Most Indian techies don’t last more than two years at startups, shows research

A decade or so ago, India’s business process outsourcing industry was infamous for its record-high attrition levels. Now, the country’s technology startup industry has taken over that mantle.

In fact, by some estimates, the employee churn rate at startups is worse than it was for BPOs.

Currently, the attrition rate at Indian startups ranges between 50% and 80%, industry experts estimate.

“That [BPO] was an easier talent to fill. You wanted people to speak [a] certain language in a certain way. You were looking for soft skills,” said Zairus Master, CEO of job portal Shine.com. “What we’re looking for in startups is sometimes unique skills. There has to be [a] high degree of entrepreneurship, [a] high degree of ownership, [a] high degree of making things happen,” Master added.

The talent shortage in startups is, thus, a deeper problem.

The churn

Experts say that most entry-level employees don’t last for more than a couple of years at a startup.

Research by artificial intelligence-driven recruitment platform, Belong, found that the number of people quitting within two years is overwhelming and those sticking on for over four years a rarity.

The reason for this high churn rate is that young professionals come to startups for all the wrong reasons.

Many fresh graduates end up in the sector when they fail to bag jobs at large IT companies like Infosys or Tata Consultancy Services, which have gone slow on hiring in recent years.

Very few startup employees in India care about building the next Google or Flipkart. For them, these young companies are just a stepping stone to bigger things.

“People think if they join a young startup, they’ll learn more and they’ll be allowed to fail four, five, six times,” said N Shivakumar, business head of recruitment process outsourcing at Teamlease Services. “Meanwhile, they’ll keep the searchlights on to join an Amazon or a Flipkart and be better-prepared once they get there.”

On the other hand, sincere startup aspirants can find themselves perturbed once they’re at a company.

Not everyone’s cup of tea

The goalposts at a startup shift daily and the absence of concrete long-term processes can unnerve many.

“The HPs [Hewlett-Packard] of the world just want freshers to have the job and do it. They’re not expected to do more,” said Shivakumar of Teamlease. “But at startups, they’re told learn this by tomorrow evening and come. It’s difficult to try to survive that.”

Moreover, these young firms lack up-skilling resources and rely on last-minute hiring of required skills, instead of training their existing staff.

Many freshers join startups unaware and unprepared for such a dynamic environment and want to check out of the ecosystem within the first few months. “[It] is not everyone’s cup of tea. Soon people realise they can’t handle the pressure and go to a larger company where projects are giant sized and enough time is given to finish it,” said Rahoul Bhaargava, founder of audio content company Creative Antenna.

And then there are monetary reasons that make small startups less attractive for many.

Perks and rewards

The high level of commitment required to stay on the ball at a startup is not always rewarded handsomely. Low on cash reserves and revenues, some startups struggle to even maintain regular salary cycles, said Kunal Kislay, CEO of internet-of-things solutions provider Integration Wizards.

In addition, many startup jobs come without basic employee benefits such as insurance, which is a given in any large IT firm.

Though startups give employees more autonomy and freedom to experiment compared to traditional IT firms, job security at the latter is no match to the former. After all, over 40% of startups in India shut down within two years of founding, owing to unprofitability and funding crunches, among other reasons.

In most cases, it’s not just the employees that fall back: startups also put in little effort to retain the talent in their early days.

Talent mismatch

By design, hiring at startups is usually done for the short-term. “Team members are hired based on instant need. There’s not much thought process behind it,” said Vivek Tikoo, who leads marketing at recruitment firm ZingHR.

“[Startups] end up hiring candidates who are less than desired and who end up giving less than ideal performance”

As a company evolves, so does its workforce. For instance, a back-office team may be replaced with automated tools. What began as a product firm may decide to pivot to services, changing the talent pool it needs.

Also, recruitment teams at early-stage startups are bootstrapped. They “end up hiring candidates who are less than desired and who end up giving less than ideal performance,” Creative Antenna’s Bhaargava said.

Meanwhile, there are plenty of suitors – more mature startups, traditional IT companies – in line to poach startup talent. For big IT especially, startup employees are gold because they have worked in an unorganised environment, and possibly picked up multiple skills along the way.

This article first appeared on Quartz.