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It’s no secret these days that we’re in the midst of a talent shortage. The technology unemployment rate is essentially zero. We’ve been seeing this for over a year, and things aren’t changing any time soon. As a strategic partner to hundreds of hiring managers throughout the pandemic who have struggled to find top talent, I’ve seen it firsthand, and I can tell you that the way you’re hiring right now is not working.
Here are the three top things your HR department is doing to fill your headcount needs:
Make an announcement internally to see if anyone is interested in the role and/or start a referral search.
Post the job on the company’s careers page.
Post on job boards including Zip Recruiter, Indeed, LinkedIn, etc.
Here are the issues you run into here:
Most internal applicants are either unqualified or unavailable.
Top talent is not targeting companies specifically on career pages, so the rate of applications will be very low.
You don’t have to meet the chosen criteria to apply for a job posted on a job board, so the rate of applications will be very high.
These are all very time-consuming, and chances are your HR department is understaffed and has other responsibilities as well. Keeping the job postings updated as well as managing all of these candidates is a full-time job all on its own. They need to be able to dedicate time to responding to and managing applicants in order to keep a professional image for the company. While HR is doing their best to juggle everything, they still haven’t been able to identify any top candidates. (Appreciate your HR professionals - their job is not easy!)
Keep in mind that your ideal candidate is working and likely a “passive candidate.” Because of this, they don’t have the bandwidth or interest to actively search for new roles, whether that’s through job boards or your company’s career page. While HR is actively sourcing online applications and filtering through active candidates, they are unlikely to conduct passive searches. Their heavy workload doesn’t allow them the time for it. This means there is an entire market of candidates that are not being targeted or approached. By the time you’re able to interview and make an offer to someone, your chosen candidate already has two other offers to consider and a fourth on the way. Think about all the time that was wasted while you, the hiring manager, were waiting for a qualified candidate to be able to interview to make this very important hiring decision.
How do we source the right person?
How do we get the right person excited about the job?
How do we get them to accept an offer and start?
We’ve already wasted too much time at the start looking for the right person. Now, if you have candidates you’re excited about, the last thing you want to do is drag your feet during the interview process and lose them halfway through.
“Money talks” is the new phrase in the technology hiring landscape. Paying above market rate has become a given, and the remote workforce has the ball in their court. If you're able to offer a dynamite culture, high pay, and a fully remote workforce, you're in a much stronger position in present-day to secure a top-tier candidate. If you want to hire the best talent in tech, you have to be prepared to pay above the market rate. If you’re working remotely, regardless of the company you’re working for, you’re working from the same location every day. You’re drinking the same coffee, eating the same lunch, having the same non-commute. The only difference is how much money you’re taking home, and if you can work for a different company for a bigger paycheck, why wouldn’t you? Especially when you’re getting bombarded by recruiters all day every day telling you so - you start to believe the hype.
This is the case everywhere we look today. Take the housing market, for example. Six years ago when I bought my house, I offered below the asking price, negotiated, and was able to close on my home under the asking price. If I go out to look at a new house now in this market, I won’t be able to use the same strategy. If I make an offer on a house under the asking price, there’s about a 0-5% chance I’ll get an accepted offer. If I offer the asking price, those odds are slightly higher. Even If I offer over the asking price, there’s still no guarantee I’ll get an accepted offer, but my chances are a lot higher.
Anything you want right now will take an updated strategy, whether it’s a home, a brand new product on backorder, or your biggest competitor’s most talented employee, you have to understand the flow of supply and demand.
You have to change your thinking in hiring or your company is going to be left behind, and you have to address it immediately.
If you say, “Well, we’ve always done it this way” - you will be sacrificing your own organization’s growth by not changing as the landscape changes. Think about a company like Tesla - five years ago, did you think Tesla would be where they are today? Did they get there by sticking to the status quo? Of course not.
Just like buying a home, the way I hired six years ago was entirely different from how I hire today. I had to learn to adapt, and you do too. If you’re going to spend the time getting together a job description, vetting resumes, and interviewing candidates, you need to be committed to getting someone in that role and doing whatever it takes to make them excited about working for you.
A lot of this hinges on hiring smarter than your competitors.
Things you should leave in the past:
Long coding challenges
Take-home tests
Five days a week on-site
Interview processes that are longer than 3 steps
Breaking up interviews that take weeks to complete
In-person interviews
Understanding supply and demand and using it to offer competitive compensation is critical in this day and age. If you’re using outdated market analysis and/or strategies, you’re doing to be targeting the wrong people and have a much lower ROI. Here’s the problem that you have with the compensation for your current opening based on the current unemployment rate and the supply and demand of #TopTechTalent.
Review this scenario about passive candidate Joanna Wick:
Joanna Wick is a great developer who has a skill level of about 9 out of 10. She makes $150k at her current job and she’s happy.
She’s getting calls from recruiters and is constantly seeing new jobs from her well-established network
The average salary for this job is $150k and is based on historical data.
All the developers on your current team are making around $150k with a standard COLA raise
Based on this data, how could you convince Joanna Wick to join your team?
Counterpoint: what’s keeping your current team of -developers from exploring their options?
When the supply and demand are equal, we have equilibrium - this is when you’ll have developers actively seeking jobs who will be happy to accept $150k. We are clearly not in equilibrium.
There are more job openings than talent available. Offering the going market rate is not going to be enough to convince someone to come work for you. When the demand is much higher than the supply, the price it will cost to get what you want is going to be much higher than it would be at equilibrium.
If you want to hire Joanna Wick, you can’t offer her $150k - why would she leave a good job for the same amount of money she’s already making? And your own team also making $150k? They’re getting the same kinds of calls all day every day offering them more money to work for your competitors.
Here are four options:
Lower your expectations - if you have no budget flexibility and need to hire someone, you can decide to hire a 7/10 developer instead of a 9/10 developer where the value would match the price tag. Focus on a strong training program instead.
Increase your budget to get what you really want - a 9/10 developer.
Hire someone as a contractor or on a contract-to-hire basis. This way, their salary does not directly correlate to the salary of the current staff and is typically pulled from a different budgeting bucket.
Wait for a needle in a haystack developer - someone who just so happens to be relocating, or is having a tough day on the job. This would obviously not work if you need someone in the seat ASAP.
If you don’t want to rely on luck, there are really no other realistic options than these four. If you want to hire someone now, you can lower your expectations, increase your budget, hire a contractor, or wait.
Lower your expectations.
This doesn’t mean hiring bad people - this might just mean hiring someone who is less senior or requires some coaching. If you already have an established team, they could learn from their peers, and if the team is smaller, they can learn from you. This might not be an ideal situation for everyone, but if your budget constraints are too tight, this is a possible solution.
PRO TIP: Use this as a way to keep your current staff (who are being paid “market value”) engaged by giving them someone to mentor to give them a feeling of ownership, or even a full-blown promotion.
Increase your budget.
To recap, if you’re really committed to your top choice candidate, you need to have the mindset that if you don’t hire them, your competitor will. We've already established that money talks - you will have to increase your budget and provide a competitive market salary to get your ideal candidate. Otherwise, your competitors will.
You have to pay them more. If you want to get a great candidate excited about your role, you need to be offering at least $175k-200k where the going market rate is only $150k. You could even get creative with end-of-year bonuses, signing bonuses, stock options or equity, or a promise of growth and leadership in the near future.
According to developer Ben Hosking, “Developers could get paid 20% to 50% more for doing the same job.” So why wouldn’t they take that opportunity?
PRO TIP: And if that means you’d be paying your new employee more than the other people on your team? Well, you’ll need to pay them more, too. And it’s best to give it to them when they don’t ask for it if you really want them to feel appreciated. If you don’t, they’ll be interviewing with your competitors who will.
Hire someone on a contract-to-hire basis.
This is a great option because you can expedite your interview process by skipping some traditional FTE steps. You can also increase your offer to the candidate because it doesn’t go against the full-time budget. You can use this from your contracting budget or create a Statement of Work. HR is a fan of this as well because you don’t have to worry about benefits, payroll, disability, unemployment, etc.
PRO TIP: If your hire ends up being a great fit and you want to bring them on full-time, you’ve given them more time to “audition” for the job and can help warrant an increase in budget. This also gives you more time to get budget approval. If conversely, you decide to let them go, it’s a lot easier to do without all of the red tape you find in handling full-time hires and fires.
Wait.
If none of these above options are feasible, you’ll just have to wait until they are. You can post a job to LinkedIn to your network. You can ask your employees for referrals. Continue to talk to your leadership about the pitfalls of burnout and what could happen if someone from your team left if you’re already short-staffed.
PRO TIP: You could also consider hiring a third party to help you.
Consider partnering with a strategic hiring partner.
I see it all the time. I’ve had executives within my network at companies big and small that never wanted to outsource their hiring needs. Now, they’re all calling and willing to outsource to get the #TopTechTalent they want. It all comes back to the market we’re currently in. A quick LinkedIn search will tell you that there are currently more job postings in the U.S. for recruiters than there are for developers; there are 9,260 available jobs with the title “recruiter” and only 7,287 available jobs with the title “developer.”
Everybody wants to be the best, and to do that, you have to hire the best - you want someone on your side who knows how to make it happen.
The talent pool is limitless. While you used to be set to a specific geographic location, you're now able to expand past those limits and find opportunities that were otherwise not available.
Interviews are easier to take now than they used to be. Before, if someone showed up to the office with a new haircut or wearing a nicer outfit than they usually do, and then they took an hour and a half lunch, it was a safe bet that they were interviewing, and the entire office knew it.
Now, you can wear your t-shirt for your daily Zoom meetings and switch into a button-down right before your Zoom interview. There’s no commute time anymore, so you have more time in your day to schedule interviews or catch up on any work you missed because you were interviewing. You don’t have to factor travel time into getting to your interview. All you have to do is put on a new shirt and hop onto your computer. Combine the ease of interviewing with the endless opportunities awaiting those talented people in tech, and it’s easy to see where this “Great Resignation” has come from. 4 million Americans quit their jobs in July 2021 - that isn’t a coincidence.
It comes back to supply and demand. The amount of good candidates and good technologists is the same as it’s always been, but the number of clients has grown exponentially. Since going remote, we’ve become so reliant on technology as a society that we’ve started to appreciate the people who make it all possible.
So if your software engineer is excited about being in high demand - of course they are! They’ve never been in a position of so much power and freedom to make decisions before. They’ve gone from being all but ignored to being the one everyone’s vying for.
Once upon a time, IT wasn't the cool thing to do. Now, technology is it. Everyone wants to be in it, and those who excel, are in a position of power and freedom to ask for more money and more flexibility.
Going back to economics, we’ve talked a lot about supply and demand. Now, let’s talk about ROI. Spending X amount now on one of these solutions will be an incremental number in the short term. Compare that number to the amount of business lost by not getting projects done on time and your staff being burnt out and unable to perform at their peak. In addition, imagine that top talent that you really wanted goes to your competitor and gives them the edge because they beat you to the punch.
Only you know your business. Weigh those two numbers and calculate the ROI in your head, and see if it’s worth updating your hiring strategy to get your full-time headcount filled now.