Start-ups Have Short Life Cycle and Lack of Niche Specialists

Jana Moisja, a graduate of Vidzeme University of Applied Sciences study programme "Business Administration" explored the topic "Attracting Employees in Latvian Start-ups" in her bachelor's thesis. The author’s aim was to study the tools and techniques of employee recruitment in start-ups in Latvia, and to perform a comparative analysis of Latvian and foreign start-up employee recruitment experience in order to offer solutions to start-ups and the related regulatory authorities in the sphere of employee recruitment.

"During the process of the research, I found out that there is a shortage of IT specialists in Latvia, which is especially significant for start-ups," said Jana Moisja and continued: "The most effective tools for recruiting are employee referral programmes, active search and addressing through social media (LinkedIn and Facebook), as well as general employer image management, but it is important to diversify the recruitment tools and channels. The biggest challenges in attracting employees are the lack of professionals, ensuring competitive remuneration, inability to compete in attracting employees and low visibility of the company. "

In her opinion, there is still neither a common definition and criteria of a start-up in the world, nor a common understanding of the stages of a start-up's life cycle; however, studying the start-up concept in the law and the expert interpretation, it can be concluded that the main keywords related to the concept in Latvia are rapid growth, easy expansion, global market, variability, technology, innovation, bold ideas, small and efficient teams.

"Overall, the life cycle of start-ups is very short - 70% of start-ups go out of business 20 months after receiving the first funding, mainly due to the lack of market demand for product, the lack of financial resources, not having the right team. The short life cycle of a start-up is the reason why some people are reluctant to consider job offers from start-ups. Relationship building and an experience-oriented approach are becoming increasingly important in attracting employees, which means that the potential employee becomes initially interested in the company's activities, goals and vision, the industry, the technology used and only then the conversation is turned to job opportunities," commented Jana Moisja.

Start-ups are characterized not only by the lack of IT specialists, which is also visible in traditional companies around the world, but also by niche specialists. Although start-ups in Latvia are open to foreign employees, their recruitment is still a big challenge due to bureaucratic processes, therefore the Latvian start-up ecosystem needs several improvements with respect to the recruitment of foreign employees.

"Since the ecosystem of start-ups in Latvia is in the process of improvement, it can be expected that the number of start-ups will increase in the coming years, therefore attracting employees will become an increasingly important topic among founders. In general, there is no certainty among start-ups about the company's lack of qualified workforce, as 46% believe that the start-up already employs the necessary specialists. It is concluded that most start-ups in Latvia do not plan for a large increase in staff, even if they claim that the company lacks specialists, since the majority (64%) of the start-ups that claim to have a shortage of qualified workforce plan to hire up to 10 employees in the next two years,” Jana Moisja commented based on the obtained data.

Significant challenges include the inability to compete with larger, longer-lasting companies, low company visibility, as well as uncertainty about the company's duration. Uncertainty about the duration of a start-up is not limited to those that have recently started a business; quite the contrary, the majority of respondents who have identified uncertainty about the duration of the start-up are the start-ups with a duration of more than five years.

Among the respondents, the three most popular methods of attracting employees are competitive remuneration, employee stock options and a strong image of the employer. "Looking at the responses of the start-ups about what they consider to be the most effective tools and channels for attracting employees, more than half or 56% have recognized active search and addressing on social media as the most effective way," explained the graduate.

After a comparative analysis of career pages, it has been concluded that in general, start-ups around the world offer various benefits to employees, such as animal-friendly office, hackathons, certain days for personal projects, etc., while the explored Latvian start-ups tend to offer uniform employee benefits or bonuses.

Overall, the career pages of Latvian start-ups are more professional, simple, the benefits offered to employees are similar, while the career pages of global start-ups are characterized by freer language, more personalized values of the company's culture and diversified employee benefits.

"Start-ups that are at the founding stage need to clearly define the culture and values ​​of the start-up and, accordingly, make decisions based on it and use this information to attract employees. Those start-ups whose main challenge in attracting employees is competitive remuneration or inability to compete with longer-lasting companies, should offer employee stock options as a unique tool to close the pay gap. Start-ups, in collaboration with universities, should complement training programmes, especially for IT professionals, based on practical knowledge and skills that could be useful to start-ups in future. Those start-ups that mention only competitive pay as an employee benefit should diversify employee benefits, including, for example, employee stock options (if possible), community building, participation in decision-making, open communication, and access to the company’s performance data," was seen by Jana Moisja as a solution.