Saturday, December 28, 2013

Low attrition in startups comes with high exit barriers

College placement coordinators in India, would have found a trend of startups signing up, to participate in the college placement round up. Especially in cities like Chennai, Bangalore, Hyderabad, Pune, Mumbai, and Delhi startups are not hesitating a bit to try recruiting freshers from colleges in these cities. Is it because startups suddenly got richer? Certainly not. It is because startups found the secret sauce of bringing down levels of employee attrition in their companies.

Bringing down the levels of employee attrition is getting real with some startups. Observations made over a few startup case studies revealed that these new firms are getting smarter in sustaining their business by cutting recruitment costs. So, what do they do?

Recruitment formula of startups

What is  the reality behind startups choosing to hire students from engineering colleges. Over the years, engineering colleges multiplied and also the number of takers for their courses. In the meantime, technology startups have also started making a visible presence in the market. The timing was just right for engineering graduates because they don’t see the threat of unemployment.

Recruiters started hunting for technical talent, with a conception that toppers would add more value to the organization. But eventually these small brands keep such talent and had to run multiple cycles of recruitment. They also could not find enough the toppers who could fit their budget.

Then, there was an Aha! moment when they found the next set students who could fit their bill. After recruiting them, the startup owners realized that with some training and direction the so called average students remained committed to company and stayed longer than the toppers of the college. While the toppers insisted higher salary and gave no guarantee about their stint with the firm, the average students were found more promising in terms of loyalty to the company and cost to company (CTC).

As time passed, it was proved that engineering students with an average mark sheet suited the small budgets and at the same time became loyal employees bringing down the employee attrition rates and hence recruitment costs. Startups also noted that when they run into a tight budget mode, they need to rise the exit barriers for their employee keeping the hiring and retention costs low.

This hiring trend spread like fire among startups which were stringent on expenditure and which experienced high attrition rates in their organizations. The problem found the solution by itself!