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> Your company is profitable but has slow organic growth in revenue/profit (single or low double digits).

> Since salaries (especially in the tech sector) are rising much faster per year than your growth or inflation for that matter, you must pay much more to the new hires.

> In the current artificially inflated tech market (thanks to easy money),

By some accident engineers have offered their time to this business which is unable to put their efforts to good economic use, and hence unable to pay market-competitive salaries. The management at this firm needs to think hard if they really need expensive skills as inputs, and if they do, why are the returns so meager.

Or to put it in other words: perhaps there is a market for better tools that would allow less skilled people (or just less people) to produce the same outputs

That's pretty much always true. Actually making those better tools turns out to be a hard problem.

Also don't underestimate how hard it is to sell otherwise good tools

That's not a complete rephrasing. It's possible the current designs and processes cannot accommodate more productivity but the relevant market segment is fine. I expect there are multiple contributors to the problem. I'd avoid explaining it all away with a single cause, even one as compelling as "let's figure out how to throw more brains at the problem".

Sure, I have no idea about the specific company cited; but I do think that most of the effort spent by most of software developers in most of the companies is wasted on details that are not manifest to people who don't have direct experience with the job on a daily basis (either as working developers or by people managing them). The farther up and out you go, the easier is it to underappreciated the rabbit hole that software development is, and thus to underestimate the costs. And to, once realizing that, still be baffled at how it is possible that "just doing this little thing was really supposed to cost that much?". Many just don't invest the "right" amount of resources, judging that there is something wrong with all that, that we're either subject to an overinflated salary bubble or something else.

I grant you the point, that you need capable Management

However, your advise is not very actionable, given that the current market is one hot bubble, where investments and valuation is not longer based on market fundamentals, see [1].

https://news.ycombinator.com/item?id=26478875

This is where equity becomes important.

If you're a company hiring engineers but can't offer a 'market rate' or find that people aren't accepting offers because the compensation is too low, your other bargining chip is to offer equity.

Maybe its .1%, .05%, .2% or even .5%.

Why can't these growing businesses that are profitable offer equity to their employees? Equity aligns incentives. If the buisness is growing and profitable the equity is valueable (and should grow in value!) as well. Even if the company remains private, there are mechanisms for trading shares of a private company.

Companies don't need to raise salaries by 20% for everyone every year. They do need to be open to making adjustments as needed. Especially if they care about retention. Otherwise they'll end up spending far more than that 20% increase on turnover, hiring costs, and onboarding costs. Which will only leave them at the same capacity as before.

The new hire will likely also be asking for a higher salary since the market will have appreciated anyway.

If you happen to know of a place though that offers 20% raises each year I'm all ears!

Companies growing gross profits more slowly than the tech market comp is growing will shrink tech market headcount in the long-run. It seems entirely inevitable that if someone else has a use for an engineer that allows them to pay $X while your use only allows you to pay $0.85X, and that difference is enduring and increasing, that you won’t have much tech talent in the medium term.

The market for tech wages is the market. You might get a couple years of loyalty or inertia out of current employees, but if you don’t (whether won’t or can’t), pay compensation needed to land too talent, you won’t have it.