Prevent Staff Turnover Part 1: Coworking Staff Compensation

Prevent Staff Turnover Part 1: Coworking Staff Compensation

This is Part 1 of a two-part series called Prevent Staff Turnover. See Part 2: Coworking Staff Allocation here.

I’ve written about proper resource allocation for coworking spaces and I’ve written about the proper roles and responsibilities for those roles in a coworking space.

Along these same lines, there are a couple of major issues I see happening at many spaces regarding staff compensation and allocation. It usually affects larger, single-space operations or smaller networks (3-5 locations). Here’s what I’m noticing:

  1. Massive under-payment of staff
  2. Too many staff

The Negative Cycle

These two problems create a negative cycle wherein the underpayment of staff causes them not to take ownership of the brand and mission of your space, which increases turnover and limits the amount of work they are willing to do (coworking spaces are a lot of work). Because of the limited scope of their work and their limited experience and skill set, you end up hiring more people to cover the gaps in your business. Because you’re already paying a chunk of money to your original staff you cannot offer this new person much money either, meaning they’ll also be less experienced, less skilled, and will work less.

“We’ll pay you less, but you’ll get experience…”

Coworking space founders who say this phrase have an underlying theory that they can bring on less experienced people for way under market rate by justifying that the opportunity for gaining experience and training will offset the money the employee should be making. This is flawed for at least three reasons.

First, it only takes a few months for a generally intelligent person to get up to speed and be able perform all of their job functions. The next few months are generally focused on increasing efficiency and expanding responsibilities. However, space founders rarely adjust the employee’s pay at this time, regardless of the experience gained. Space founders follow the age-old model where employees are rewarded with incremental increases in compensation as opposed to value-based compensation (i.e. the amount of value the person generates for the business relative to their cost and the cost it would take to replace them).

The second reason the underpayment-for-training model is flawed is really simple. Once trained, the employees leave! As soon as they realize they can get paid 50% more (or even sometimes 100% more) than they’re being paid by you, they will jump ship.

Lastly, as a new coworking space founder, you likely can’t provide them any guidance, operational models to follow, or best practices. This means you expect them to be strategic and execute the strategies they come up with, with almost no experience in the industry. This is incredibly stressful and can increase turnover without proper compensation.

How to Actually Get Good People for Lower Wages

The answer is simple: ownership.

This should be in the form of equity. Not a little sliver of equity, though. The amount needs to be enough that the employee feels invested in the outcome of the space as a whole. They need to feel that those extra hours will pay off in the end. Considering that single coworking spaces are rarely very profitable, you should be thinking in double digits for the equity percentage, especially for your founding team.

Ownership isn’t just about equity.

Ownership also means providing a lot of autonomy to your employees. Regardless of pay, your employees are not willing to figure out how to both build a coworking space from scratch and let you be their micromanager. You get one or the other (in my case I’ve never put up with micromanagement). Yes, you are still their boss. You need to hold them accountable for goals, but you also need to be a good leader and let your staff fail and learn. You need to recognize that they are putting themselves on the line for this business, and for you.

Ryan Chatterton
[email protected]

Ryan is the founder of Coworking Insights, a coworking media platform focused on delivering unique and in-depth insights for coworking founders and their teams. He’s the Marketing Director at Habu, a quickly growing coworking management platform that is simple, fast, and intuitive for managing recurring billing, bookings, and other admin tasks. Formerly with Impact Hub and PARISOMA, Ryan now has over 4 years of combined experience in a variety of roles in the coworking industry, including marketing, events, operations, sales, software, and partnerships. He’s a digital nomad and a lover of wine and tacos.


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