Developers - Cost or Asset?

When things get big enough there might be functional silos that concentrate on specific activity. These could classically be something like sales, development, support and marketing. Of course these functions should be made as efficient as possible taking into account the whole. Customer value is usually built in co-operation between all the functions, not by a single unit.

Metrics can be a double-edged sword, if they are applied to functions instead of taking into account the whole value chain. Sales funnel is quite easy to quantify. You have numerable amount of possible clients. You can count how many units you can sell to this market, thus getting the absolute limit value for your cash inflow. It's easy to measure how much a single sales person or sales unit can close deals and bring in money.

If you sell development hours, it's also quite easy to measure how much a developer generates turnover or how big the billing rate is.

In typical cases salaries are even easier. There's usually a fixed sum of money that is paid to the person monthly. This is the cost of a developer (plus hardware & licenses too).

But it’s much more difficult to quantify the financial benefit of an in-house developer who works in R & D. One could make a rough estimate about how much an equivalent consultant would cost. But this doesn’t take into account the subtle knowledge that is accumulated over time or the internal relations. Possibly this person is the glue that keeps the team together, the humorist that keeps people in high spirits or the oil that lubricates the internal cogs and makes things happen. Not impossible, but difficult to quantify.

Without visibility and understanding, one can draw wrong conclusions about the situation. Classic would be rewarding sales department for bringing in the money and cutting costs in operations by sacking people.

 

"What should I do then?"

To remedy the silo problem and optimizing parts in expense of the whole, you should concentrate on metrics that measure the whole value chain and are difficult to gamble. Some examples:

• NPS. How the customer experienced your service?
• Lead time. How long it took your organization to meet the customer’s need?
• Profitability. Do not concentrate on (just) how much sales you make. Pay attention to how much it costs for you to develop, deliver and market the product/service.  

 

 Photos by "My Life Through A Lens", Spenser H, Fabian Grohs and Mike Wilson on Unsplash.

Employee Turnover and How To Avoid It

In the current market situation, software development professionals are the ultimate scarse resource. I'm not exaggerating if I say that these people, for example talented architects or data scientist, don't need to look for positions. They are being actively approached by headhunters and hiring managers.

They are neither easily replaceable, like cogs in a machine. Usually they possess knowledge that has been accumulated over a long period of time. Into some extent this information is useful in other environments, but it's most valuable in the current setup. That is why the existing employee is most valuable to their current company.

The cost of employee turnover

Losing a member from a well welded team has a significant cost that can be divided into (at least) the following parts:

1. Team loses a member and thus his/her direct contribution.
2. Team needs to reorganize and learn to function without the lost member.
3. Recruitment takes time away from development.
4. When the new team member is found, he/she needs to be oriented and inducted.
5. Team needs to reorganize again to function with the new member.

Sadly, I feel that many times people only think about the first bullet. And maybe if there's been difficult recruitments, also the third one. But all of these have a cost.

For the above mentioned reasons companies should do all possible efforts to keep their employees happy. I understand this is not possible for all company roles and it might be viewed as unfair. But it's really as simple as the law of demand and supply. With the rise of banks and other companies digitizing their services the demand is bigger than ever. (Almost) all companies are becoming software companies. And there's rather limited supply of software engineers.

Few tips on how to keep your employees

Compensation is one parameter in the puzzle. It should be on a decent level, but it isn't everything. Benefits that either have monetary value or make the life easier also count. I think the latter ones are more effective in retaining employees. Generally people are lazy (at least I am). Autonomy in choosing your own tools and ways of working increases happiness. If your work has a higher purpose or meaning to the society, it's a plus. For people who work with their brains, right amount of challenge is expected. And finally, you should be able learn new things.

There's a cost for keeping your employees, but usually it's smaller than losing them.