Category: General Tech Business

The value of a good team cannot be overstated, it is more important than strategy, technology and even cash available. I have written before on some of the principals for recruiting a great team and how you should never stop recruiting. It is ironic how much effort companies put to recruiting the best but do not put the same effort into their existing team members until it is too late.

While most companies acknowledge the importance of recruiting, they often neglect the complementary principle that you need to put as much effort in keeping your existing team satisfied. Just as increasing user acquisition costs intensifies the value of retaining existing players, the increasing difficulty in finding great employees intensifies the need to minimize employee churn. There are multiple costs of replacing a good employee

• The hard costs of recruiting a new employee. This can be payments to a recruiter, referral fees to employees, travel costs to attend recruiting, travel costs to bring candidates in for interviews, etc.
• The lost time spent evaluating candidates. The time you and your team spend reviewing resumes/CVs, interviewing candidates and discussing options. These days, almost all candidates go through multiple rounds of interviews before being offered a position. Each of those interviews takes 30 minutes or more of someone’s time, if you value that time based on the interviewer’s salary, you quickly get into the thousands of dollars (even more for a senior candidate who meets with leadership).
• Training costs. These are both direct and indirect. You may have to send the new employee to various external training courses to prepare him for the job. More likely you will need to spend you time or your colleagues will training the new person on how the company works, practical issues (i.e. where the bathroom is), systems, interactions with other teams and what they need to perform their tasks optimally. Again, there is a cost for every minute that you and colleagues spend getting a new hire up to speed. When you break out salaries by how much the person earns per hour, this training cost often runs into the thousands of dollars.
• The lost productivity in losing a high performer. You should never consider replacing an employee as an upgrade. If there are better people on the market, you need to recruit them proactively and replace weak team members. Assuming you adhere to this principle, if someone leaves voluntary, it means their replacement is not likely to be as good as the existing team member. The cost can range from minimal to huge in having somebody not as good performing a role on your team.
• Less output. If you employ somebody, they should be providing a valuable service (or else you should proactively have eliminated the position). When you lose somebody, that task either does not get done until a replacement is in place or you must take other people off of their tasks (which again are worthwhile or you should not having them doing it). In either case, the overall output of your organization decreases.
• Stronger competitors. When a good employee leaves, by definition they go somewhere else. That somewhere else is often a competitor, so not only are you losing their services but a competitor is likely improving. If Messi were to leave Barcelona for Real Madrid, the loss to Barcelona would be magnified by the improvement of their arch competitor.
• Higher risk. Regardless of how rigorous your recruitment process, there is always risk that you make a bad hire. Many people interview above their actual competence, while others may just not be a good fit for your organization and processes. Thus, you have the risk that not only will the new hire be slightly weaker, they may prove incapable of doing the job and themselves have to be replaced. Then you have both an extended period of the job not getting done (or people being pulled off other tasks) and a repeat of the costs above.

Continue reading “Don’t forget to recruit your own team”