So, I stumbled upon (or rather, saw it in Alan Page's five for friday) this blog post explaining why companies should "pay their people to stay" that is - offer the people who are already working and having good impact on the company a competitive salary. I read the argument there, and it's convincing at first glance, at least up until the point you start thinking about it. For those who don't want to read the entire post, I'll sum it up - People currently working for the company are becoming more valuable as they stay, since they gain domain knowledge and become more effective in the specific thing the company does. Therefore, the argument goes, it's worth paying those individuals above market value for those skills.
So, what's wrong in this argument? Oh so many things.
First of all, the assumption that if you pay well people won't leave is not realistic. People leave for a lot of different reasons - they might look for a position that is not available, they might move to live elsewhere, or even just feel that they want to change domain or learn a new area of technology. That's assuming they don't run away from a bad boss. So, let's just put this on the table. You might be paying well, only to retain 10% of the people you want (or it might be 90%, but I doubt it).
Second, let's assume this strategy works - if we're doing it, other will too. In this case, let's look on the options our star employee with 5 years of tenure. Before we implemented the suggested change, their salary would get a nice 20% bump if they would be hired for their current level. Now, we've implemented a tenure-based salary increase that compensates for that, and their salary is 10% above market. They interviewed with foo-corp, which finds them a perfect match for what they are looking for. They can keep on looking, knowing that many other suitable candidates might have the same conditions, or they can offer above market rates, resulting in the market value of the job rising and our formula will need to be updated. Since companies do have some limits on their budget, this race to the impossible salary will stop somewhere, and on the way might have other side effects (such as "no raises for the first three years" or just underpaying juniors and deepening the imbalance between higher and lower paid workers). Another possible side effect if such practices are common, people might be hesitant to interview people who have been in their current workplace for over 5 years, pushing people who care about their career to start looking sooner just to avoid being labeled this way if they do need to change jobs in the future.
So, the financial model is not really convincing. But let's assume for the sake of the argument that it does, that we've found a magic formula that actually helps retaining people in significant numbers in a financially reasonable way. Do we actually want this? The post assumes that tenured people are more valuable, but that's far from being universally true. There are several costs to having people, even good ones, stay. Here are some disadvantages:
- Reducing our bus factor. If we nurture those super-valuable people and they stay forever, they become more and more central to our organization, despite honest attempts they will gather more knowledge and expertise, and more people will rely on them, when they finally leave, or retire, it will be ten times more painful than if they left after only five years.
- They prevent change. The people who are being retained are central to the current way of working. The learn the organization and grow accustomed to it. When they say "we've always done it this way", or "we've tried it and it didn't work" it will carry even more gravitas.
- Less mobility means less ideas travel in the industry - yes, we might meet in conventions and meetups, but nothing can compare to working in a different setting and seeing your previous ideas about what's right just burn to the ground in a new context.
- Slower growth to the others: When people who are central to the organization leave, there's some sort of vacuum left behind them in all the things they were just the go-to person. When they leave, this vacuum is filled by one or more people, who now need to fill boots bigger than they wore before, and most of the time they grow to do this well, and give it their own spin. Thus the industry gains more skilled people, the company gets to have the same tasks benefit from multiple viewpoints and the people themselves are gaining skills and sometimes a promotion. Yes, there are growing pains, and the right person leaving in the wrong time might mean those pains can topple a company, but by having multiple, smaller, holes to fill, we avoid the giant crater.
One final point - I'm not advocating to push your senior people out (I keep this recommendation to cases where you're starting to think "Uh, oh - if this person leaves we're all doomed"). If you're able to create a workplace that has a good balance between compensation, culture and professional interest people will stay and you will benefit from that extra amount of domain knowledge they learn, knowing that other companies will have a hard time matching you on such a fine balance. But don't fret if they leave. The graveyards, after all, are filled with people who couldn't be replaced.
