Culture has become a new buzz word among startups. I keep hearing it everywhere I go but, IMHO, a lot of entrepreneurs (sometimes even me) do not completely understand what a company culture is. I am extremely proud of the fact that we grew to 60 people with almost no one leaving the company. Two people did leave — One early employee left to go to school and another quit to start doing his own thing.
@Yotpo, we built our code of culture to help us better recruit and preserve talent by trying to figure out and pin down what our DNA is. It’s a working document — we still have a ways to go, but it is for sure an important step for us as a growing company.
Still, a question that kept bothering me is this: how can we measure our company culture? If we can’t measure it, we can’t know if it’s working — so after a lot of thinking I believe I found the formula: E-Churn
The equation should be:
# of Employees who quit /# of Total Employees
# of Employees who quit = Obviously, this is people who chose to leave your company. But it’s important to note that I do not count employees that decided to open their own startup in this number. These people didn’t quit, they graduated — they are a form of alumni and should not be considered as e-churn.
# of Total Employees = # of Current Employees + # of Fired Employees + # of Employees who quit. Basically, the entire employee turnover of your company. So if you currently have 50 employees and you fired 10 and 2 left, your total employees should be 62.
Why this is the right metric?
If you built a great company culture then your employees like to come to work, are value-driven and feel that they are a part of something great. If you succeed in creating such an environment, then who the hell would want to leave? Of course, they could probably be better paid somewhere else but they are staying for something else, something money cannot buy.
It also works the other way around. If you are culture-focused and someone is not a good cultural fit then you should let them go — and fast. This is the difference between great companies and okay companies. Low e-churn shows exactly that.
I know a lot of conventionally successful companies that are making tons of money or growing their user base quickly, but I define them as so-so companies. Why? Because they have a terrible culture and a lot of their key people keep leaving.
What is considered good/bad E-churn?
Just as customer churn is judged differently depending on whether your company sells to small businesses or enterprise customers, e-churn should be judged based on the size of your company. Although this is a relatively new phrase, I believe the numbers should be around:
If your startup is <=20 ppl → good e-churn= 0%
If your startup is between 20 and 100 ppl -> good e-churn <= 5%
If your startup is more than 100 people -> good e-churn <=10%
If you are e-churn focused then:
- You are culture focused
- You will fire people who are not a good cultural fit
- You will know if you are losing your DNA as you grow
I’m surprised that more investors don’t ask about this — if I was an investor, e-churn is the first thing I would ask a company about. This metric is far more important, and telling, than revenue growth or customer churn. BTW, Yotpo’s e-churn is 2.6%.