Abstract: Hiring the cheapest candidate looks like sound business management, at face value, but cheaper employees can be problematic and companies may be screening out the very top talent they actually need to succeed in a highly competitive environment.  The ultimate, true, hidden cost of refusing to entertain the idea of paying fairly, to attract top talent, may be catastrophic for the viability of the company, in the long term.  The widely reported skills shortage has its roots in low pay.  Much of the best talent simply leaves the industry for good, seeking better pay elsewhere, or better quality of life.

With an exclusively financial focus, it would seem to be the case that if you can fill a certain job specification for much less money, it is a benefit to the business, but is it really?  Do people that offer low salaries really understand the consequences of their actions on the viability and competitiveness of their company?  Is a candidate that works for half the money really as good as the one that wants a higher salary and is the difference significant, if there is one?

Silicon Valley employers will tell you that penny pinching, when hiring talent, is roughly the same as guaranteeing your company won’t produce anything outstanding and will, therefore, fail to succeed in the highly competitive world of technology-based products and services.  They know that really good talent is scarce.  For every incremental dollar they pay for talent, the multiplicative effect on company value increases dramatically.

There is anecdotal evidence that, at least in the UK, pay scales for technical talent are lower now than they were ten years ago, for equivalent roles and skill sets.  Real wages have not only failed to keep pace with price rises, they’ve fallen, leading to lower material standards of living for technical talent.  Meanwhile, the complaint of a skills shortage regularly does the rounds.  What is the cause?  Why are UK-based companies so apparently unwilling to pay to attract the best technical talent?  Is low pay for technical talent an attitudinal problem, or a structural one, or both?

Many technical roles in the UK are filled through recruitment agencies.  As they predominate, the salaries they set are taken as the benchmark for all technical salaries.  In this process, the employer asks advice from the recruitment agent regarding salaries and the agent nominates a salary range on the basis of what they think they will be able to find talent for most easily.  There is pressure on recruitment agents to nominate low salaries, as they compete on price, which is ultimately tied to the salary offered (as a percentage).

Given their almost total stranglehold, as gatekeepers, on the employment market, the salaries that recruitment agents nominate, in order to keep their fees to employers low, fixes the salaries on offer to all technical talent.  Technical talent is forced into a “take it or leave it” position.  There is no possibility of negotiating a salary.  When a recruitment agent learns that a candidate requires a higher salary than that on offer via the advertised position, they simply screen them out of the recruitment process.

From the employer’s perspective, this means that they never even see the very best candidates, because the recruitment agent screens them out before their CVs are ever presented.  They remain invisible.  Employers are forced into settling for less than the best talent they need, because the salary has been established for the job specification in question.  The option of increasing the salary on offer to attract a slightly, or even dramatically, better candidate never arises, because no such candidate is ever presented to the employer.

Often times, the job specification asks for just about everything imaginable, while the salary attracts only those with, at best, a partial match to the job specification.  This attracts chancers, who are prepared to represent themselves as meeting all of the job specification requirements, while not actually having the skills and experience required.

The prevalence of chancers applying for roles has led employers to suspect all candidates of being chancers, to some degree.  This causes another problem.  When a candidate presents with broad and deep skills and experience, it can make their CV look less specific to the role advertised.  Consequently, they are assumed to be under-skilled for the role, whereas in fact the opposite may be true.  They may have such an arsenal of skills, that they make a small deal of the specific skill the role demands in their CV, even though they are more than accomplished in it.

Despite careful screening, employers frequently make offers to chancers who have bluffed their way through the process, claiming they can do more and have done more than they really have.  The problem with hiring chancers is that they are learning on the job, making costly mistakes that could have been avoided entirely, by hiring better talent.  While chancers are prepared to work for a relatively low salary, in order to remediate their work history, two chancers do not produce the same bottom line results, for the company, as a single top flight talent who asks twice the salary of each chancer.  It’s a false economy.

The moral to the story is that offering half the salary only attracts people that are half as good, if you are lucky.  They will not be able to produce the outstanding, breakthrough products and offerings that a really good candidate, who costs more, would.  If you want a higher rate of mistakes, as the candidate learns at your company’s expense, burning customer good will and competitive advantage in the process, hire inexperienced and cheap talent.

Setting low salaries for technical talent is a “red flag” signal, to candidates, that the company does not properly value the contribution of its technical people.  A company that is unwilling to move on salary, on discovering an outstanding talent beyond their nominal salary range, is kissing a valuable opportunity for outstanding performance and results goodbye.  On the rare occasions that top technical talent finds a company with a position to fill, sticking rigidly to a fixed idea of what the salary ought to be, without being open to negotiation, is going to guarantee that top talent goes elsewhere, perhaps to a competitor.

By the same token, working for too low a salary, relative to one’s skill set, sends the signal that you don’t value your skills, experience or contribution either.  This leads to abusive or difficult working relationships in both cases.

There is an ageist bias that works negatively in technical recruitment, as well.  Most recruiters, today, are drawn from the ranks of the Millennials, or those born in the decade before.  Millennials, it appears, think that nothing of significant technical merit happened before they were born, whereas in reality some monumental technical feats were accomplished, using computers that were too slow and which had not enough memory, to provide user experiences that were often superior to those provided by profligately wasteful, modern technology stacks.  I know of at least half a dozen of the finest engineers from that era, top talent, currently struggling to find a suitable role for their skills.  While their credentials are impeccable and their abilities beyond doubt, among their peers, recruiters born much later cannot understand or appreciate the value of these long work histories, it seems.  They are frequently overlooked for younger, cheaper, less capable candidates.  Employers are, again, short changed.  Talent is squandered.

About a decade ago, there was an enthusiasm for offshore development, because it was thought that much cheaper engineers could be hired to produce the same quality of result, due to differences in exchange rates and local costs of living.  While the engineers were often impeccable, the use of offshore development teams came with hidden management costs.  The most expensive part of using offshore development teams turned out to be in transferring the requirements and domain knowledge to remote developers.

Irrespective of how diligent, capable and dedicated they were, offshore developers struggled to produce the same quality of finished technical work as those that were embedded in the markets and geographies they served.  Rework was more prevalent and products mismatched to requirements were frequently produced, due to incomplete understanding of the problem domain, despite the best will in the world and sincere efforts to produce the right thing.  The enemy was simply the paucity and limited nature of the rich communication that is required to produce excellent technical things, caused by distance, language incompatibilities, differences in cultural norms and expectations, and time zone differences.

Offshore development proved to not be a route to cheaper results, but the effect on technical talent salaries was that it depressed them, because the perception arose that the same technical talent could be obtained for much less money.  Factoring in the additional costs of managing offshore development, however, this was never true, but that did not stop the chilling effect on technical salaries.  Offshore development often ended up costing more, in the end, than on shore development.

Very few of the best technical talents can afford to work cheaply, due to the cost of living where they are and their stage in life, with its attendant commitments.  Working at less than would be required to maintain a reasonable standard of living, in the overpriced real estate markets that characterise the location of most technical jobs, means that the technical talent must accept a considerably reduced standard of living, effectively subsidising their employer through their own personal sacrifices.

Having worked hard and incurred considerable expenses to become top flight technical talent, it is very unattractive to be required to accept a lesser remuneration today, than a decade previously, yet that is precisely the offer many technical employers are making to potential hires.  For this reason, employers can only fill their positions with people who are able to structure their living expenses to work for less.  This means single people, younger people and people with alternative or supplementary incomes (parental support, etc.).  That eliminates a lot of the very best people and the very valuable skills they have.  It also dooms the people that accept lesser salaries to permanently constrained lives, in which having children, for example, becomes impossible, financially.  Recreational and discretionary spending is also severely constrained.  Work becomes their whole life and drudgery.  Consequently, they become progressively more miserable, increasingly unwell and less productive.  Outstanding products will not pour forth from people working under such duress.

What many financially-oriented people, in a company, fail to recognise and acknowledge is that their company’s value derives critically from the talents they hire, especially in engineering.  Making people disaffected, financially distressed and grumpy, by underpaying technical talent, or else hiring the relatively incapable and inexperienced, puts the value of the entire company in peril.  Even the best marketers and chief executives cannot sell substandard products profitably, if produced by mediocre technical talents.

If a company hires somebody relatively cheaply, to do their hiring and firing for them, they often lack the experience and wisdom to really know what they are looking at, when the candidates for various positions they are trying to fill come in.  Their hiring decisions are apt to be sub standard.  There is also some evidence that they hire to protect their position, not to find the best possible talent for the company.  Feeling insecure about their own qualifications, they tend not to hire outstanding individuals who might eclipse them, within the organisation.  They rarely recognise exceptional talent, anyway.

In recruitment, the inexperienced hiring manager makes some characteristic mistakes.  For example, when technical people applying for a role have done a lot, in their career, it is a total misreading of their CV to assume breadth of experience means shallowness.  This perception arises when you fail to take into consideration the sheer length of their career, relative to that of a person who looks more specialised, but has only been working for a handful of years.  It is also a mistake to hire somebody that appears to be more dedicated to the narrow job specification advertised, because the limited range of their skills gives the impression that this implies depth, on their CV.  What you are actually getting is somebody with not very broad experience, not a specialist that will do superior work.

The lack of experiential breadth means the seemingly more specialised candidate will not know how to really do the job, because real working roles are rarely as narrowly and specifically defined as the written job specification suggests.  Broadly skilled candidates bring highly valuable, additional abilities to the company that the job specification writer may not even be aware the company desperately needs.  Inexperienced recruitment consultants and inexperienced people making the hiring decisions compound and exacerbate this issue, with their obsession with exact keyword matches between CVs and job specifications.  Buzzword compliance is a poor measure of ultimate candidate value.

Somebody struggling to make an entire career, specialising in just one thing, is not a better hire than somebody that has successfully accomplished many things, professionally, including the particular area of skill written up in the job specification.  The more broadly skilled candidate is the more valuable because, not only do they possess the depth necessary for the specialist role advertised, they can also readily adapt to do the thousand and one other things that a real job requires of them.  They are rarely in a position of not knowing what to do, when faced with challenges beyond the nominal job specification.

Strangely, underinvestment also has played a role in depressing technical salaries, in recent times.  While potential investors, with piles of cash, certainly exist, they are currently hoarding it, rather than investing it, for fear of the mass market not having the discretionary spending power to buy anything they might make or offer, produced by any enterprise they might invest in.  As inequality has increased, the tendency to impoverish the middle classes, which describes the economic status of the best technical talent, has also increased.  The richer the richest have become, the poorer the best technical talent has consequently become.  Potential investors are playing out a self-fulfilling prophecy, as their failure to invest guarantees that fewer people have the money to spend with any enterprise.  Enterprises, therefore, find it harder to make a good return on any investment.  As a result, good investment opportunities have become harder to find.  It’s a downward spiral.  Cash hoarders, ironically, are ensuring that the value of their hoarded treasures is more in peril of collapsing than ever before.

The perceived skills shortage has its origins in low pay.  Some of the best talents simply find better things to do with their lives, which are more remunerative or which offer a better quality of life.  As a result, they leave the industry for good.  Their skills are no longer available to potential employers.  Low pay for technical talent drives out excellent skills, leaving a vacuum in its wake and creating an artificial skills shortage.  There may be many candidates, for each advertised role, but the best skills are no longer in the market.  The overall quality of candidates is reduced, as the best and brightest simply exit the market forever.

Great talent, if you are lucky enough to find it, is worth every penny to a company and then some.  The returns on investment in outstanding people are always much more than any increments in salary required, to secure their services.  Setting salaries at too low a level screens out exceptional talent.  Those are the very people who are necessary to create extraordinary offerings.  No company can thrive, or even survive, offering unremarkable products, today.