Recruitment vs. retention in the short-term labor market
Earlier this year our portfolio company Carta published this comprehensive study on employee tenure in startups.
In it, they disclose that, at least among early stage startups, a typical employee sticks around for about 37 months. Or, one month after their three-year mark.
Whether this seems long or short to you probably has a lot to do with your own personal career path and your industry. When I mention this stat to tech companies in the Bay Area, they retort back with: “It can’t possibly be that long! We see people come and go every 18 months!” In other parts of the country, this figure seems to check out. But among more mature industries and organizations, they tend to see much longer track records of employee tenure.
The question of course is, what’s the right way to hire? Is it better to approach the talent market knowing full well that there’s a good chance you’ll lose people on a 3-year cycle? Or is it instead more impactful to double down on retention tactics that keep employees around for longer than usual?
The role of recruitment
In my role at USV, I encourage cross-pollination of idea sharing across 75 organizations and seek out opportunities to bolster the effectiveness of many companies at once.
When I ask, “What’s the number one thing we can do from our birds-eye view in VC to support you better?” the most common response is easy: “Help us hire.”
In a way, this isn’t surprising. In the world of venture-backed startups, a new funding round signals an imminent need to double or triple the size of the business overnight. With each new scale point, it’s crucial to fill the leadership suite with people who match the company’s current needs. And as companies grow, they also tend to outgrow certain individuals, hence a healthy amount of churn from one phase to the next.
This is why the role of recruitment is more important than ever — an industry worth billions of dollars in itself when you add up the costs of everything involved: Staff hires, technical tools such as applicant tracking systems and CRMs, recruitment marketing, executive search fees, and heads of recruitment to manage each company’s pipeline.
Today we have nearly 1,500 open jobs across our 75 active portfolio companies. I’ve seen this number as high as ,2400 jobs. There is a constant, unyielding demand for top talent. It’s little wonder that so much effort goes into recruitment. After all, if you can’t bring the right people in the door, you can’t grow the business.
An eye toward retention
I sometimes wonder what it might be like to see companies spend as much time and money on retention, as opposed to recruitment.
If, for instance, we spent more time cultivating and nurturing the people we have, would it be possible to get to an equal state of operational efficiency or productivity as an organization that is constantly recruiting in the best people?
It’s expensive to bring people in the door. It’s also expensive to onboard and train them. And of course there’s an opportunity cost to team transitions that may be impossible to measure but is certainly a factor to consider.
Lately I’ve been thinking a lot about initiatives like General Electric’s Leadership Development Track or Nielsen’s Emerging Leaders program. In these career cycles, new graduates have an opportunities to “try out” three or more different jobs or functional areas during a two-year period of time. During these role shifts, they are often accompanied by a program manager who looks after their career pivots and offers guidance and counsel along the way.
A great benefit of working for a larger organization is the opportunity to dip your toe into many different functional units or domains. But of course the end goal of these enterprise organizations isn’t purely to recruit the best straight out of college: It’s to keep them for when they are high-level enough to really make an impact. After all, it takes at least two years to learn how to get good at the job you have. Why would your company let you leave after three years?
I get that startups operate on a different timeline than a company like General Electric, which is 126 years old and counting. But if we stop thinking about each company-wide milestone on a quarter-by-quarter scale, I wonder if the way we treat talent would be a little bit different too.
If, rather than train people in two weeks to do a job for three years, we train people for two years to do a job for 10, would that affect the way we hire? Could it impact the way we manage?
Thirty-seven months is a very short time in the grand scheme of a company, particularly one that aspires to be 1,512 months old, like GE is today.
If you’re setting out to build a company that establishes a century-long legacy, how would you treat your philosophy on talent? Would you focus on recruitment or retention? And if you’re an employee looking to dig into their next big project or career goal, what kind of organization would you prefer to work for today?
There are no easy answers to these questions. But I do think it’s important to consider the trade-offs of either side of the spectrum. Recruitment and retention each optimize for different ends of the talent spectrum. Which one are your prioritizing today?