Hiring in tech? Don't compete on price

There's a strong business case—a financially sound, common-sense case—for acquiring tech talent such as developers, designers, product managers, and QA engineers using quality-of-life values instead of competing on compensation. Conversations about this topic have been taking place in online developer communities for years, but it seems these ideas haven't penetrated the larger tech and business world. If you read on, you'll find there's a wealth of compelling evidence in favor of offering shorter workdays and remote options to your employees as a hiring and loyalty incentive, rather than trying to out-pay the market.

Competing on price

Anyone who's taken an econ class knows that when the goal is to make money, there is no greater evil than price competition. Economic theory teaches that when two companies are selling comparable products, competition will lead them to undercut each other and lower their prices until neither one is turning a profit. Grocery stores, like many businesses, are always trying to break this cycle using techniques like loyalty cards, "price discrimination" (coupons and short-lived sales), and exclusive premium products. If your local FoodMart has recently unveiled a fancy cheese or sushi island, you're witnessing an attempt to claw its way out of the profitless pit of price competition.

Tech talent has the same problem, but upside-down. For example, software engineer salaries have risen dramatically since 2010, report Forbes and CBS News. This is because talent is relatively scarce and demand is high and rising. The same forces that drive down the price of milk and eggs will drive up engineer salaries until the median salary is similar to the median value they provide. In other words, if you're a businessperson in the software world, the hiring market is coming for your lunch.

Attempts to get a good deal on talent often come in the form of stock options, corporate culture, and on-site perks like catered lunches or massage therapists. These are effective in some cases, but:

• The consensus on stock options is turning negative, thanks to the fact that they usually end up being worthless. Even when they have a positive return, their after-tax value is generally miniscule or no better than a common year-end bonus. Some recent grads still see dollar signs when stock options are mentioned, but by and large the tech community sees them as only slightly more valuable than a lottery ticket.
• Generally speaking, a company's claims about its culture—often poisoned by empty terminology such as "cool," "exciting," "meaningful," or "rockstar"—are at best stunning examples of the Dunning-Kruger effect and at worst willful fictions. Most people have learned that these statements are filler, intended to cover up the company's unhealthy expectations or lack of real benefits.
• Free lunch, ping-pong and massages are nice, but experienced talent will know that the value of these perks amounts to several hundred dollars or so per year, which pales in comparison to a higher salary or a good health insurance package. What's worse, these perks often veil a company's quiet pressure to work longer hours and tolerate toxic elements in the workplace.

The most experienced and talented members of the tech community have, in my observation, learned to value a few things above all else:

• Salary. This is a flat number that can be taken mostly at face value and compared apples-to-apples between offers.
• A workplace that does not actively harrass or mistreat them (people find this out through casual networking and rumors).
• A team whose product is under active development, where individual contributors can create value by doing high-quality work.

What talent wants

If your workplace is already non-toxic and building good products, you're back to square one: salary. But there is a simple and evidence-based solution to the problem of salary competition in tech. And for some reason, it makes founders and managers profoundly uncomfortable. It is this: the death of the 40-hour week. If you can't compete with the giants on price (competing with Google on salary is undoubtedly a fool's errand), compete with them on quality of life. For example:

This is only one developer, but he echoes the sentiment of millions. "Wait a second," you might say, "a 20% pay cut for a 25% reduction in hours isn't equal in terms of price for output, and it slows down the company's pace. And that's not even taking into account the fixed costs of employment, like benefits and office space." Those are valid concerns, but the stated mathematics lack the nuance to really describe the situation.

For starters, the 8-hour workday is arbitrary, a relic of factory labor unions in the 1700s. It's been widely reported that the average employee is productive for three to seven hours per day, and those who work six-hour days or less often accomplish more than those who work a full eight or more. A conservative calculation, labelling just one hour of the average employee's day as unproductive, would mean that a 25% reduction in working hours is only a 14.3% reduction in productive hours (from seven to six). This makes the 20% pay cut a relative bargain. If two or more hours of the average employee's day is unproductive, then the reduction in hours incurs no cost to productivity at all; and if a six-hour workday is in fact more productive than an eight-hour workday, then offering a 20% pay cut for a 25% reduction in hours is a win-win.

And this calculation is still too sterile. The mere mention of a 30-hour work week in your company's job ads would result in a flood of applications from the most talented and experienced people in the industry. The coalition of workers who value life over money is large enough to put any startup on the same playing field as Microsoft and Amazon when it comes to hiring, and the productivity gained from this influx of top-tier talent would more than make up for any perceived losses in development speed.

Oh, and about those fixed costs I mentioned. A simple way to reduce them is to rent a smaller office and let your employees work remotely. All the time. Multiple studies show that they'll be happier, more productive, and more likely to stick around. And you won't need to buy as much space and equipment.

The one-two combo of shorter workdays and remote work is backed by so much available evidence, and so rare in today's job market, that its use at a company of any size is likely to be a hiring panacea. And it will make your payroll budget go much further, since it no longer has to compete directly with multi-billion-dollar companies on the Pacific Coast.

Why this works

It's common to think of productivity as an equation, c * hours = output, where "c" is a constant describing the productivity of the average employee over one hour. But humans are not machines. Productivity, especially in creative or abstract work, varies depending on time of day, environmental factors, and mental state. Technological work is mentally exhausting, and overworking the brain (especially over long periods of time) causes productivity to diminish. Eventually, it can even enter the "negative work zone," a state familiar to many programmers where the quality of work is so low that it actually harms the product being developed, creating regressions, security flaws, and awkward code that needs to be refactored later. Of course, programmers aren't the only ones who are vulnerable to negative work. Anyone with a history in tech can probably share anecdotes about situations like this.

If a tradition that began with manual labor in the 18th century was really the most productive way to do knowledge work in the 21st, that would be a truly absurd coincidence. But all the research indicates that shorter, remote workdays are an overall productivity boost. And quality-of-life measures like this reduce burnout, which is a major cause of employee turnover, a huge expense for most companies. Once you look past the c * hours equation, it becomes clear that the best way to compete, in every sense of the word, is to prioritize employee satisfaction and quality of life.

These ideas may be uncomfortable to some, but they're rational and evidence-based, and being ahead of the curve on them could produce a significant competitive advantage for your business.

Is your company already doing this? Let's talk—I'd love to add my friends' resumes to your hiring pipeline.