Turnover Rate: An Analysis on Major Problem of Human Capital in Startup
Chapter I: Introduction
Background
Rise of Indonesia-based Startups creates more opportunities. As a growing body needs nutrients, a growing startup needs to have good human resources to sustain it and help them develop more. Human capital revolves around co-founders and employees, but in a broader sense, it also includes partners, customers, and other stakeholders who might be able to increase the growth of the startup (Gaskell, 2019). Let’s try to focus more on employee for now.
As a venture with Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) as a “usual” working condition and atmosphere, a highly-skilled human resources are needed to help the startup to exist day by day, and thrive all the way. From searching, to persuading and putting them all in good use, it is not an easy task. Retaining human resources inside a company might be tricky, and this is also become one of the main problems in startup industry. People coming and going, with many reasons behind, has made the turnover rate for startup especially high compared to other types of industry. A high turnover rate might have a positive implication, but can also show a negative one, or maybe just showing the industry is currently changing. Career development opportunities are one of the main reason for people quitting the job, hence the solution needed might be related to its management inside a company.
Project Description
The objectives for this article is to address on possible cause for the high turnover rate of startups, compared to other industries, and also to delve into possible solutions. The possible solution will be focused on career development management, which the writer saw as one of the major cause of employee’s turnover.
The method used in this project is mainly desk research through the internet, from other articles, and secondary data taken from online survey in social media done by account with content based on startup (shout out to @ridehaluing in instagram for inspiring me to delve into this problem & providing insights from the industry player itself in the survey).
Chapter II: Root Cause & Insights Elaboration
Turnover rate might become one of the most important problem that the startup industry face. Turnover might actually be costly for a company, ranging from costing the company thousands of dollars to 2 times of annual salary (Bersin, 2013). Some positions that we find in tech-based startup, such as user experience designers, data analyst and also embedded software engineers faced a high rate of turn over (23.7% for the first one and 21.7% for the latter two respectively) (Petrone, 2018). From a survey conducted by founderscircle, data of tenure for each department in startup is as follow:
Remember that those results are the average one, and possibility of lower tenure per department might likely to happen. By the survey also, founderscircle found that one-in-four of their employees leave in the given year, which accounts for a higher attrition rate (25%) from the average attrition rate of tech-companies (13.2%) and retail & consumer goods (13%). What might cause this?
From the survey made by LinkedIn pictured above(Booze, 2018), from over 10.000 professionals in general, lack of career advancement opportunities ranked first as the reason for employee resignation (accounts for 45% of the result). This result might be seen as a bigger picture for all industry, including startup. Employee career development is an important part of employee engagement, which help them to have a sense of direction related to their career path, and to have a vision of a successful career for them (Trevor-Roberts, 2021). Career development might be the highest priority for some people on deciding whether they need to apply for a job position, or to retain a current position in a company, including in startup.
Chapter III: Analysis Conclusion & Possible Solution
As we see from above, there were many reasons on why people come and go from a company, especially startup. As career advancement opportunities become somewhat a major reason for resignation, it should be taken into consideration when planning on the solution for turnover problem solution.
Related to this, we might be able to solve this through the planning and implementation of Job Architecture & Career Ladder (JACA) system. What is it? and how it might possibly helps?
Based on publication by Deloitte (2015), Job Architecture itself is not a new tool, but an evolved and progression of job classification in the 21st century. It places further importance on a consistent approach to identification of job levels, career paths, mobility criteria, and pay values. These might help the startup to build a better employee management system in the future, which will help to decrease the turnover rate, and increase the retention rate. Framework on planning, developing, and also implementation of the system can also be seen on the publication (link on the reference).
A comparative analysis of JACA in two different startups (Gojek and Grab) based on the survey made by @ridehaluing in Instagram is one of the case related to this method implementation. Based on insiders response from both groups, Grab has a more structured JACA system than Gojek, which in turn helped them to retain more employee with a better career advancement program. On Gojek sides, as it might still be in development phase on implementing this system, they don’t always have a clear information that can be given to the employee which made them confused on the procedure and implications of career advancement in the company (Disclaimer: that this is only a one-sided analysis from me based on the answers, please refer to the highlight on the account’s feed to read more about this).
In conclusion, the planning of JACA system in startup might help to decrease the employee resignation rate/turnover rate and/or increase the retention rate of the employee. It might be complicated in the early stage for planning and developing the plan, but it might help to save cost and make a better working culture and condition, both for the employee and the startup itself.
Disclaimer: I’m not affiliated to any of the sides said in the analysis. This analysis is meant for a project capstone of Indonesian Bright Future mentoring program, which I choose Human Capital as the study case to be analyzed. Please feel free to contact me if there any evaluation or opinion regarding this analysis article. Thank you!
A short Bio!
Hello, I’m Bagus Kresna. A new enthusiast on Human Capital and Product Design. Currently a final year student in Agricultural Microbiology, Universitas Gadjah Mada. Highly curious, love to learn and explore new things. Currently passionate on food and fermentation technology, but really open for any new experiences.
Feel free to check my linked in, on:
or asked any questions through my e-mail (baguskresnaudk@gmail.com)
Reference & Further Readings
Booze, M. 2018. These 3 Industries Have the Highest Talent Turnover Rates. <https://business.linkedin.com/talent-solutions/blog/trends-and-research/2018/the-3-industries-with-the-highest-turnover-rates>. Accessed
on March 9th, 2021.
Bersin, J. 2013. Employee Retention Now a Big Issue: Why the Tide has Turned. <https://www.linkedin.com/pulse/20130816200159-131079-employee-retention-now-a-big-issue-why-the-tide-has-turned/?irgwc=1>. Accessed on March 9th, 2021.
Deloitte. 2015. Job architecture: Laying the building blocks of effective Human Capital Management. <https://www2.deloitte.com/content/dam/Deloitte/us/Documents/human-capital/us-cons-job-architecture-041315.pdf>. Accessed on March 9th, 2021.
Gaskell, A. 2019. Why Human Capital is The Key To Startup Success.
<forbes.com/sites/adigaskell/2019/05/01/why-human-capital-is-the-key-to-startup-success/?sh=664ec713105b>. Accessed on March 9th, 2021.
Petrone, P. 2018. See The Industries With the Highest Turnover (And Why It’s So High. <https://www.linkedin.com/business/learning/blog/learner-engagement/see-the-industries-with-the-highest-turnover-and-why-it-s-so-hi>. Accessed on March 9th, 2021.
Trevor-Roberts, E. 2021. Why is Career Development Important and How Does it Impact Engagement?. <https://blog.trevor-roberts.com.au/why-is-career-development-important-and-how-does-it-impact-employee-engagement>. Accessed on March 9th, 2021.
