Whilst the events of 2019-2020 were unprecedented, it would be misguided to believe that the level of global disruption we all endured was a once-off, and couldn’t happen again. Without even having to put on your future-vision glasses, you will probably also be able to see that the climate crisis and tidal wave of ESG momentum is going to change the worlds we live and work in, fast.
For businesses, these changes create opportunity and threat – both of which require awareness, nimbleness and decisiveness of action.
Many medium and large businesses take ‘calendar quarters’ to plan, and longer to execute, an inertia that would have been demonstrably painful in the last 18 months. As McKinsey acknowledges, businesses that haven’t adopted new adaptive, agile working practices need to with urgency.
“This pivot requires a new type of planning. Most annual planning processes can take six to nine months, but in-crisis planning must be done in a fraction of that time. In addition, most annual planning processes do not need to account for the current level of uncertainty around the magnitude and duration of consumer behavior change. We recommend a SPRINT re-plan, which can be executed in four to six weeks” - McKinsey
Organisational structure is an important part of agility, and one that all sizes of businesses can often struggle with for differing reasons, yet an organisational structure that can rapidly adapt can be the key to successfully dealing with continued uncertainty.
In an article for the Economic Times, Stanford University Scholar and chair of the Institute for Competitiveness, Amit Kapoor, discusses how businesses must realise that despite COVID-driven reorientations, they cannot assume things will ever go back to normal. He concludes that in order to respond to future uncertainties, organisations need to change how they think about their teams and rewire the organisational models.
Customer Focus & Technology
Kapoor, along with many others, asserts what might nowadays be considered an obvious fact – customer focus must be at the heart of everything a business does. Ranking amongst the world’s most successful companies, Amazon is a fantastic example of this. Their 'Flywheel' methodology puts the customer and the centre of everything.
"start with the customer and work backward." - Jeff Bezos
In today’s world, Technology plays an ever more important role in achieving customer centricity. So, when thinking about customer journeys and customer experiences, the decisions a business makes about how to manage their technology teams can make the difference between hit and miss.
Technology Team Organisational Choices.
In-house, off-shore, hybrid, near-shore are staffing options any CTO or Head of Technology will be already very familiar with. Many organisations have toyed with a various combinations of these already, and many technology leaders will have already developed a preference, or unconscious bias towards some of these options.
However, CFOs, Chief People Officers and Heads of HR might see things differently. Let’s dig into some of the implications of attrition and the cost of staffing technology teams.
Hiring is a lengthy process.
Software development skills are scarce resources that can be hard to fill - and retain. It takes, on average, 43 days to fill a senior software development role. During this time, hiring manager distraction, recruiter overheads and impact on the development teams can equate to a loss of productivity of approximately $33K.
When the developer is finally hired, it could cost up to $31K in administration, recruitment and managerial oversight.
In percentage terms, recruitment overhead costs can work out to be between 18%-25% of the final salary, with recruitment fees coming in at between 17% and 22% for in-house and external agencies, respectively.
The overhead costs of hiring developers doesn’t stop there. Then you have tax and social contributions, paid leave, sick leave, equipment, office space, ongoing training, pensions, bonuses and share plans or equity. Yikes! That an awful lot.
And for all of that, what do you get?
The average employee tenure is less than six years, with almost a third of staff changing their jobs in less than three years. Other research paints an even bleaker picture, with 20% of staff leaving within a year.
Let’s look at some of these numbers in respect to a growing company, with a better than average tenure.
Attrition in High Growth Tech Companies
In pressured environments, such as high growth tech startups, where runways are short and time to market is critical, attrition of highly skilled engineering teams can be as great at 70% annually.
This means for a company with five engineers, looking to grow by just 50% in the year, they should plan on making seven hires in the first year, and spend about 280 days doing just that.
A laid back 'employee first' culture can help here, but this is rarely a luxury when working with seed / series investment or when trying to penetrate and defend a market. Small dedicated teams and slick and agile project management, product ownership and testing are also key, this can often be overlooked by those with a view that throwing more developers at a problem will solve issues.
At a time where businesses are contemplating their very existence and being challenged with new opportunities and risks, the importance of building nimble high-performance technology teams, while all the time mitigating cost exposure has never been more critical.
Many technology directors might look at development “outsourcing” or “team augmentation” with caution, however, the ability to rapidly scale up (or down) expert teams, without worrying about the impact of attrition can certainly deliver tantalising benefits.
Add to that the additional cost benefits described in this article, and you can see why more and more companies are choosing to adopt hybrid approaches to deal with modern business challenges.
To find out how our flexible, high performance technical teams can help your business address these new opportunities, outflank competitors and navigate around unexpected risk, get in touch today.