Employee Development: Do You Pay to Grow Them, or Pay More to Get Them?

Photo by istockphoto.com
Photo by istockphoto.com

I’ve been thinking quite a bit lately about development vs. performance.

How much money should you put into an employee to get out of them the performance that you need vs. how much money should you pay to get the talent that will perform at the level you need without having to develop them? Remember – training and development are two different things.

Training is the knowledge you give someone to do a specific function or job at your company that is unlike another company. Development is knowledge you give an employee that will help them at your company, or any other company – it’s transferable. Yes, there’s some gray area – some training will help some at other places as well.

Here is the dilemma: you have a position to fill and you can do it a number of ways, but two are predominant.

  1. Hire high-level talent. This will cost more, but you don’t have development costs, and they will come in and perform at a higher level right off the bat. Think about an engineer with experience – for $85K.
  2. Hire lower/no experience talent. This costs you much less, but you’ll have a ton of ramp up time to get them up to speed and performing at a level you need. Let’s think about the same engineer at $45K.

So, our opportunity cost seems to be around $40K in development simplistically (clearly the opportunity costs are much greater taking into account an experienced person in the short-term will produce more, make fewer errors, etc. – so $40K is just the salary difference). If you were to take $40K and a young fresh engineer with a great attitude, could you have them producing the same as an engineer with five years experience within a year? That’s the $40K question, right?

Are you thinking strategically about your needs?

As HR Pros we tend to gloss over this entire equation on every position we have and let our hiring managers tell us what they need, instead of really analyzing the organization needs short-term and long-term. If a group already has 80 percent of their headcount with under five years of experience, maybe it makes perfect sense to go after the senior talent.

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But if the group is loaded with senior talent and the hiring manager just doesn’t want to take the time and energy to “develop” a new employee – so they ask for another senior level one – are you really thinking strategically about your people needs?

The flip side of this is having the patience as an organization to know – we hired low level experience with a commitment to develop – we can’t freak out when the person is at nine months and not giving us the same performance as our person with 10 years. We struggle with this concept many times, and let our hiring managers pull us down with them. “Well, they’re both engineers – so we shouldn’t expect different levels of performance.” Yes, we should – one has one year, the other has 10 years. They better be performing differently, or I’m paying my 10 year guy way the hell too much!

Here’s The Big Question – When was the last time you sat down with a hiring manager and did and ROI on their employee development costs, as a comparison to the talent they have within their group?

This was originally published on Tim Sackett’s blog, The Tim Sackett Project.

Tim Sackett, MS, SPHR is executive vice president of HRU Technical Resources, a contingent staffing firm in Lansing, MI. Tim has 20 years of HR and talent background split evenly between corporate HR gigs among the Fortune 500 and the HR vendor community ? so he gets it from both sides of the desk. A frequent contributor to the talent blog Fistful of Talent, Tim also speaks at many HR conferences and events. Contact him here.

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4 Comments on “Employee Development: Do You Pay to Grow Them, or Pay More to Get Them?

  1. Great post, Tim.  One thing, though:  you’re absolutely going to need to develop someone who’s hired at an $85K salary.  The only people I can think of who wouldn’t require any development are top-level executives.  Of course these people should never stop learning, but at that point they can probably do it on their own dime/time. 

    Kind Regards,

    Alexandra Levit
    Business and Workplace Author, Speaker, and Consultant
    http://www.alexandralevit.com
    blog.alexandralevit.com

  2. Thanks for the post,  I agree with alexandra comment around the expectation of those on the $85k around training/development investment.
    Other things to consider are if you choose to develop it, is your existing management capability and  in house ability to develop at a level to support more junior staff ?  Conversely, if you buy it in,  at such an experienced level is the work interesting enough at that level to keep the more capable resource interested and engaged, Do you really need so many well experienced staff ?  Perhaps you do… the point I make is to understand your business model and resource accordingly.
    Regards, Karen

  3. Karen touched on this in her comment; this is really about alignment with an org’s overall human capital strategy. Some org’s are notorious for preferring to bring in “fresh” talent and be able to mold them how they see fit, others want the seasoned pro’s who can hit the ground running.

    Obviously some positions afford the luxury of time to develop an individual, but others such as a business development role in a highly competitive/emerging territory does not.

    Constant re-evaluations are required in order to grasp the cost/benefit numbers and identify any market cycles in the demand for specific talent.

  4. Hi Tim – interesting post here –

    If you sit down to do this analysis, then it probably also goes without saying to take into account the company culture – do employees stick around for a long time?

    To train / develop internally, or externally but funded by your company, can sometimes be the wrong choice if employee turnover is high.  If you’ve got employee loyalty, then most recruiters can be a little more confident in hiring lower salary / steeper curve employees.

    Of course, there are many other things to consider – as you mentioned in the post – you can’t purely hire trainees.  There has to be a mix of talent and experience in any organisation.

    Thanks,
    Jane

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