Home / Companies / News /  Attrition rate soars at start-ups

Mumbai: The employee turnover rate across e-commerce and technology start-ups has soared to nearly double that of mature companies as employees switch jobs in search of even more generous pay packages and stock options.

An average of more than 30% of employees in mid-level positions at tech start-ups and e-commerce firms quit their jobs every year, according to human resource (HR) consultants and industry executives. In managerial roles, the average attrition rate stands at around 10%. Attrition rates at firms that are rapidly changing business models are much higher, consultants say.

“What we are seeing is the initial set of people who had joined the start-ups are leaving. For them, a new set of opportunities have come up," said Alka Dhingra, assistant manager, Teamlease, a hiring agency. “At the junior level, the average attrition rate is over 25% currently, which is almost double of what is seen at more mature sectors like IT (information technology)."

The start-up boom in India has fuelled strong demand for skills such as predictive analytics and product and software development, making it tough for young companies to hold on to their prized employees despite high pay and stock options. While the lure of becoming a millionaire and building the next big thing are a powerful draw for most, the fast-paced and demanding environment of a start-up can also burn out many workers. Along with this, the relative ease with which start-ups can fire employees also contribute to the high employee turnover rate, experts say.

Over the past few months, India’s largest e-commerce firms including Flipkart, Snapdeal, Ola and have all seen several exits at the senior and junior level. Mint reported last week that the respective HR heads of Flipkart and Myntra—Mekin Maheswari and Pooja Gupta—have quit their positions to take up advisory roles. Earlier this year, e-commerce firm Snapdeal saw chief technology officer Amitabh Misra quit his position to set up his own company. Suvonil Chatterjee, former chief design officer of real estate website, too resigned recently.

“Priorities change overnight. Sometimes, the things that you joined for may still not be happening in the next few months," said Chatterjee, 22, while explaining the challenges of working in a start-up and the reason for high attrition.

While he resigned to do something new, for many employees, the fast-paced start-up culture is tough to cope with.

Mansee Singhal, who leads hiring across the technology-driven sectors at HR consulting firm Mercer, adds that the rapidly evolving business models at start-ups is another reason for high attrition.

“Business models keep evolving; competencies which were relevant to achieve a level may no longer be relevant to fast-track into the next one," said Singhal.

Moreover, as the sector consolidates, companies which are scaling up through mergers and acquisitions could see more job losses in the days to come.

For instance, real estate portal recently fired around 200 employees after it shut four of its business verticals including the land, franchisee, commercial and luxury real estate divisions. The decision was part of the company’s plan to focus on its core business on selling housing products.

Food delivery firm TinyOwl sacked more than 100 people as part of its restructuring programme, Mint reported on 7 September.

The attrition rate at mid-level positions ranges between 18% and 32%, while at the junior level it is around 40-50%, said Ajay Nair, HR head,

The biggest churn is happening at the mid and junior levels, where employees are far more flexible in picking up new skills and looking out for better opportunities, he said.

“Productivity, joint ventures and mergers are some of the reasons which will force companies to downsize their headcounts. And at a certain point of time, everybody is going to ask for return on investments," Nair said.

Hari T.N., head of HR at online grocery delivery firm BigBasket, agrees that attrition rates will continue to rise as the pressure to increase valuations will force managements to discard underperformers.

The Bengaluru-based firm is seeing around 7-12% of its employees at the junior level moving out every month.

“It is common knowledge that e-commerce industry is experiencing explosive growth. Like any growing industry, it has its set of challenges when it comes to talent," said Raj Raghavan, director (HR), Amazon India, without disclosing the attrition rate at his firm.

Amazon India has adopted various mentorship programmes to help employees cope with the increasing challenges of working in an e-commerce firm, Raghavan added.

Mercer’s Singhal said that the churn may continue to be high for certain roles particularly in the technology segment as there is huge demand for such professionals.

Some others say the unpredictability of career progression and lack of a proper organizational structure also contribute to increased attrition.

“Due to the maddening pace for increasing the scale of operations, structures, processes and systems are taking a back seat," says Harold D’Souza, co-founder and director, WalkWater Talent Advisors Pvt. Ltd, a Bengaluru-based hiring agency.

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