
companies are offering $250k salaries to any engineers?

------
6d0debc071
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.

------
DrJokepu
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.

~~~
dyadic
Brit here.

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.

------
lumens
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!

~~~
danielweber
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.

~~~
lumens
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](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!

------
dsri
Typo in the submission: "On the [other] hand, Stripe"

Also: "$250k a year for an engineer right [out] of college"

~~~
sama
thanks!

------
ultrasaurus
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.

------
fraction
Great article, but I got a really good laugh out of this.

"But very often, the hard technical problems are important to the world (e.g.
Google, Palantir, Facebook)."

Let me know when Facebook starts doing something important to the world.

~~~
sokoloff
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](http://www.jwz.org/doc/groupware.html)
Facebook isn't helping me there, but it's helping others, and that's important
to them.

~~~
aet
I guess people don't see Facebook as a "hard technical problem"

------
michaelochurch
This guy might be a VC that I can actually like.

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).

~~~
infinite8s
The difference between good and bad is only 40k?

~~~
michaelochurch
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.

