Over the past few months, I noticed a trend in many of my conversations with people in the tech sector – one was a lament about the lack of tech talent. The second was having to pay more money than they thought they would have to for a hire.
Unfortunately, it is no longer unusual for an organization to hire a reasonably good resource at an unreasonably high salary just to meet the immediate needs of a project. Services companies started the trend as they wanted to kick projects off or start billable positions. But the go-to-market demands that product companies face have pushed them into this cycle too. Having a key position open for too long has far-reaching implications that no one is willing to accept. So, when you find someone suitable, it’s become the norm to offer incredibly high salaries to get the person. And the current salary or market standards become irrelevant.
For organizations, the objective is to fill a position with the right resource and get productivity going. For the employee, this is an opportunity to jump ships for career progression. But does this happen? I would make the case that both the employee and the organization lose out.
The battle with complacency
Money can be a powerful motivator. But what happens when it becomes the ‘only’ motivator? A salary that is beyond the market reality drives complacency in the employee.
When there’s too much money involved, employees won’t feel the pressure to seek opportunities for advancement. They won’t feel the need to pursue challenging work. They also won’t feel the need to stretch and improve their skills. This vicious cycle of complacency leads the employee to become demotivated to grow. That, almost always, translates to a lack of interest at work and consequently to low productivity.
On the employee’s side, as they do not take measurable steps to remain relevant, these employees also become increasingly unmarketable – and then they become more ‘loyal’ to your company. They stay with you but don’t really give you your money’s worth.
Spreading it thin
The other thing about paying tech employees too much is that it spreads your resources too thin. Let’s assume you hire a resource at a blown-up salary to meet immediate demand. You end up overspending in this area. But this will have an impact elsewhere, simply because cash is finite and profits matter.
Now if you were to overpay two (or twenty) employees then your ability to fairly reward other employees gets simply compromised. And this inability to compensate fairly across the board can severely impact employee engagement for obvious reasons. Bloated salaries could also impede your capability to adequately staff other areas of work that could bolster innovation within the enterprise.
The golden handcuff – a burden for the employee and the organization
One reason for overpaying a tech resource is to make sure he/she does not jump ship, a sort of a golden handcuff. Making sure they never go anywhere else because of the salary ends up creating a talent bottleneck in the organization. This bottleneck emerges because, over time, these resources often reach and stagnate at a level of competence (or incompetence like they would demonstrate in the Peter Principle) and are just not able to move ahead. In such a case you end up paying a higher than usual salary to an employee for a job that may have become less valuable than it used to be. You know you have the option of finding other people to do that job at a lower price but that means letting the current resource go. You also have the option of rationalizing the employee’s current salary. But realistically, how many organizations do that?
This golden handcuff can be a burden for the employee also. A high-value tech resource would ideally want to do high-value work. Having a high salary is just one aspect of influence for a tech employee interested in developing a ‘career’ over a ‘job’. This means he/she will be looking out for opportunities for growth.
In the absence of growth opportunities or if they’re dealing with a dead-end job they will begin to look for an escape. But is it easy to leave money, especially when there’s a lot of it? Idealism aside, the golden handcuff can be hard to take.
What does such an employee do then? He/she continues to come to work and continues to mark time. And marking time is all they do. There’s no motivation. There’s no productivity. There’s no innovation and creative thinking. And consequently, there’s no progress – both for the employee and for the organization.
Spending more for the best and the brightest mind has generally been a smart business strategy. But this strategy can backfire badly if it is your knee-jerk reaction to fill vacant spots. It also makes it very difficult to justify internally why one of the two people performing the same job is paid more. You need to have a really good reason to treat two employees who have similar job functions differently especially if they are similarly-situated employees.
While salary can and will continue to be a powerful motivator, it is time for employees to not merely get attracted by all that glitter. It’s prudent to focus on the opportunities of the job role, the work content, the learning and development initiatives, and the avenues for future growth. When all these things fall into place, a higher salary inevitably follows. And for the organization, this salary will not become a burden borne grudgingly.
(This blog first appeared on the LinkedIn timeline of our India Lead, Trushit Buch)