A working pattern, drawn from years of watching founders respond to senior departures: hiring problems are usually retention problems wearing a mask. The second senior person resigns within six months, the founder reaches for the phone to brief a recruiter on speed and seniority, and the actual question (why two senior people just left a healthy business) does not get asked. Twelve months later, the replacements have churned through the same structure, the recruiter has been paid twice, and the founder is having the same conversation a third time.
This is not a piece about hiring. It is a piece about the moment before hiring: the decision a founder takes when the chair next to theirs has just emptied for the second time. Get that moment wrong and the cost compounds across the year. Get it right and the hiring problem, when it returns, is half the size. The pattern echoes one we have written about elsewhere on the marketing side: when a senior decision feels strategic but is actually reactive, the cost of acting before diagnosing is high and quiet.
The diagnostic that costs nothing
Our HR service page carries one question that does most of the work: of your last ten hires, how many are still here and performing? If the answer is below seven, you have a retention problem funding itself through constant recruitment. Hiring three people to replace two leavers plus one growth role is the most expensive way to grow we know of, and it is invisible on a P&L because the cost is buried in recruiter fees, ramp time, and the institutional memory that walks out with each departure.
Run the number before you do anything else. Pull the last ten offers accepted, mark which are still in role, and look at the count. Below seven, you are funding hiring out of a leaky bucket. At eight or nine, you have a normal level of attrition and the next hire is probably the real conversation. At ten of ten, congratulations, but check the floor under your feet: very low turnover in a growing company sometimes means people are stuck rather than committed, and that is a different problem.
The diagnostic that founders reach for instead is the exit interview, and exit interviews are the wrong instrument. By the time someone is leaving, the conversation is polite, retrospective, and structured to protect the relationship. Richard Finnegan's "The Power of Stay Interviews", written up through SHRM, makes the case for the better version: a structured conversation with the people who are still in seat, asking what is keeping them and what would push them out. The information is current, actionable, and not filtered through the politeness of a leaver.
The five drivers, and the one most founders fix last
Daniel Pink's "Drive" (2009) names the three intrinsic drivers most often: autonomy, mastery, purpose. To those, in our experience with UK SMEs and scale-ups, add two structural ones: a manager who is competent at the management part of their job, and a compensation ladder that is legible (people can see how it works and where they sit on it). Five drivers in total. Pay is on the list, but it is one of five, and it is rarely the one that breaks first.
The one founders fix last is manager quality. Gallup's analysis, published most prominently in "State of the American Manager" (2015), attributes roughly seventy percent of the variance in team engagement to the manager. The mechanism is familiar in SMEs: a strong individual contributor gets promoted to manage their old team, receives no training in the skill of management (which is genuinely different from the skill of doing the work), and becomes the reason the best people on the team start updating their CVs. Marcus Buckingham and Curt Coffman's "First, Break All the Rules" (1999) made the "people leave managers, not companies" point from Gallup's underlying data and the finding has held up for twenty-five years.
The fix is not glamorous. It is manager training (a real programme, not a half-day workshop), one-to-one cadence enforced, and an honest conversation with any newly promoted manager about whether the management track is what they actually want. Gusto's manager training programme, written up on First Round Review, is the canonical SME-scale example: a structured curriculum, run internally, with the founder visibly invested. It is not expensive. It is just rarely prioritised, because it pays back over twelve to eighteen months and the recruiter pays back this quarter.
Career conversations done properly
Kim Scott's "Radical Candor" (2017) sets out a three-conversation framework that translates cleanly into SME practice: the life-story conversation (what shaped this person), the dreams conversation (where do they want to be in three to five years), and the eighteen-month plan (what does the next role-shaped step look like from here). Each manager runs the three with each direct report, once a year, properly, with notes that survive the meeting.
The objection here is predictable: we are too small for career paths, there is nowhere internal for people to go. It is the objection that most often comes from companies who have not actually had the conversation. People rarely want a literal promotion path; they want to be seen, to be developed, and to know that someone senior has thought about where they are heading. A twenty-person business cannot offer the ladder a two-thousand-person business offers, but it can offer something a two-thousand-person business genuinely cannot: a founder who knows each person's career arc by name. That is a retention asset. Use it.
The trade-off no one wants to name
Retention done well slows the external story. This is the part the seed bank flags and it is worth saying plainly. A company that retains its senior people looks, from the outside, less dynamic. The LinkedIn announcements are fewer. There is no "thrilled to welcome our new VP of X" cadence to feed the algorithm. The board paper has a smaller org chart growth number than the founder of a comparable company who is hiring through churn. Investors who index on headcount growth (and some still do) will sometimes prefer the noisier story.
There is no clean answer to this. The honest framing is that a retained ten-year senior team is worth more than a twice-replaced twelve-month one, but its value is invisible to outsiders and shows up only when it is gone. Patty McCord's "Powerful" (2018), drawing on the Netflix experience, is sharp on the comp side of this trade-off (pay top of market for the people you most want to keep, and mean it), but McCord is writing from a Silicon Valley context with venture capital depth that most UK SMEs do not have. The translation for an SME owner-operator running a twenty-person business is not "pay top of market across the board", which is unaffordable. It is "pay top of market for the three or four people whose departure would be a genuine setback, and be honest with yourself about who those people are". The metric to track here is what senior tech HR calls regretted attrition: not the overall leaver rate, but the rate at which the people you wanted to keep leave. Most founders track the first number and it tells them very little. The second number, watched quarterly, is one of the more useful instruments in the building.
What to do next
If a second senior person has just resigned in six months, the move is not to brief a recruiter. The move is to do three things in the next two weeks, in this order. Run the last-ten-hires diagnostic on paper. Sit with the two managers who lost the senior people and ask, with notes, what they think the pattern is. Pick the three or four people whose departure would set the business back twelve months, and have a stay conversation with each of them this fortnight, before someone else does.
After that, the recruiter conversation gets clearer. Sometimes the answer is genuinely "we are growing and we need to hire". More often it is "we have a manager problem in one team and a comp problem at one level, and once we fix those, the next hire is straightforward". Both answers are useful. The expensive answer is the one founders take by default, which is to skip the diagnostic and hire faster into the broken structure.
When to call us: when the pattern has appeared twice and you want a senior outside read before committing to a recruiter brief. When to call a recruiter: after the diagnostic, with a role designed properly and the upstream problems named. When to do nothing: when the leaver was a flight risk from day one, the team is stable, and the next hire is genuinely additive rather than replacement. That third option is real and underused. The cheapest move now, in most cases, is to ask one more question before you act.