The Psychology of Employee Retention

A lot of good stuff has been written on employee retention in startups, especially on the tactics part of it.

When I talk to people who leave startups, it comes down to one thing –
People stick in companies as long as they can tell a good story about it. When an employee can’t tell her/ himself and their friends a good story for a while they quit.
It’s basic human nature: we want to tell ourselves and our closest friends/ family the best stories. Stories that make us seem heroic, stories that we are proud of and stories that are unique.

Understanding this psychology as an employer and helping appeal to the basic instinct of storytelling is key to employee retention.

Anything from “my company gives me 20% times off”, “has video games”, “flexible work hours”, “mustache Mondays” “Whiskey Fridays” are all just tactics in trying to help employees tell better stories about the places they work.

What’s interesting is two people in the same company can tell themselves different stories – so stories may not necessarily reflect reality.

(I would argue from my observations that in most cases stories are actually exaggerated than what’s real. Things always seem better or worse than reality.)

There are a few triggers that help with telling better stories, outlining three general ones-
1. Mission/ values/ goals

Some examples that convey good stories – making the gap between internet and computers smaller (Dropbox), world’s largest platform for creative projects (Kickstarter), transforming education by empowering teaching and democratizing learning (Skillshare) . They help everyone believe they are part of something much bigger than themselves.

Another reason why what you do is important for every person in the company to understand.

Everyone in startups wants to change the world in some way or the other. Help people understand what and why you want to impact.
2. Success – There is no other better story than the story of success or the hope of it.

Success breeds hope and loyalty. The moment something is successful or has a really good chance of being successful everyone wants to attach themselves to it. The hope of success is incredibly important.

You have to make sure that at no point the hope of success they want to be part of (even if you’re doubtful) is removed from people’s mind. Even for a second.
3. Perks

Airbnb has Mustache Mondays, some have 20% days, a lot of startups – video games, ping pong tables, even formal dress up days.

These make for a unique story. A unique cult to want to be a part of and more importantly tell people about.

How many times have we heard people talking about the “perks and culture” before their job?

Understanding triggers helps you tell better stories. And looking at your employees and figuring out the good stories they tell themselves and people around them helps understand even more triggers. A lot of them are unique to your culture and your company’s personality.

It’s important not to let go of them.

28 thoughts on “The Psychology of Employee Retention

  1. Thanks for this great post on what makes employees stick around. I love your points about creating a positive culture and mission that teams can attach to, and this quote in particular: “Help people understand what and why you want to impact.”


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