The consequences of employee turnover in startups

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School of Business | Bachelor's thesis
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Date

2022

Major/Subject

Mcode

Degree programme

Laskentatoimi

Language

en

Pages

25 + 7

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Abstract

Motivated and innovative employees are vital for the early success of young startups. However, being dependent on individual talents is a major risk for these companies when a higher rate of employee turnover seems to be a new working life phenomenon. Even though a majority of employee turnover consequences seem to be negative, the experienced consequences and their severity is ultimately case-specific. Hence, the goal of this thesis was to study, what are the consequences that startups face and how do they differ from the ones that companies experience in general. It was expected that there would be some specific consequences to distinguish due to the employee-driven and unestablished nature of startups. According to previous research, there seems to be similarities as well as some differences in turnover consequences between firm types. This makes it justified to state that usually employee turnover affects startups in a slightly different way than other firms. The findings indicate that startups struggle especially with stronger negative consequences on productivity and knowledge loss in employee turnover compared to established firms. In addition, executive turnover seems to affect startups in the opposite way than firms in general. Even though we found differences in the most significant employee turnover consequences between startups and established firms, we can’t conclude whether the overall performance was more negatively affected on either. However, it seems to be efficient to especially startups to develop human resource management systems like knowledge recordings to be able to prevent their most significant turnover consequences better. Even though this study provides a view of consequence patterns that the employee turnover causes to startups as well as established firms, it must be stated that the experienced consequences are always tied to individual environments. All in all, this literature review strengthens the image of connection between employee turnover and cost accounting. This might inspire startup managers to optimize their people management costs or develop their HR practises to avoid the introduced startup specific employee turnover consequences.

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Thesis advisor

Vuolteenaho, Tomi

Keywords

startup, employee turnover, consequences, established firms

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