Canadian software startups statistically solid place to work

Canada’s small software companies are a good place to work if you’re seeking a steady job and not expecting a big raise any time soon, says a new report from PricewaterhouseCoopers (PwC) Canada.

The statistics pour some cold water on the stereotype that the start-up environment is often transient, with employees coming and going, leaping for the next best opportunity like a promiscuous lover. It turns out a job with a small Canadian software firm is reliable, as 80 per cent of firms have less than 10 per cent turnover annually and 60 per cent of them have less than five per cent turn over.

The PwC report collected answers from 130 CEOs with less than 50 employees in Canada’s software industry. Most companies (81 per cent) were located in Ontario, while others came from across the country including seven per cent in Quebec and six per cent in B.C.

These companies likely have a low turnover rate because they attract a specific type of personality, says Peter Matutat, author of the report and partner in the audit and assurance group at PwC.

“You have to make a pretty conscious decision to give up any safety and security to work in a more dynamic situation,” he says. “The people drawn to that type of company are satisfied once they’re there in that environment.”

While working for a small software firm may be satisfying, it might not be the best way to line your pockets. CEOs named “hiring and compensation” as the top area they’d be conservative in spending given the current economic climate, with 66 per cent selecting that area.

That comes despite 60 per cent of firms expecting at least 25 per cent growth over the past year.

“I suspect that when we do the survey this year, you’re going to see a loosening in that area,” Matutat says. “With our client base, we’re seeing increased hiring and more flexibility on pay.”

Sometimes employee retention can be created with a rigorous hiring process, as is the case at Toronto-based firm I Love Rewards. The company sells its employee recognition and incentives program, based on points being awarded for achievements, to other businesses. It has a six-step hiring process before bringing employees on board.

It’s a tough one, admits Razor Suleman, CEO at I Love Rewards. “I don’t know if I was applying if I would get hired.”

The company receives an average of 211 resumes for every position they open. To narrow the field, they invite all applicants to an open house night at their office. There, the attendants have a speed-date style interview with one of the I Love Rewards employees. If they pass, they can go on to the group interview stage.

“When you invite candidates to an open house, you create a low barrier of entry but put the onus back on the candidate, and 80 per cent of people don’t come,” Suleman says. “It’s neat to see the self-selection process work in our favour. We haven’t even read the resumes at this point.”

The group interview stage involves five groups of 12 people doing 90-minute long conversations. From that, one or two candidates from each group are asked to prepare and present the results of a case study in one hour. Finally, it’s down to just several candidates for a one-on-one interview.

“We think that the right people who want to work at I Love Rewards will go through with it,” Suleman says.

I Love Rewards estimates its turnover rate is between 10 and 15 per cent. Its hiring process was profiled in the PwC report.

“They seemed pretty positive about the results they were seeing,” Matutat says. “There is a very high morale at that organization.”

Part of the success can be attributed to having company employees involved in the hiring process, he adds. Instead of human resources parachuting in a new face, existing employees have a stake in the new hire and feel responsible for their success.

Other firms, such as Mississauga, Ont.-based Empathica Inc., focus on employee engagement to improve talent retention. The software firm helps enterprises collect feedback from customers and employees, using business intelligence software.

Most companies will survey all their employees on an annual or a bi-annual basis, but Empathica does a monthly survey, explains Gary Edwards, executive vice president of client services.

The five-star rating system it uses for their employee satisfaction categories is reminiscent of the rating system in Apple’s App Store.

“It takes about five seconds for an employee to rate one attribute and then they have an opportunity to leave an open-ended comment,” he says. “We can see if people are distressed or are in danger of leaving.”

Based on its work, Empathica recommends three main categories to focus on for talent retention: relationship with managers, perceived opportunity for the employee, and sense of belief in enterprise values.

“Those three are the ones we see surface to the top when we do our mathematical modeling,” Edwards says. “That’s the recipe for a highly engaged employee.”

Canadian software companies fared well during the recession, with 53 per cent reporting a profit in 2009. Another 29 per cent expect to be profitable by the end of 2010, and another 17 per cent by the end of 2011.

About half of software companies make between $1 million and $5 million revenue, and another 31 per cent make less than $1 million annually.

Brian Jackson is a Senior Writer at Follow him on Twitter, read his blog, and check out the IT Business Facebook Page.

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Brian Jackson
Brian Jackson
Editorial director of IT World Canada. Covering technology as it applies to business users. Multiple COPA award winner and now judge. Paddles a canoe as much as possible.

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