How much does employee turnover really cost?
medium.com
medium.com
* It's a good idea to try to quantify the cost of losing an employee. If you at least understand what basic costs you'll incur, such as cost of hiring, training, etc. it'll give you a basis for realizing the importance of minimizing turnover (perhaps you'll even conclude that turnover isn't a big deal in your case). But it's very hard to quantify some of the largest costs such as employee moral. I was once at a company where an entire (small) team slowly left after a single person departed. Perhaps any individual's departure could have been handled without too much of an issue, but the loss of entire team and all the institutional knowledge contained there was quite damaging to the company.
* The article mentions some tips for retaining employees and I think they are spot on. But I don't think it emphasizes the importance of salary enough. A lot of employees jump ship because of the higher salaries they can get when they move around. Meanwhile, the original company they left will likely have to pay market rate to get someone with similar experience (and none of the institutional knowledge), so they would have been much better off if they would have just bumped their employee's pay to market rate in the first place. By the time it gets to a counter-offer stage, it's often too late.
EDIT: The article briefly mentions the importance of paying market rate salary, but I missed this sentence when I read it over the first time. Updating my second bullet accordingly.
I worked at a company where a company decided to introduce a new management program (LEAN) into one department. That 16 person department saw 18 people leave during my 6 months at the company, and only three of the original team was there when I left. That is to say, five people started work after I showed up and left, before I quit to be a WFH dad.
And yet, nobody blamed the brass or the people implementing the LEAN program.
But the people who share a lot of the blame for this idiocy and who have no good excuse are "heterodox economists" and TED talk presenters telling us how money doesn't motivate people past a certain point, or how it actually makes people less creative, all supposedly to criticize "capitalism" but in fact to make the market work worse for employees who now actually have to argue with management that yes, money does motivate them, with the manager replying "I know it doesn't so tell me what's really bothering you" or what-not. I mean it's not like companies seek less profit having seen the TED talk, instead they learn that they can cut expenses by avoiding "needless" raises. Quite the heterodoxy, that.
It's simply amazing how somebody can spin this into "money doesn't motivate people". Some people will only see what they want, and make any excuse for that, no matter how absurd.
1 - Does thinking about it as a problem have the same effect? Is there some data about this?
Almost nobody reads the original studies. Instead, they read news stories and articles, most written by professionals who are paid to spin it in amazing ways.
So, memes.
But if you're underpaying people or not giving raises, people quickly become unhappy and will either slack off or eventually leave - that's the 'certain point'! You absolutely need to keep giving good raises to keep good people there - but for most people it will just maintain their performance, not to motivate them to be better.
It is a terrible motivator as the impact of a raise is short lived, we very quickly come to believe we are worth the higher pay. See Wall Street and SV salaries. Once you're happy with your pay things like challenging work, recognising success, personal development, good co-workers become much more effective.
It is a powerful de-motivator if you're being paid less than you think you should be, to the point that the weighting between the two effects is almost entirely on the de-motivation side.
However, the lack of money (or other tangible benefits) that people feel owed is a huge motivation for those people to leave.
Thus far the market has always agreed with me.
It's probably true that post-raise motivation boost is short lived, and people's expectations level out, and it might be even true that money could even act as a demotivator. But it doesn't mean people don't want more money and will quit if an opportunity shows up.
I know the training itself is free (they actually are giving us a few grand in credit for going), and hotels, flights, etc are under $1k, so this is a super sweet deal for his company.
For normal people, its infuriating to hear businesses complain about turnover and a lack of loyalty when their "performance" raises amount to a cost of living increase, and their promotion raises don't bring them in line with the salaries that people getting hired at the more senior position make coming through the door. Money isn't the only reason I work, but it is one of the reasons. Its more about the principle. A company that wants loyalty should show loyalty and not attempt to nickel and dime the talent.
Tech companies are usually responsible for creating the turnover they complain about.
I see complaining itself as nothing but an act of trying to weasel out of the responsibility. If a company is really hurt by the turnover, it either dies or starts solving the problem - by e.g. paying people more, or reducing the impact of turnover on the business (e.g. by choosing tech stacks so that developers are easily replaceable). Complaining loudly about turnover seems to be done in hope that someone steps in and solves it without the company having to pay for it.
Want to cure polio, go to Mars, put LED lighting in every home in Africa, fund research into fusion reactors, build flying cars, or push VR into the mainstream? You'd better have some cash.
That might have been more accurately stated as:
"Want to hire people to cure polio, go to Mars, put LED lighting in every home in Africa, fund research into fusion reactors, build flying cars, or push VR into the mainstream? You'd better have some cash."
It's rarely the people with the big money that are doing these things, they're just hiring people and having influence on direction. Sure, they might get credit for being a "visionary" or "innovator", but the people doing the real work rarely make the big bucks (or get much credit, unless they're very lucky).
But, in fact, the very people with lots of money who are influencing these developments are themselves influenced: often by people with not nearly as much money -- such as relatively poor authors, or other "real" visionaries.
So you could also say something like: "Want to have some really significant influence on the world? Write a book." It doesn't take a lot of money, and it's not certain that you will be influential, but if you have some really great ideas you might stand more of a chance of changing the world by writing than by trying to compete with the likes of Gates or Musk for the really big bucks.
Of course, lots of other cultural artifacts have also been hugely influential. How much of our modern world has been influenced by Star Wars or Star Trek, or by mathematics -- which really makes all those Mars journeys possible in the first place. How many people have been influenced and inspired by music? All of the arts really feed in to and greatly influence each other.
So there are plenty of ways to influence and change the world apart from being rich -- and many of them are even more effective, as these other means could influence many generations of people -- poor, rich, and otherwise.
Fortunately, my employer already does both of those. I just wish it wasn't almost a requirement to leave in order to get a decent raise.
Note: I'm not expecting to make $200k in a technical role as a security analyst any time soon, its just hypothetical.
http://www.wolframalpha.com/input/?i=US$100000+2017+in+1980+...
$100,000 today would have been $33,000 in 1980, $53,000 in 1990, $70,000 in 2000, and only $84,000 in 2007.
You are totally right about the $200k mark feeling comfortable. $200k is the new $100k.
The interesting thing though is that you wouldn't really want to entice me that way, because I'd guess you'd get a worse product out of me. So there are different types of motivation that are important. The motivation to make a choice, versus the motivation to work hard on a choice.
What would your 18yo self said about 100k?
What do you think about a Netflix engineer making 300k? They'd probably be happy with 500k (though, cost of living, derailment ahead..).
That being said, motivation is a complex thing, and most people are motivated by many different things at once. Money itself may not be the only motivator, but it's definitely one of them, and an important one. Trying to skimp out on it is a recipe for failure.
- the one meaning "the stuff that will get you involved"; - the one meaning "the stuff that you'll want to get".
The first one will drive you enthusiasm to work, your professionalism, the quality of what your produce and your loyalty. It's a "motor" kind of motivation, and money can't buy it. Only a sense of purpose can.
The second one is just bound to the reality of life : you need money for food, shelter, logistic, health, hobbies, then a growing family, and an evolving lifestyle. This will make you choose something. It's more a "motive" kind of motivation.
You can get a lot of people with only the second one. You can get some people for some time with only the first one. But to get the best, and for them to stay, you need a balance of both.
But if it doesn't make you happy and you always want more, that desire must motivate you, right? Make up your mind!
You live my dream life.
The rank and file tend to be told that we're not motivated by money, so we shouldn't expect any, whilst c-level salaries have to be "competitive to attract the best talent".
I did note that many of my peers where COMPLETELY freaked out by my decision that I mentioned above. My choice to step back from the game freaked them out. No over aggression but a mix of outright confusion as well as somewhat confused jealousy.
He said he ran into some Coca-Cola executives after they purchased the company and he was sort of crowing about all the money they had just made him. I guess two of the executives were like, "Huh, $400 million, not a bad start Curtis. Let us know once you get in the $800 million or even the billion dollar range."
He said it made him a little more humble, but at the same time, he said there's a sort of pissing game when you're at those income levels with people like that.
But, ok, that's a fairly prohibitive expense. Musicians can get that and have the audience pay for the privilege. They can do so repeatedly, which certainly qualifies as some kind of asset.
So call it a type of capital, a social capital, maybe... ability to muster crowds?
It would be interesting to see a graph of how much "muster" varies across a given population.
Follows Zipf's Law like everything else, I'd wager. Most people would have to buy an audience. A tiny few can get audiences to pay. There's a growing middle-class sitting at the zero-pivot--emerging indie bands and popular academics--they pull in audiences, but only for free.
Once we formalize all that we'll of course need some sort of exchange rate for muster, USD:MST, before we can get down to the important work of comparing the relative capital of a superstar and the super-rich.
Take note young econ grad students: the to-be-written papers on the liquidity of muster are the stuff careers are made of!
In terms of consulting, credit/loans are harder to get for smaller businesses and most software ends up being targeted toward large businesses, and so do most consultants.
It's harder to be a small business than to be a large business; therefore it's hard to pay more and since you're already as efficient as possible it's harder to get those rates up.
(Also there was wage suppression by Google and Apple and other big companies for around 5 years, that's a HUGE damper on the maximum salary which also translates into a damper on consulting rates.)
Anecdotally one guy I know quit embedded to do rails development and doubled his paycheck.
I've seen it so many times. Instead of wasting money on boosting morale, why not just give us cash?
I may not need a raise and the money may not make a notable improvement to my life in and of itself but getting one is a clear signal of appreciation and in the opposite direction not getting one while your peers do (again regardless of whether you need one) sends a clear (if unintentional) message of undervaluation.
Unlike most other signals of status, salary is directly comparable.
The previous job gave me back-to-back 1% raises. Left that job after two years as well. Should have left at the one year mark.
I've been in my current job a few months. I'll stick around till the first annual raise cycle to see how they treat me. I don't think I'll give this employer a second chance if they screw up the first one (Hint: if your raise doesn't at least cover inflation + offset the costs associated with your annual medical benefits cuts -- I consider it a pay cut, and I'm not going to be happy. In fact, getting a "Congratulations on your (1%) annual raise" email from corporate HR is probably not going to get the reaction you were anticipating).
I actually had one employer that gave me an 8% raise at the two-year mark. So they got another year out of me (until the mass layoffs came).
The result? I was offered 2%-3%, to be discussed on the next annual review (still some months to go), and the PM said strictly that it would depend on my performance. That happened on a Friday, and I quit the job next Monday. My conclusion: never accept verbal agreements again..
> My conclusion: never accept verbal agreements again.
Was the verbal agreement not honored? 2-3% after 6 months is not nothing.
It seems your problem was accepted an offer 20% below what you should.
Actual was at 6/7 month be told that contingent on performance you would get a raise of 2-3% at 12 months.
Being 20% lower than market rate is definitely the problem and a signal that they don't want to pay appropriately.
Edit: if you don't value your worth appropriately from the get go, why would the employer?
Ah, I missed that was delayed.
Yes, that was indeed his mistake.
And so was expecting a 20% raise six months after being hired. That is, frankly, a ridiculous proposition.
2. Your conclusion is spot on. I've never seen this kind of agreement actually work: it's almost always FUD. If they're not willing to put it in an offer letter, it's not real.
After 6/7 months I went to talk to one of the founders about that specific issue, i.e. that I was promised a raise, and that I wasn't expecting anything below 20%. I came to know during the time that I work there that was being paid well below my coworkers (and the market rate in general for my position).
Their response was that I would only get raised on the next company review (still some months to go, but note that I was promised a raise after 6 months), the raise would be around 2%-3% (note that I said to them, quite direct, that I was being underpaid, at least 20%), and the project manager even said that I would be subjected to a performance review before they would give me a raise.
So they failed me at least with 3 things: no raise after 6 months as agreed (still some months to next review), would not raise me enough so I would still be underpaid, and I could even not get raised because I would have to be reviewed first..
Basically, I quit on the next working day, and one or two months later, most of the team got laid off, so there was bigger problems on that specific company..
I can't imagine the majority of managers fixing it and I can't imagine an employee doing anything other than finding a new job. Everyone loses this one.
If they aren't willing to put it on paper, it doesn't exist.
> My conclusion: never accept verbal agreements again.
Was the verbal agreement not honored? 2-3% after 6 months is not nothing.
I got 60k raise over 2 years because I pushed for it.
Which was probably an honest statement. Raises were centrally managed by 'Human Capital Management', and individual supervisors had pretty much zero say in the size of their employees raises.
As it happened, my departure was ill-timed (for them) and I'm pretty sure it cost them far more than it would have to just give me a decent frickin' raise (seriously, 3-5% and I would have stayed).
Money is not a good motivator for one's involvement in work. But it's a decisive factor to choose a work place because it's a limited and required resource.
E.g. person A generally wants to be happy in their job, but needs $100k to maintain their lifestyle, pay the mortgage, not worry about bills etc. If paid $100k they wouldn't jump ship.
Later, person A has a baby. Well guess what happens next.
Person B also wants to be happy in their job, but they also want to invest in stocks for an early retirement. They get an offer at a stressful trading job paying 3 times their current salary. They think it is worth it in the short term so they go for it.
Money isn't a motivator for doing better work. Once people are being paid 'enough', the studies showed increasing pay lowered performance.
The part they didn't mention is that money is a major factor in choosing who you do the work for. Of course you are going to haemorrhage employees if they get a much better deal to do the same job for someone else.
Companies that pay more will get to pick the best people from the talent pool, who may perform worse due to being overpaid, but the company still comes out on top because underperforming top tier employees still perform better than the remainders working for a 'standard' salary. And thus wages are driven up in industries where talent is at a premium.
0. A caveat about the "studies" is that they typically start with workers who are already receiving market compensation. That little bit is always left out during the seminars. At the factory where I once worked, unskilled workers quit over a $0.25 per hour raise offered by a nearby factory.
1. Most HR personnel have psychology degrees, so they are trained to believe that people are motivated by psychology. Imagine if HR people all had economics degrees. For me, treating my fellow workers as homo economicus is a sign of respect, because as engineers we are paid to make rational economic decisions.
2. It's a bargaining strategy, intended to attach a social stigma to people who demand more money, and to make the money game more stressful for people by making you feel like an oddball. This is also why people are discouraged from discussing salary from one another -- divide and conquer.
3. They are also bargaining with their managers, i.e., telling me as a manager that I shouldn't ask to pay my people more -- divide and conquer.
4. Yet... I looked around and the managers who had the highest regard and most power in the department, were coincidentally also taking care of their people with promotions within the ranks (e.g., from junior to middle to senior), meaning that they played the salary game differently than what HR told us. In addition, because salary budgets for the work site are relatively inflexible, it's kind of a zero sum game, and more money for their employees meant less money for mine. I was competing with the other managers for salary budget.
5. I decided to compete hard. I somehow convinced my higher-up that my people were "special" and thus immune from stack ranking. This eliminated the zero percent raise in my group. I got one engineer a nice raise. I promoted two others, making them equal to me in rank. In practical terms, a promotion in between annual review cycles was a way to give someone a raise, since the money came out of a different pot. This kind of thing worked for a few years, then I started to run out of luck, and stopped being a manager.
The people who I took care of are now some of the most valued and loyal employees.
Or did they quit because they increasingly felt they've become stuck, left behind and not valued highly by their employer?
I went from a local company with overseas offices paying poorly for my niche into an international company paying nearly double without even flinching at negotiation. That was eye opening to me as a signed up 'what matters is autonomy, mastery and purpose' guy. Not only that but the company matched salary raises to a local unions pay negotiations which meant that my until then roughly cost of living raises suddenly doubled. I also ended up getting an annual bonus bigger than I was contractually entitled too as well. All in I more than doubled my salary which let me do things like rebuild our family home.
I realised that not only did I feel my work wasn't recognised at the previous company but they were actively taking the piss. I also realised that whilst I didn't do anything I did for the money reward (I genuinely felt this bonus scheme would have been as worthless as others) the actual monetary demonstration of value in raises and other rewards really makes your value apparent in a manner very meaningful to the rest of your life.
I still think the competition for bonuses and raises can lead to all sorts of degenerate behaviour from the POV of the business and stress on an employee but I really see the absolute value of monetary rewards now when they appear out of your expectations.
And yet I'd bet that money does have a significant correlation with retention and satisfaction. Perception of insufficient raises will certainly lead to dissatisfaction. Offer of meaningfully more money at a different job --> who wouldn't want that if the work is otherwise as good?
So in other words, productivity != retention.
Like, you might still make less money than you would elsewhere, but if your employer at least makes an effort, people are much happier.
An employee that feels as though they are not valued by the company or feel as though they company does not feel that their contributions are valuable will probably see their job as insecure and will look for better opportunities.
Classic example of telling stories that the audience wants to hear?
WHAT management consultant will tell CEOs that they need to pay their employees high enough salary to the point that they won't leave for another company?
Don't mean to be a cynic, but it's all about money.
If you treat people well on multiple dimensions, you can underpay them relative to their value.
Also made me think of the Netflix HR/culture document [1] - pay the max you would be counter-offering for an employee right off the bat, don't wait unitl you actually have to give a counter offer (which would probably be too late anyway)
It's a good way to get great people, if you can afford it.
The policy doesn't seem to be working for their UI team either.
The real question is how many times do people fall into that tricky edge case vs. how often is there a fairly clearly case for a termination?
At my current job I accepted knowing I was going to be leaving at 2 years on the dot. I told the manager hiring me this verbatim. For the first time when I leave a job I will be able to simply say "Well this is what you agreed to when I joined."
Perfect example of cutting of your nose to spite your face IMO.
A bit of experience, a bit of pedigree, a bit of pay bump, and a good job while it lasts.
I'm not going to stop switching until people stop offering me 30% raises. Once equilibrium is reached I'll start evaluating them on merits, but the jobs that pay better have also been better in all dimensions. At least that was how it has gone during my career progression.
In many companies (I worked in one) you need to get CEO approval to give somebody raise more than 5% ("CEO approval" means - no way). But there was a trick: you can re-hire valuable employees after a year with 20% to 50% increase in salary. And they will not even lose 401k matching or other benefits they have accumulated.
And system seems to work well: re-hired employee would be much more experienced and they came back like nothing happen.
So I do not know...
Maybe CEO approval just means the company is belt-tightening.
I'm in that position now. If a PM who I highly respect leaves I'll probably leave as well because I wouldn't want to deal with the stuff he protects us from. I also wouldn't want to abandon this guy, so I probably won't leave as long as he is here.
In retrospect, I should have left way earlier. I urge you to consider whether, by staying, you are just enabling the sort of disfunction you dislike :)
Camaraderie is great and if there is actual friendship/respect then the relationship will continue even after you quit.
I can attest to this. Half my team has left over the past year, the other half all seem to be (and talking about) actively looking. We all still manage to get a poker night together every few months, as well as having a quite lively group text chat.
Employees, Bersin explains, are appreciating assets that produce more and
more value to the organization over time, which helps explain why losing
them is so costly.
I think when you see the entire world ignoring your wisdom, you probably need to question the wisdom.
Yes! But this is difficult. But beyond the easily computable costs (e.g., $x that the company spends on recruiting / total number of people recruited per year) there are significant costs that involve a lot of assumptions to quantify (e.g., effect of drop in team spirits). Those estimates often get discounted by bean counters exactly because they are based on some personal guesses.
In general I find the article somewhat disappointing: it refers to the need to quantify the cost of turnover and IMO does little to help people get defensible estimates. On the other hand it goes on (and on) on why it is important to keep employees. No contention, but I thought the goal was to get to this conclusion by independent, numerical means.
Raises are subjective judgements, which are scary things. Word gets out that raises were given and everyone is looking for something. Also, HR often doesn't trust the managers. Is the manager rewarding good work? Or building an empire?
Incentives are always aligned with short term goals. If you give someone a raise, you're fucking up some KPI the HR guys cares about. If an employee quits and the company spends more, its either the former employee or the manager fault.
There is little industry agreement on what titles mean (SR engineer, for example isn't universally the same job).
And...both sides are incented to either over or under state market rate.
Fundamentally, you are worth whatever someone will pay you. If you can negotiate an offer for 20% over market rate, congrats, that's your personal market value. Conversely, if you're currently paid 20% under market value and can't find another job, the same applies.
Rinse and repeat, and the cycle gets shorter, and the problems get bigger
So view market-rate compensation simply as table stakes, and spend your energy focused on the next level of Maslow’s hierarchy of employee happiness: opportunities for growth, the ability to have impact towards a purpose, and a caring environment that makes them feel valued.
Managers seem to think that just because they say something their employees believe it when the reality is the employee doesn't care and will just replace the faulty manager.
So I think the only good source of market rate is people (either candidates or current employees asking for counteroffers), and if you're poor at being competitive for recruits on all axes other than money, or at making it safe for employees to interview and tell you about their offers, you have poor information.
That hardest part is figuring out which generic categories match our specific positions, since every company in the survey has different definitions and requirements.
Our employees seem pretty happy with the results, and we've had very few offers rejected for salary range reasons. So it seems like we're pretty close. If anything, we're probably a bit above our local market.
I used to work for a company that used their data. The reports they provided did not have any technical positions included. There was no transparency on their process.
Comparing those numbers to the Bureau of Labor Statistics, the salaries for anyone doing technical work were below market rate. https://www.bls.gov/bls/blswage.htm
BLS data is transparently provided and very specific.
I worked at a place which got the salary data, and then announce that everyone was underpaid and that salaries would be adjusted 'soon'. When is 'soon'? Why, it's inaudible mumbling.
Managers not MBAs is a good book that summarizes the problems with the current management culture.
Basically, by having a class of people who have never done the grunt work of a particular job, you ruin what the Army calls "Unit Cohesion".
The UK was no different to the US.
Does anybody have links to these studies? The under-compensation seems to be in wide agreement but I am curious as to what studies have been conducted that show that the preferred points (Growth, Impact, Care) are preferred over higher compensation.
> By the time it gets to a counter-offer stage,
> it's often too late.
Truth be told, HR/managers are people like everybody else: when things go smoothly, they don't proactively analyze if somebody is unhappy (but they're not showing it right now). However, I think this should be a part of their job.
HR/management really can borrow some wisdom from us the programmers: we not only ask why something isn't working, we also ask why something is working. They should adopt similar approach and never get too comfortable and automatically assume people are the happiest they can be simply because they are quiet.
Nowhere was this more apparent than at my first big job. The company's first full time engineer was still working there, and still extremely essential to the operation of the business. (It was actually bad that he was so essential, but that's another story). This company made several hundred million dollars a year. Online. And almost daily this individual used their tribal and historical knowledge to keep the site up. He left. I doubt he was paid a million dollars, but I have no doubt that paying a million dollars to keep him around would have been a cost saving measure.
There was an article a few years ago about a Google employee. Competitor interviewed, offered what they thought was a great package around 500k, found out candidate was making 3mil at Google. Failure on the recruiter part not getting that info beforehand, but can understand more senior folks not discussing till the end.
Meanwhile, I had to sit through an all hands meeting where some dingy broad got a 5 figure award for cooking up an Access database that some asshat manager used for like a week!
Franz Kafka could not dream this up!
Just praise people in private, actually trust them and listen to them and reward them accordingly comes compensation time.
This sounds like every tech company ever. I used to excitedly watch youtube videos about the extreme measures startups took to scale to "massive" amounts of traffic while undergoing huge growth spurts.
Now I just kind of roll my eyes and think "Yeah, obviously a message bus in a relational databse using rails wasn't the optimal solution for scaling that app".
In the real world emergencies happen. The unexpected happens. But the truth is that if you actually prepare and have been around the block once or twice, they don't happen all that often. And when they do, there's usually a handy little knob to ameliorate the issue.
Public announcements of awards and raises, hell no.
Employees aren't worth the market value of their job title on the open market. They are worth the cost of replacing their contributions to the company's bottom line plus any gap in contribution that the market is unable to replace. Often early employees (regardless of objective skill level) hold tremendous non-commodity value to fast growing companies. It is ultimately very costly behavior to think of these employees as commodities.
[late note: the bottom line oriented valuation method that I outline, can of course be negative. If we take the gp's assertions as given, then the employee in question is clearly worth more to the firm than his/her 'commodity' price on the market. But it is possible for the commodity value to be higher than the value of a given employee, even once the transactional turnover costs are taken into account. In such cases, it may be preferable to allow the employee to seek his/her fortunes elsewhere. I note this to make it clear that this sort of valuation model doesn't unduly bias the firm toward retaining low or negative producing employees. By the same token, it frees the firm to recognize value in excess of 'replacement value', as any reasonable worker productivity model should]
Despite being able to show I could get paid much more at a tech-company, my company will not pay me more. However, you are claiming that the opposite is also true. You are not paid based on the value you can provide to an organization, but based on how much you COULD provide to other organizations.
So I think you are wrong. These are all just attempts to justify why companies are averse to highly paid employees, but will happily spend 10x a key employee's salary on a new machine or on a month worth of consultants.
And yes, they are just coders. Coders are bad at negotiating, they're bad at politics, they're missing out on earning ALL of their labor.
What has yet to percolate into the consciousness of a lot of managers is that "web delivered" products are essentially constantly drawing on the engineers who keep them running and available. When they do, they will be able to more accurately assess revenue at risk based on personnel and losing valuable people will become a good reason to let a manager go.
For one thing, you can’t just measure what a developer has done; you need some sense of how easy maintenance is going to be. Given two brilliant solutions that required an extraordinary developer to create, one may be an indecipherable mess and the other may have been built in a way that makes typical maintenance tasks very straightforward. From the outside they may look the same but the cost difference is huge.
Some people are really good at writing solid code, and replacing them may mean introducing headaches that you didn’t have before. Also, a particularly weird bug may cost your team tremendous amounts of time (and possibly more), and you may not have the right people to deal with that quickly.
Also, “cost of hiring” probably isn’t referring to the cost of having a really bad hiring staff. If those people are not doing a good job of filtering résumés or otherwise finding the right people, or if they leave good candidates dying on the vine due to slow response times, there is a big cost. It is extremely important for companies to look good from the outside to attract candidates.
The first point, about keeping people who write maintainable code, I agree with 100%.
The second one, about keeping codebase expertise, seems complicated.
On one hand, we all know there are weird bugs and edge cases best handled by knowing the code intimately. What's 20 hours of QA and engineering for an unfamiliar team can be a 5 minute tweak for the guy who wrote the method, even with clear code and good tests. Weird bugs do happen, and just knowing that what it isn't can help with finding some awful probabilistic issue.
On the other hand, I wonder if this is a "controlled burn" kind of issue. Everyone's heard of systems that work fine for 20 years and then explode as soon as the expert leaves. Normally that's a design and maintainability issue, but at some level we're talking about bus factor here. You're definitely trading fewer crises for worse crises, but I don't know the rate on the tradeoff.
Obviously unplanned turnover is still a huge issue, but I do wonder what the right balance is on "just knows how to fix it" versus "institutional knowledge is safer than personal".
It's important to remember that specify specific exit criteria, like "it should take one command instead of fifteen to add a new request to the XYZ endpoint."
There's good turnover and bad turnover.
Maybe there is something to be said for preventing people from getting too comfortable, or even establish trust relationships outside of the designated bureaucratic channels.
I have a theory that a lot of the terrible mismanagement we see with modern American corporations comes directly from HR. Didn't W. Edwards Deming say that companies would be better off just eliminating their HR departments altogether?
They may not have been thought of that way, but I've very much seen them treated that way.
Pressed on all sides, dealing with unreasonable demands from above, and with internal competitors and naysayers to fight off, even the most enlightened manager may sometimes behave in ways that treat people as easily replaceable.
Even if intellectually they know they aren't.
This is in stark contrast to when I was consulting in LA/OC, where I was constantly having to justify my not so high hourly rates/fixed bid projects.
If people really had such a great preference for mission over compensation, then the public sector, and non-profits could be 'selective'. I mean, the public and non-profit sector usually don't even have to do bullshit PR vanity projects (cough Microsoft-Google-Facebook-Amazon-Exxon-GE-BP) to convince people that they are not evil on balance. Still, it's the massively profitable companies that have the luxury of selectivity, not the ones with the best missions.
Like so much in 'management methodology' literature, there is such a willingness in this article to prefer anything (like small ungeneralizeable psychology studies[1]) that confirm clearly absurd magical beliefs (e.g. there are easy cheap scalable alternatives to compensation for retaining employees) that it is impossible to take the advice therein remotely seriously.
[1] that are being misinterpreted, to boot
[edit: added the footnote, grammar]
There are people who have been "let go" because their manager had no idea what they actually did, and that caused a huge impact on the organization overall. There are people who have been "retained" because their manager felt they were key to the success of the group/project but didn't realize the toxic impact they were having on the organization.
These are the "inverted" cases where you really need to keep the person having high impact and manage out or move the person who is creating stress on the rest of the team.
Look at Costco compared with Sam's Club. You can see the difference since Costco employees tend to stay longer there.
>The $5-a-day rate was about half pay and half bonus. The bonus came with character requirements and was enforced by the Socialization Organization. This was a committee that would visit the employees' homes to ensure that they were doing things the "American way." They were supposed to avoid social ills such as gambling and drinking. They were to learn English, and many (primarily the recent immigrants) had to attend classes to become "Americanized." Women were not eligible for the bonus unless they were single and supporting the family. Also, men were not eligible if their wives worked outside the home.
http://www.forbes.com/sites/timworstall/2012/03/04/the-story...
I wasn't trying to argue that the optimal amount to spend on employee turnover is infinite, but I do think most companies dedicate less than the rational/optimal amount of effort on it.
Assume that the company loses 10 employees and loses $1.57M as a result.
This means that it would be better off if it spent less than $157k on each employee, on the average, to prevent the loss.
$157k is a yearly salary of a senior developer, or maybe the entire yearly cost of a senior employee outside the hotbeds like SV or NYC.
We can cautiously suppose that a company could retain the employees with measures less drastic than paying them twice as much for a year. OTOH paying them +20% for 5 years would be the same. So, if they can keep hiring cheaper developers, even while losing productivity due to onboarding issues, maybe they can actually save money!
Recruiting costs are typically worth several years of 10%+ raises.
It sure would be nice to have some case studies, perhaps? Has anyone worked at a place that tried to calculate required onboarding costs for high-skill, salaried positions? I've only ever seen places just create random budgets for online programs like Linda.com, but these programs never seemed relevant to the positions that, well, were the most significant to the company, to put it nicely.
I just suspect unless you had a quant in an HR department, this sort of thing just will never get calculated correctly.
Now, is the world full of rational employers? Nope.
By far the biggest cost to software companies is employee turnover because the second greatest cost is employee education and training. We've measured developer productivity in multiple ways and time to full productivity within any new team/project generally is 3-6 months. Average empployment time at any single company in the tech industry is now 18-24 months. It makes more sense to pay 3-4x for most work, rather than have to deal with HR, education, and retention overhead.
But you are missing the point. The idea is to have a small core of highly skilled devs who can chop complex tasks/systems into bite sized chunks that can be outsourced.
I've seen it work, but it's very difficult to pull off. I've seen it fail more often.
The devs who are ok with this have no idea how bad this will bite them later when they're older and nobody wants to employ them. Hope y'all are good at saving money.
Tech, for better or worse, is moving so fast that working on the same codebase for 5+ years is likely to greatly reduce your marketability for a new job. While that loyal individual may have been very valuable to his former employer, much of what he learned/specialized in is specific to that company and provides little value to someone else.
One can always blame the individual for not spending his free time staying current, but not everyone is at the life stage where they have the ability/energy to end a 10 hour day at work by coming home and spending another few hours coding.
Personally, I agree with you someone with a string of 18 month jobs would put me off as an employer. However, if you find yourself stagnating in your job, you must move on.
A remarkable number of these are people who have taken full time jobs and moved on soon after. The only thing that results in is the resume going in the trash.
I'm kind of in this position. My first job out of university was a 3 month contract, then I had a 9 month "permanent" position which ended when they closed the office, then two back to back contracts at the same place spanning 12 months, and now another permanent position which I am 6 months into. Before this most recent position I had the most interest of potential employers to date.
I suspect you are right in one sense - as you get further into your career the length of time you stay in positions should be longer, or you should move into contracting. I certainly plan on staying at my current position for at least 24 months. But I feel like 5 and 10 year tenures will start to be the exception rather than the norm.
projects or operations with fragmented continuity because of turnover contribute near zero additional value and existing value decays quickly over time - each time a role is replaced more knowledge is lost - to the point the project is permanently on life support
paying people more and more to stay isn't enough - you also have to remove all the oxygen stealing layers of bureaucracy to create a bearable working environment - but that isn't usually possible in an enterprise as everyone senior tries to avoid being responsible for anything which almost always leads to more management and compliance layers until someone soils the bed over cost
I take my hat off to Microsoft over the last couple of years - what those guys (Scott Guthrie?) have done with .NET, SQL etc. appears, from the outside, to have reversed that trend
I got several job offers in the new city including one from the same company. Problem was...the company was 20% lower than the best of my other offers! Apparently there was a company policy limiting how much of a raise could be given, so they straight-up couldn't compete. I got the distinct impression that I could have taken a job with another company, then come back 6-12 months later and gotten a much higher offer. Basically mandated turnover. Talk about an awful policy.
1) Money is a factor because my job is difficult.
2) Up to date technology is important because I want to build interesting products.
As a developer, these are my motivations.
Also, it makes it possible to get to the point where you are retaining people for 2+ years. If there is a lot of turnover under that then it's probably the companies fault.
From my experiences, those in tech for the most part have come from the tech community and stayed in the tech community. Employee mobility is creates a mixture of ideas and also lets individuals to be trained in certain disciplines by those that are most capable at it. In return, companies get employees that were well trained by other companies thus increasing the value of tech companies as a whole. I wonder if this becomes a trend and companies try to close their borders tighter (somewhat reminiscent of U.S. politics right now, huh?) that companies will see short term gains, while the entire industry would suffer in the long run.
It would've been interesting to see this addressed. In some particularly bad cases, organizations atrophy and lose the ability to respond well.
Since a lot of tech companies employ young talent (relative to other industries), this video by Simon Sinek on "Millennials in the Workplace" can be enlightening:
https://www.youtube.com/watch?v=hER0Qp6QJNU
Forewarning, he goes off the deep end on a few points, but IMO the general ideas are valid.
Over the last few centuries, power gradually shifted to the firm, then to markets, and now finally to individuals. Used to be, you had to pick the right parents, pick the right industry, and hope the political winds don't shift against you to earn a decent, livable life.
Now, all you need is intelligence and mental fluidity to weather hardships. No longer is a job loss catastrophic. Just about anyone born in a Western nation can, if he decides to, gain an education and make his way up the social ladder.
This is completely unprecedented from a historical perspective. The ability of the not-well-off to earn and enjoy the benefits of education was far and away only the province of the extremely gifted, the John Rockefellers of the world. It's easier than ever for someone born dirt-poor to become a CEO or politician.
Soon the world will turn completely on merit. It'll be fascinating to watch the way our societies go next. Certainly affluence will continue to push out into the developing world. But how will modern Western societies evolve? Will we conquer aging and produce scions of unimaginable ability? Death is the ultimate limiter of the power of individuals.
What Western nation do you live in?
Because in the Western nation I live in, both job loss and education can be catastrophic for many people.
There's quite a few people that you don't know then. The median personal income in the US is $30,240 for all workers over age 15 with income.
That means half of all working people in the US have less than $30k a year in income. What percentage of your "know many people" sample make less than that?
There is very few "no-strings attached free government money" for people living below poverty.
This still only applies to people who have picked the right parents and the right industry.
I get that the historical trend is toward social mobility and equality, but "all you have to do is decide to succeed" is still an idealistic cliche, and probably always will be.
My money is on general AI and widespread sustainable fusion reactors before that happens. The crab mentality is strong, and those who can merely talk a good game will do their best to maintain the status quo.
You weather hardships with money. What's with this four-minute-man talk?
lol
- Salary is VERY important for most engineers - most of us are making incomes where making a little more money might be important. That said, consider the incentives that drive the decision makers (managers) who decide on salaries. The managers who say "Yes we can keep these people but no we don't have to pay them more" are much more likely to succeed than the ones who say "I need more money for the same headcount". Unless you've put serious institutional capital in the bank in the form of previous success, you won't win this argument with higher management. (By the way, I agree with the general premise that turnover is really expensive and most companies, including their upper management, don't take it seriously).
- I think that this is another example of the "Hard to measure, easy to measure" divide in otherwise scientific management that defines most companies today. It is easy to measure salary. In fact, you are usually required to report it in most accounting schemes. Measuring cost of employee acquisition is easy for some parts only. On-boarding and training costs can be relatively well quantified. But what about lost productivity? What about lost innovation? Trying to measure "what isn't there" has never been easy. Managers will make decisions based on the hard data at hand. There is almost never enough hard data to justify greatly increasing their salary, and most managers won't go out on a limb (lacking hard data) to try and justify this. I can't say I'd do differently in their situation...
Anthropologists don't commonly live in mud huts, that's just a prejudice.
Where the heck did that come from. I'm well aware of cultural anthropology and have worked with a couple on academic grants. I just think those more familiar with oral tradition of tribes would have an amazing time in a software company.
Also, just for your information, not all tribes live in mud huts, that's just a prejudice.
This spoke to me the most as I've seen this happen at multiple places. lack of growth seems to be the most common reasons for employees leaving (apart from stagnating salaries) and that's something a company can easily invest in
Does a work-to-live kind of person become a live-to-work kind of person if his workplace is genuinely happy? Does he forgo attempting to find happiness at work because he doesn't have the expectation of finding it, thus being more likely to accept poor work conditions in exchange for higher salary?
Interesting questions.
In the article's examples, I took the author's position as describing the situations concerning positive-value employees, not negative-value ones.
A surprise case study here should be Amazon which has turned this wisdom upside down on its head. There have been rumors of 40% to as much as 70% churn at Amazon and despite of that company thrives.
Considering this is a medium opinion piece, which are essentially blogs, you very well could.
Medium is just a place where people go to say stuff, and should be valued accordingly.