Tuesday, 28 August 2007

Sparing a buck by spending more on programmers

It is a well known fact that turnover among Software Developers is high, since they usually want higher salaries than the company can afford. So it is just reasonable to save money by letting them go and hiring new ones, instead of trying to retain them. It's just the way things are.
Except it isn't. For those of you who have read my thesis, I will just copy a small part, so don't bother to go on. Imagine you have to replace a developer. Yo have to train him/her for 6 months, in order to have him up to speed (my estimate is quite optimistic, isn't it? So you already have 3 monthly wages lost. In addition, hiring a person through an agency or through internal processes normally costs about 2 months worth of his salary. So you have already lost 5 months as a sunken cost. If you have just a 66% turnover (quite low, I might say), every person stays around 1.5 years, so 5 months is about a 30% of the amount you'll pay this person during his career in the company. If you could double his stay, that would be only a 15% of his earnings with you; I think that paying 15% above market conditions is a good way of keeping your people for a really long time. By doing this you improve quality by having better trained people, with a longer-term mindset, who are more loyal to the company. For the exact cost of 0.
Of course, Timothy Lister and Tom DeMarco said this and nobody listened to them. Also Joel Spolsky repeats this every now and then, but who cares. Only bad companies as Microsoft and Google.

Disclosure: As of the date of publication of this article I am employed by Google. However, the content of this article reflects only my opinions and beliefs, and is in no way sponsored by my employer.

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