It's no secret that startups are considered highly volatile; fewer than half of all new businesses make it to their fifth year. On average, startups lucky enough to see age five retain 80 percent of their initial total employment, but it takes some incredible talent to get any new business to that point. Attracting and retaining the best employees in the industry is crucial to a startup's long-term success, but how can entrepreneurs achieve this on a tight budget?
1. Develop a Strong Company Culture
“Company culture” is a popular buzzword in entrepreneurial circles, but there's good reason for it. Company culture refers to the behaviors and values that contribute to a business's social and psychological environment. This includes the behaviors and beliefs that drive interactions between management and employees. According to a Gallup poll, 70 percent of Americans are not engaged at work. Boosting morale in the workplace is necessary for employee satisfaction and retention, and that's where company culture comes in.
Putting people first and communicating your company's vision is key to growing company culture. The best employees want to feel like the company they work for is authentic and personal. They want to know that you're personally invested in your company's fate and, by extension, their own.
Determine how you want to give back, and express this in your company's vision. Communicate these ideas to prospective and current employees, and view each one as an individual. When the best employees believe in the company and feel appreciated for the work they do, they're more likely to stay. And, since a clearly communicated company culture leads to a solid reputation in the community, your startup is more likely to attract the best and brightest employees.
2. Be Transparent
Communicating the overall vision for your startup is important, but so is admitting the negatives. Transparency is actually a major factor of company culture, but it's one often overlooked by entrepreneurs because they don't want to admit to any struggles when the company is still trying to find its legs.
Rather than sugarcoat any negative aspects, reassure employees and prospective talents that they're a vital part of the company's future. Don't be afraid to share basic information and the reasons behind major company decisions. Clarify that transparency is a two-way street from the top down, focusing on teamwork. You'll also want to make yourself available as the business owner, even participating in or conducting job interviews yourself.
When a company is focused on transparency and clear communication, morale is boosted because employees are more invested in the business and the part they play on the team, which leads to increased productivity. New talents will appreciate this kind of work environment and are more likely to be attracted to a transparent startup.
3. Support Career Path Development
The best talents don't always want to take a chance on a startup, so there has to be an incentive for these prospective employees to choose your fledgling business over an established company. Leaving room for career advancement is one thing, but creating a work environment that fosters learning is a big draw for new employees. You can approach career path development in a number of ways, such as offering continued education opportunities, mentorship programs, professional development, or opportunities to move up in the company.
Since most startups simply don't have room for career advancement, at least not for the first few years, a strong employee training program is a great alternative. Employee training and development programs have been shown to increase motivation and reduce turnover rates. Popular training methods include classroom training, interactive methods, computer-based training, and hands-on training. Each offers its own benefits and drawbacks, but even startups on a tight budget should be able to implement some type of employee training or career development program that encourages employees to succeed.
4. Offer Alternatives to Employee Benefits
Let's face it, employee benefits are a major draw for most job seekers. For startups on a tight budget, however, offering these benefits isn't always feasible, at least not in the early stages. If your startup is feeling the pressure to provide employee benefits but simply doesn't have the budget to do so, you're not alone; only 35 percent of companies with 2 to 15 employees offer any type of healthcare benefits.
The best approach in your startup's establishment stage is, quite simply, not to worry about it. The Affordable Care Act (ACA) has made individual healthcare plans more affordable than ever, and companies are not required to provide group health insurance until their number of employees reaches 51 or more.
This doesn't mean that there aren't alternatives. More physicians are breaking from private insurance altogether and offering low-cost healthcare directly to patients. Direct primary care doctors often charge by the hour, by procedure, or have an annual patient membership plan in place. Many direct primary care practices even work with business owners to offer their employees healthcare coverage options. In addition, discount dental plans cost substantially less than traditional insurance. Discount plans allow employees to choose their own provider and save money on dental procedures, keeping out-of-pocket costs low.
5. Offer Other Incentives
Most startups aim to form a team of fun, hardworking employees, so when it comes to offering employee incentives, it may be time to think beyond the traditional profit sharing and stock options.
How about offering an iPad to each new employee? Discounted gym memberships are also great, as are free snacks and weekly lunches. Fresh talents are more likely to be drawn to a business that maintains a casual dress code, offers free coffee throughout the day, and lets loose at the end of the week with a company-sponsored happy hour.
Other attractive employee incentives include working in a dog-friendly office, having a basketball hoop or pool table on site for breaks, and enjoying a paid vacation day on their birthday.
Establishing your startup may feel like an uphill battle, but employing the best talent can help you realize your vision and take your company well beyond those first five years. No matter your budget, invest in the best employees by any means necessary to give your business the best chance to succeed.