Dear SaaStr: What incentives work well to attract new employees to a company, and what ultimately makes them want to stay?

The tough part is that things that incent folks to join … don’t really incent them to stay. Not really, at least not in my experience.

Things that incent folks to join — but that don’t really incent them to stay:

  • Signing bonuses. It feels like free extra cash they aren’t getting at their current job. You may find signing bonuses annoying, stupid, or a bad sign … and even be sort of opposed to them … but folks love them.  They do work to tip an employee over the line to take a job.
  • A specific amount of equity, for senior folks especially. Many folks have a specific amount in mind, and they’ll join a start-up to get it. Without fully thinking that’s how much … of what.  I.e., they really want a certain percentage or amount in their next role.  Getting it often again tips them over the line to taking a new role.
  • That title they’ve always wanted.  Some folks will jump to finally get that VP or Director title.  Even if they aren’t ready yet.  But … it doesn’t get them to stay.
  • Profit-sharing. This really only works for profitable companies, but folks love the idea of profit sharing and will join a start-up that has it. But I’ve found it doesn’t really work as a longer-term retention strategy, in part because it’s too complicated to understand.  Every startup I’ve talked to that does profit sharing says the same thing.  New hires love it, but it’s too complicated and nuanced to work as a true retention strategy over the longer term.
  • Work-from-home etc.  Almost everyone in tech wants flexibility here.  It does help you close candidates.  It just doesn’t help you keep them.  They can go get this benefit elsewhere, too.
  • A “no layoffs” policy.  A number of tech companies quietly do this.  Commit to 100% voluntary retention.  I’ve done this myself.  In fact, I’ve never laid a single person off, ever.  What I’ve learned is again, this sounds appealing to folks in the interview process.  But once they start, they don’t care.  They just internalize it.

Ok so what in practice actually gets people to stay? I’m no magician here but a few learnings:

  • A great boss. You know this, but it’s reason #1 folks stay.  And it’s perhaps the #1 reason to not settle when you hire your VPs.
  • A promotion — for the best. You can’t promote everyone, and not everyone wants a promotion. But those that value them, tend to highly value them.  The rest, the less than the best, however actually often leave after a promotion.  A bit more here.
  • Top-of-market comp. This is a bit of an arms race, but it does work.  This doesn’t mean competing with Google / Facebook / Huge Public Companies, but it does mean being top-of-market vs. other startups.  This is especially important to sales reps.  They really want to work somewhere that pays top of market, even if it’s more work and harder than working somewhere else.  Having said that, for most sales reps, what matters is a high OTE.  It’s usually OK to make the quota reasonably but fairly high — in exchange for top-of-market comp.
  • 401k matching.  OK this one has really surprised me, but folks really value this.  You probably don’t, as a founder.  You don’t care.  But I think so many employees spend every dollar they make, getting 401k matching from their employer feels like they are starting to “put something away” for the future without having to do the work themselves.   This really doesn’t cost all that much, especially when you are smaller.
  • Contractor vs. employee flexibility.  There are some accounting and legal issues here I’m going to stay out of, but in the post-Covid era, many folks value being able to be a contractor, a digital nomad, etc.  It’s worth it to be a bit flexible here.
  • Supportng side hustles.  I’m not a huge fan here of side hustles that take more than a few hours a week.  Because the side hustle often becomes more stressful, and demanding, than the core job.  But many feel supported when side hustles are supported.
  • Success. Folks do tend to stay longer, more often, at a winner.
  • Growing — for the best folks. You know this too, but the best folks want to grow. It may be a promotion, or a larger role, or more responsibility. But most of the best folks want to grow, and they want to know you will help them grow.
  • Appreciation. It’s not magic, but it does help.
  • Moving on from the mediocre and toxic folks.  They drag everyone down, and create excuses for everyone else to underperform.
  • Low drama.  This can be a tough one to pull off in the early days, but startups are hard.  Folks that join them get that.  But drama?  That’s not so necessary.

Related Posts

Pin It on Pinterest

Share This