Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

Non-Financial Metric #2: Employee Loyalty

“I believe the real difference between success and failure in a corporation is how well the organization brings out the great energies and talents of its people.” Thomas Watson Jr.

Volumes of books and years of study materials have been developed to enable managers to attract better talent and retain them. From an entrepreneur’s point of view there are several structural differences compared to those faced in larger organizations. First off, much of the time a new start up will have an untested product/service with a small team which may or may not have the relevant experience needed. What they do have is an intense passion for what they want to do, that is probably the only way they can attract quality talent. Even though they are convinced and on board, things do not become easier. Salaries are usually minimal, stress levels are very high and burnout thresholds are reached much earlier. Losing a critical member of a team for a start up can signal the end of the road. Therefore this metric has to be given due importance to ensure that goals are met. Listed below are a couple of steps that have helped me keep the employee loyalty index high at businesses I have been part of :

1. Full Disclosure of Position: When recruiting someone for your start up team, one needs to ensure that you communicate clearly what role they will have to play. We all know that at smaller start ups many different hats need to be worn during the course of the day. The individual needs to be comfortable with this and willing to put in the long hours which will be required. Salaries, equity stakes, confidentiality agreements and all other formalities should be openly discussed and negotiated before hand. If these factors are left to be discussed at a later date, there is bound to be trouble and the situation becomes sticky.

2. Open Communication & Fairness: Take for example,  two founders who want to add a new marketing individual to the team. Whether this individual comes in with a substantial equity stake or on a salary it is important for the founding team to keep communication channels as open as possible. I have noticed that when groups are formed or information withheld, it leads to a drastic decrease in loyalty as the feeling of being ‘part of the team’ is not there. Have regular feedback sessions to understand the sentiments of the team. Trust has got to be earned and the only way this can get done is by communicating and getting to know the individual better.

3. Development Opportunities: Do your best to give everyone the opportunity to showcase their skill sets as well as learn new ones. I have been pleasantly surprised many a time when I found that a technical team member had some pretty extraordinary presenting skills or marketing insights. At a start up there needs to be strong focus on getting your team members to open up and move out of their comfort zones. If they don’t feel like they are growing and getting experience, which they would not have received in large organizations, chances of them defecting increase dramatically.

4. Fair Compensation & Reward: As hard as we attempt to get people to work for as little as possible in lieu of a big pay day, down the line, chances are they are going to react at some point in time. First off, compensation and rewards need to be discussed before adding the individual to the team. They should have a good idea what to expect to make, as well as how they will be compensated with non cash benefits. There will be times when cash flows are thin and payroll expenses may not be met. This is a time for open communication and ways of compensating them differently, greater equity or the ability to work part time needs to be offered.

Employee loyalty is directly linked to customer loyalty and corporate profitability. Whether you are a new start up or an established one, this measure needs to be continuously monitored. Sub indicators such as burnout thresholds are critical to ensure that you know when to apply the brakes. It is undoubtedly a challenging juggling act and becomes harder as the team begins to expand. By monitoring this metric from the beginning a start up has a substantial advantage and can use it to develop a sustainable competitive advantage.

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