4 ms·

> $9,000 a year to keep each disengaged worker and between $25,000 and $100,000 to replace them. Given how job tenure has plummeted over the years, I have a h

> $9,000 a year to keep each disengaged worker and between $25,000 and $100,000 to replace them. Given how job tenure has plummeted over the years, I have a hard time believing this is accurate. Does anyone know a place where retention efforts come anywhere close to hiring efforts?

cratermoon 5y ago
> I have a hard time believing this is accurate How does that follow? It certainly seems that spending $9K/year or less compared to coughing up 3 to 10 times that to hire proves that attention to retention is nowhere near that given to hiring.
- MattGaiser 5y ago
  But if it were accurate, wouldn't companies spend more effort on retention and engagement over hiring? This is a data point that I have seen claimed for years and years and yet companies don't act on it. Companies are either making a near universal error that has been well publicized at this point or the number is wrong and hiring is nowhere near that expensive. Amazon is a very data driven company. But they have no problem churning through people like crazy. They are a company with hire to fire, so if hiring an SDE cost $50,000, they are letting managers spend 50K to fiddle with attrition stats.
  - amanaplanacanal 5y ago
    But those numbers are averages, my case is special because of X, Y, and Z. I’m sure every manager can rationalize this away.
    - mrguyorama 5y ago
      Indeed, plenty of employees also tend to make this error. They'll fight against unions because "I can bargain better than a conglomerate of employees could"
  - lostcolony 5y ago
    It's an average, not a universal. Confronted with the data, you COULD choose to increase engagement, or look to reduce cost of churn. Amazon delays equity a lot, so it may look financially sensible to churn through people. Beyond that though, companies make plenty of universal errors. Can you think of any other errors the -average- company makes, that may cost them money?
    - MattGaiser 5y ago
      I can think of plenty of companies that do plenty of things wrong, or at least seem to be wrong. I can't think of many things virtually all of them do wrong, especially ones that are so well publicized and are at the organizational level rather than the individual team level. I can see equity being a reason for Amazon, but it is hardly just equity granting companies that are this way.
      - lostcolony 5y ago
        You call it out yourself; it may not even be "the company" is seeing much change in retention, but different parts of the org are. Others have solid retention. But retention also isn't an easy metric to solve for. It's not "just do X and watch that number improve". The closest thing companies do is throw money at people, but that only works if you're so far higher than the rest of the market that people are looking at a massive paycut if they go somewhere else, and that still is only one data point affecting those averages. Certainly, no company that I left could have kept me by throwing $9k more at me; I made more than that with every company change I made, let alone what actually caused me to start looking in the first place.
  - danaris 5y ago
    > But if it were accurate, wouldn't companies spend more effort on retention and engagement over hiring? Retention and engagement are hard, complicated problems. The mindset that employees are interchangeable cogs with no real needs of their own—particularly psychological needs that have anything to do with the workplace—is still a very strong one in every sector of the American workplace. Even for those companies where management, as a whole, does genuinely understand that it benefits everyone to have engaged employees, if you ask 10 people "how do you keep employees engaged?" you'll get 12 different answers. We're still just a few steps away from tenant farmers, sweatshops, and company towns. The fact that there's research that shows spending on retention is massively more effective than spending on hiring will take generations more to actually catch on amongst the American executive class...unless we can manage to pull together a serious union renaissance and demand the better conditions that will actually help everyone.
  - s3r3nity 5y ago
    A few things: 1) Just like in Sales, on average it is cheaper _and_ marginally more profitable to retain an employee than to recruit a new one. This includes cost to recruit, interview, onboard, etc. 2) The exceptions here that throw off the average are those companies with strong inbound hiring pipelines (ex: Amazon will never have a shortage of applicants) that reduce the costs of recruiting + interviewing, and retaining high performers (e.g.: the cost of losing an upper-decile performer is much more significant.)
  - cratermoon 5y ago
    That goes back to how different costs are accounted for in the corporate world, how they appear on the bottom line, and how they affect valuation and the stock price. I don't pretend to understand corporate account practices, but generally, look at what's considered an asset, what's considered a liability, and what sort of costs can be amortized and or taken as a tax credit. I imagine that if there was a law that said companies could write off half or more what they spend on employee retention and development, you'd see Amazon and others put a lot more money that direction.
hinkley 5y ago
I remember when it was all the rage to point out how the CEO to build up a company might not be the best choice to keep it working smoothly once it begins to see the limits of growth. Maybe this is true of everyone and simply less documented. Silicon Valley has hijacked “disruption” but in many ways the old definition still applies to the same people. Tom was a disruptive influence so when he demanded a raise we let him go instead.
Mikeb85 5y ago
For employers it's game theory. If employees are commodities then it's better to keep the pay structure and have X amount of attrition than to pay everyone more to keep attrition low.
- MattGaiser 5y ago
  But if employees are commodities and companies can get away with thinking that way, that number is either inaccurate or everyone is getting it wrong.
  - Mikeb85 5y ago
    I mean, I'm not these companies and I don't know the exact formula, but you'd be looking at things like the attrition rate, the cost of hiring, the cost of raises but also the value of wages across the whole market. There's some low-key collusion going on for sure (not necessarily outright collusion although some firms have been caught doing that too, but multiple firms all employing the same strategy keeps wages low for everyone). Now obviously developers do have enough leverage that they earn more than many professions, but it's obvious that many are under-valued. If it truly were more expensive to hire than to give raises, more firms would be giving raises.
    - nine_zeros 5y ago
      > If it truly were more expensive to hire than to give raises, more firms would be giving raises. I don't disagree but the real world is more complex. Recruiting is an entire department in most companies that have a vested interest in hiring from outside. They will pull all strings to keep getting money for hiring. Corporate structures are really inefficient
- planet-and-halo 5y ago
  I think I finally figured part of this out. Like you said, employers treat workers as commodities. This worked out great for them in the short term, as they saved money by not giving raises etc. In the long term, though, workers started realizing they often had to go back to the market to get meaningful pay raises. Now you have a situation where workers are switching as often as every 12-24 months, and the thing not previously accounted for is onboarding costs. In a situation where workers stay an average of 5 years, let's say they take a year to become net productive, you're losing about 20% of their time as an investment for 80% payoff. Now, though, that static year of onboarding costs accounts for 50-65% of their entire tenure. That's a huge swing against companies, who are suddenly realizing retention might be a problem. So the economic/management theory that everyone is just an interchangeable commodity is running up against the wall of reality, where second-order effects have taken over and destroyed a bunch of business value that could be captured in a more stable environment. There's an additional problem that firms are caught in a game theoretic trap. If you're the only firm providing stability, your investments in that in the short term might make you less competitive on pay, which means you'll train up people who might leave seeing higher pay elsewhere. So stability investments might be rational in the long term, but because of market conditions you get killed in the short term, and you end up tempted to abandon your strategy after a few bad quarters where it looks like they aren't paying off.

cratermoon 5y ago

> I have a hard time believing this is accurate How does that follow? It certainly seems that spending $9K/year or less compared to coughing up 3 to 10 times that to hire proves that attention to retention is nowhere near that given to hiring.

MattGaiser 5y ago
But if it were accurate, wouldn't companies spend more effort on retention and engagement over hiring? This is a data point that I have seen claimed for years and years and yet companies don't act on it. Companies are either making a near universal error that has been well publicized at this point or the number is wrong and hiring is nowhere near that expensive. Amazon is a very data driven company. But they have no problem churning through people like crazy. They are a company with hire to fire, so if hiring an SDE cost $50,000, they are letting managers spend 50K to fiddle with attrition stats.
- amanaplanacanal 5y ago
  But those numbers are averages, my case is special because of X, Y, and Z. I’m sure every manager can rationalize this away.
  - mrguyorama 5y ago
    Indeed, plenty of employees also tend to make this error. They'll fight against unions because "I can bargain better than a conglomerate of employees could"
- lostcolony 5y ago
  It's an average, not a universal. Confronted with the data, you COULD choose to increase engagement, or look to reduce cost of churn. Amazon delays equity a lot, so it may look financially sensible to churn through people. Beyond that though, companies make plenty of universal errors. Can you think of any other errors the -average- company makes, that may cost them money?
  - MattGaiser 5y ago
    I can think of plenty of companies that do plenty of things wrong, or at least seem to be wrong. I can't think of many things virtually all of them do wrong, especially ones that are so well publicized and are at the organizational level rather than the individual team level. I can see equity being a reason for Amazon, but it is hardly just equity granting companies that are this way.
    - lostcolony 5y ago
      You call it out yourself; it may not even be "the company" is seeing much change in retention, but different parts of the org are. Others have solid retention. But retention also isn't an easy metric to solve for. It's not "just do X and watch that number improve". The closest thing companies do is throw money at people, but that only works if you're so far higher than the rest of the market that people are looking at a massive paycut if they go somewhere else, and that still is only one data point affecting those averages. Certainly, no company that I left could have kept me by throwing $9k more at me; I made more than that with every company change I made, let alone what actually caused me to start looking in the first place.
- danaris 5y ago
  > But if it were accurate, wouldn't companies spend more effort on retention and engagement over hiring? Retention and engagement are hard, complicated problems. The mindset that employees are interchangeable cogs with no real needs of their own—particularly psychological needs that have anything to do with the workplace—is still a very strong one in every sector of the American workplace. Even for those companies where management, as a whole, does genuinely understand that it benefits everyone to have engaged employees, if you ask 10 people "how do you keep employees engaged?" you'll get 12 different answers. We're still just a few steps away from tenant farmers, sweatshops, and company towns. The fact that there's research that shows spending on retention is massively more effective than spending on hiring will take generations more to actually catch on amongst the American executive class...unless we can manage to pull together a serious union renaissance and demand the better conditions that will actually help everyone.
- s3r3nity 5y ago
  A few things: 1) Just like in Sales, on average it is cheaper _and_ marginally more profitable to retain an employee than to recruit a new one. This includes cost to recruit, interview, onboard, etc. 2) The exceptions here that throw off the average are those companies with strong inbound hiring pipelines (ex: Amazon will never have a shortage of applicants) that reduce the costs of recruiting + interviewing, and retaining high performers (e.g.: the cost of losing an upper-decile performer is much more significant.)
- cratermoon 5y ago
  That goes back to how different costs are accounted for in the corporate world, how they appear on the bottom line, and how they affect valuation and the stock price. I don't pretend to understand corporate account practices, but generally, look at what's considered an asset, what's considered a liability, and what sort of costs can be amortized and or taken as a tax credit. I imagine that if there was a law that said companies could write off half or more what they spend on employee retention and development, you'd see Amazon and others put a lot more money that direction.

hinkley 5y ago

I remember when it was all the rage to point out how the CEO to build up a company might not be the best choice to keep it working smoothly once it begins to see the limits of growth. Maybe this is true of everyone and simply less documented. Silicon Valley has hijacked “disruption” but in many ways the old definition still applies to the same people. Tom was a disruptive influence so when he demanded a raise we let him go instead.

Mikeb85 5y ago

For employers it's game theory. If employees are commodities then it's better to keep the pay structure and have X amount of attrition than to pay everyone more to keep attrition low.

MattGaiser 5y ago
But if employees are commodities and companies can get away with thinking that way, that number is either inaccurate or everyone is getting it wrong.
- Mikeb85 5y ago
  I mean, I'm not these companies and I don't know the exact formula, but you'd be looking at things like the attrition rate, the cost of hiring, the cost of raises but also the value of wages across the whole market. There's some low-key collusion going on for sure (not necessarily outright collusion although some firms have been caught doing that too, but multiple firms all employing the same strategy keeps wages low for everyone). Now obviously developers do have enough leverage that they earn more than many professions, but it's obvious that many are under-valued. If it truly were more expensive to hire than to give raises, more firms would be giving raises.
  - nine_zeros 5y ago
    > If it truly were more expensive to hire than to give raises, more firms would be giving raises. I don't disagree but the real world is more complex. Recruiting is an entire department in most companies that have a vested interest in hiring from outside. They will pull all strings to keep getting money for hiring. Corporate structures are really inefficient
planet-and-halo 5y ago
I think I finally figured part of this out. Like you said, employers treat workers as commodities. This worked out great for them in the short term, as they saved money by not giving raises etc. In the long term, though, workers started realizing they often had to go back to the market to get meaningful pay raises. Now you have a situation where workers are switching as often as every 12-24 months, and the thing not previously accounted for is onboarding costs. In a situation where workers stay an average of 5 years, let's say they take a year to become net productive, you're losing about 20% of their time as an investment for 80% payoff. Now, though, that static year of onboarding costs accounts for 50-65% of their entire tenure. That's a huge swing against companies, who are suddenly realizing retention might be a problem. So the economic/management theory that everyone is just an interchangeable commodity is running up against the wall of reality, where second-order effects have taken over and destroyed a bunch of business value that could be captured in a more stable environment. There's an additional problem that firms are caught in a game theoretic trap. If you're the only firm providing stability, your investments in that in the short term might make you less competitive on pay, which means you'll train up people who might leave seeing higher pay elsewhere. So stability investments might be rational in the long term, but because of market conditions you get killed in the short term, and you end up tempted to abandon your strategy after a few bad quarters where it looks like they aren't paying off.