Just how costly is it to replace engineers in a tech company? More than you might expect.
While the same position might be filled by a person paid the same salary, there are many hidden costs, everything from time taken away from team members who must bring the new employee up to speed to productivity lost with someone less familiar with the job. Teams are disrupted in terms of their social dynamics, and it can take time for a new and comfortable rapport to be found with the new employees.
High turnover is a growing problem particularly for tech companies, who must constantly find new ways to engage and retain new talent. Studies show that the highest employee turnover often occurs in engineering, accounting for 21.7% of all turnover studied. Reasons for leaving include: limited career advancement opportunities, insufficient training, and development opportunities.
Turnover costs come in three main categories: acquiring new talent, lost productivity, and company culture.
Talent acquisition costs for engineers to be higher than average. According to Salary.com, technical recruiters cost an average of 12% more than non-technical recruiters with the same experience. Job listing fees and advertising all drive down total profit, as do the costs of on-boarding a new developer and bringing them through your company’s training center. Studies report that replacement costs such as these can be as high as half the annual salary per employee, a statistic that should cause CEOs and HR departments alike to pause.
The scarcity of exceptional engineering candidates makes talent acquisition for these positions particularly difficult. There are more than 500,000 open tech & engineering positions in the US with limited qualified candidates. SHRM reports found software engineering roles have a 47% higher than average time to fill, at an average of 62 days.
Once hired, new employees take an average of 12 months to be as proficient as tenured employees who know the operating systems and standard practices within the company. While new employees are in training to learn the new procedures, productivity on the team drops and work piles up. Projects are either put on hold or the team must pick up the work of the employee who left in addition to their own work. While the engineers on the team may be familiar with the former employee’s project, it takes time for them to get up to speed. Team-members work harder for longer hours to pick up the slack, creating frustrations among the team and can lead to additional turnover.
A more intangible aspect of employee retention is company culture. A friendly environment, where employees look forward to going to work the next day, is a defining factor in retention rates. Coworkers who are also friends make any employee less likely to move from a current job because it would disrupt their relationship. Moreover, friendly colleagues at work can act as a welcome stress reliever for employees who can take five minutes or less to joke around with a coworker. Working in friendly teams can make collaborative tasks more enjoyable and even something to look forward to when going to work. This enthusiasm can be evident in the final product, improving the quality of their work overall. Therefore, a combination of a friendly company culture and the possibility of career advancement will do the most to improve retention rates in all employees, not just engineers.
Overall, the clear conclusion is this: hiring is much more costly than retaining the employees a company already has. No amount of new talent can replace the productivity, coherence, and stability of a developer team that has been with the organization for years. These seasoned employees will contribute more of their passion and effort to a company that gives back to them with professional development and an inclusive culture that makes them feel valued. Seeing this employee-employer relationship as a two way give-and-take goes a long way in keeping employees engaged and passionate about contributing to the success of the company.
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[EDITED: April 14th of 2022 – statistics updated and links refreshed]