The Lightspeed Founder Success Team Presents our Annual Workplace Re-Entry Report of 218 Startups and their approach to returning to the workplace.
In the early days of the pandemic, many pundits predicted a remote work renaissance and the abolishment of traditional offices. We imagined nomadic knowledge workers roaming the globe or migrating to low-cost rural areas. While this was the case during the mandatory lockdown, post-covid work structures will fall on a broader spectrum.
To answer the most common questions from Founders, Lightspeed ran our second annual Workplace Re-Entry & Remote Work report. We asked companies within our portfolio and outside of it from across the startup ecosystem how they will operate in a post-pandemic world.
What we heard might surprise you: while the traditional office model is indeed broken, it’s not dead. Offices remain an important driver of company culture and employee connection. At the same time, employee’s have greater flexibility in how they work and more leverage in compensation decisions, regardless of location.
Flexible work is here to stay
Prior to 2020, only 37% of companies allowed flexible or remote work. Going forward, 95% of startups will allow for remote work, with 41% not requiring employees to ever return to an office.
What this means for startups: Employees will expect greater flexibility in how and where they work. Ensure your workforce plans align with current and future employee expectations. Surveying employees is an essential step when designing a plan.
Offices remain important to the future of work
The rapid shift to remote work hasn’t been seamless. Cultural challenges, 48%, and employee demand, 40%, were the main drivers of office re-opening.
What this means for startups: We predict a move away from centralization around headquarters to a “hub and spoke” model with many smaller offices near clusters of employees.
Hiring remains highly competitive
Nearly every industry has felt the tight labor market over the last 6 months. 88% say their hiring constraints are due to compensation against other offers & internal recruiting capacity. Only 3% of companies find candidate location an impediment to hiring.
What this means for startups: The days of candidates accepting lower salaries at startups are coming to an end. We have already seen a compression of the historical startup salary discount compared to late-stage and public peers.
What this means for startups: Internal recruiting capacity is an often overlooked metric. The market for strong recruiters is white-hot, preventing many companies from building the function in line with headcount plans. Executives should carefully map their recruiting capacity to headcount plans and expand teams accordingly at least 1 quarter in advance.
Hiring plans don’t account for the Great Resignation
Overall attrition predictions for 2022 are not as bleak as the Great Recession would lead us to believe. Companies are projecting lower attrition this year compared to 2021.
What this means for startups: Getting attrition wrong is painful. Annual operating plans are built on assumptions of employee productivity. Any unexpected resignations will rapidly spiral into missed company goals. Executives should revisit their attrition assumptions and create contingency plans in case the Great Recession emerges.
Companies are minimizing the impact of location on salaries
Given compensation is the primary challenge to hiring, companies are unsurprisingly searching for solutions. Before 2020, the vast majority of startups used employee location to determine salaries. 50% of companies will now offer a location-agnostic or single-tier premium salary (ex. SF & NYC) for US-based employees.
What this means for startups: Companies must understand the compensation philosophies of their closest hiring competitors to remain compelling to candidates. We predict a continued smoothing of regional salary differences and a move to one US-national rate with premiums for expensive markets.
Where to go from here
Two years into the pandemic, companies have learned how to adapt their operating models to align employee productivity with engagement. There is no one-size-fits-all model for company building, and employees will have more options than ever before. We are still in the early innings of the shift to remote work, learning and adapting as we go.
We welcome questions, thoughts, and feedback in the comments on your startup’s evolving workforce plans.
-Luke Beseda on behalf of the Lightspeed Founder Success Team