A look at the Tech Retention Crisis: Causes, Key Trends & Plausible Solutions
With the tech industry booming and the competition for tech talent on the rise showing no signs of slowing down, it’s no wonder retention is a huge problem in this industry.
According to research from LinkedIn, the tech turnover rate stands at 13.2%, the highest turnover rate of any sector. Xpert HR cites an even higher turnover rate of 18.3% for the industry.
Though one might think the sector was more immune to COVID & the Great Resignation than others, BLS data shows otherwise. According to BLS (Bureau of Labor Statistics) data, voluntary employee attrition rose by 50% at tech companies in the second half of 2021. The software sector also came in third when it comes to increased quit rates showing higher resignation rates for senior-level employees rather than mid-level ones.
In this article, we’re going to address why employee retention matters, why tech employees leave, why they stay, key macro trends worth paying attention to, how to dodge the resignation bullet, and what it takes to thrive & not merely survive.
Table of Contents
Why Employee Retention Matters!
∘ High Revenue Loss
∘ Lower Employee Morale > Lower Productivity> Snowball Effect
Why Tech Employees Leave
Why They Stay!
∘ Most Important Drivers
∘ Purpose as an Emerging Driver
Key Trends Worth Paying Attention to!
∘ The Rise of Tech Salaries
∘ The Shift in Employee Mindset
∘ Other Trends
How to Dodge the Resignation Bullet
∘ Let Technology Help You
∘ Learn from Immune Companies
∘ Promote Transparency, Communication & Engagement
∘ Personalize & Provide a Multi-Faceted Employee Strategy Experience
Final Recommendations
Why Employee Retention Matters!
Given that the average tenure of an employee at Google is 1.1 years, 1.8 at Uber, and 2.1 at Dropbox, you might wonder why you should care about retention if everyone seems to be facing the same issue.
The fact is lack of a retention strategy can cost you big time.
High Revenue Loss
According to Work Institute, the cost of employee turnover lies around 33% of an employee’s salary. Another study by SHRM also estimated that the cost of replacing an employee averages around 6 to 9 months of their salary. Apart from revenue lost, you must also factor in the time required to replace your developer.
Devskiller estimates that you need around a month and a half, 43 days to hire a new software developer. This can cost you approximately $33,251 apart from the onboarding costs.
Add to that the time it takes you to bring the new employee up to speed. This might create bottlenecks, as your best employees take on some of the extra work.
Lower Employee Morale > Lower Productivity> Snowball Effect
In the long run, it would also lead to lower employee morale and a snowball effect where one resignation leads to another.
Hence making employee retention a priority can reel up your team’s productivity, improve your company culture, and reduce your expenses in the long run.
Why Tech Employees Leave
According to ICONIC’s most recent future of work report, 83% of tech employees leave due to dissatisfaction with the job role, 78% leave due to dissatisfaction with career growth and professional development, 75% leave due to salary or compensation reasons, while 73% leave due to burnout.
Why They Stay!
Regarding why they stay, 97% cited career advancement, 92% cited salary, 90% cited team & culture, and 89% cited company mission. Interestingly even though 90% agree company culture is a reason to stay only 24% cite it as a reason to leave.
Most Important Drivers
Career growth, professional development, and compensation turned out to be the most important factors when switching or quitting a job.
ICONIC’s survey also noted that when it came to employer and employee sentiment regarding resignation reasons, both agreed across major categories except team & culture, and company mission. Most employers 71% believed team& culture affected resignation, while only 24 % of employees reported it as relevant. Additionally, only 15% of employers attributed belief in the company mission to be relevant to resignation, while 62% of employees cited it as relevant.
Purpose as an Emerging Driver
According to tech employees’ team & company culture are nice to have, but not a reason to leave. This means the workforce is placing more emphasis on the company’s mission and employee purpose. This is extremely important for Millennial and Gen Z employees; that’s why companies with a purpose report 40% higher retention and 30% higher levels of innovation compared to non-mission-driven ones.
Key Trends Worth Paying Attention to!
With the fast pace of change & innovation, all companies are soon to be tech companies or heading in that direction.
That’s why it’s important to stay on top of the following macro trends:
The Rise of Tech Salaries
As per Dice’s 2022 tech salary report, the average tech salary has increased to 6.9% and now exceeds six figures ($104,566) showing power has shifted to the hands of the candidate. Subsequently, companies are adjusting their compensation and bumping it up; for instance, Amazon declared bumping its base salary from $160000 to $350000.
Though salary is a very important driver for why tech talent quit, Art Zeile, CEO of DHI Group, advises organizations not to solely focus on a compensation-based adjustment approach for retaining them. Organizations should also focus on how best to engage them, and base their bonus structure on team-based OKRs, objectives & key results, rather than on individual ones.
The Shift in Employee Mindset
According to both Zeale, CEO of DHI Group, and Brownridge, Deloitte’s digital workplace leader, employers should be aware of the changing employee mindset shift. It’s no longer about work-life balance but about life-work integration. People are bringing their lives into their work as opposed to their work into their lives.
Due to that, Zeale states DHI group has made many adjustments, like allowing for hybrid/remote arrangements and personalized flexibility, re-imagining the notion of vacation time, offering a truly flexible annual leave, early out Fridays, and even specific mental health days. Consideration for healthcare also shifted whereby they absorbed all associated costs associated with increased healthcare and added fertility benefits.
More importantly, he stresses the importance of personalizing individual experiences and committing to driving diversity, equity, and inclusion. Training managers, and introducing employee resource groups (voluntary employee-led groups whose purpose is to promote diversity & inclusion) are also of utmost importance.
Other Trends
Other trends worth noting are:
- The generational divide between millennials and baby boomers:
Younger generations value salary, career growth, and purpose more than older ones. - The increasing demand for remote work & exodus of tech talent from tier 1 cities that require in-office work.
- The venture & entrepreneurship trend that drives technologists to launch their own companies or join other early-stage ventures.
- The rising demand for hot tech skills like lambda: serverless computing, machine learning, and cloud computing
- The rise of wellness as the most recent metric to comprehend employees and offer personalized experiences.
- Fairness, equity & inclusion as flexibility drivers: flexible work, geographical salary considerations, & considering different investments for different employee segments.
How to Dodge the Resignation Bullet
If you’re not a Google, an Amazon, or a Facebook, Zeile advises you to work on getting your corporate branding and value proposition in front of candidates. Additionally, make sure to combine your compensation benefits with the notion of work from home or hybrid work.
Let Technology Help You
Add technological tools that enhance your company’s overall communication. A Harvard Business Review article showed they provide better direction, insight, and governance enabling your employees to have more autonomy in the long run.
Learn from Immune Companies
When asked what immune companies have in common, Josh Brenner, Hired’s CEO, exclaimed they mainly prioritize and seek minority prospects. They extend offers to select candidates more promptly, are more transparent about compensation, and keep consistent salary offers for people in the same position.
Daniel Zhao, a senior economist at Glassdoor, also revealed their competitive edge lies in focusing on culture, diversity, inclusion, active leadership, opportunities for advancement, and mental health resources.
Examples
Naming a few are companies like Dropbox, Dialpad, Atlassian, Slack, Hopin and 15Five which were featured on the list of ten most innovative workplaces for 2022.
Dropbox, for instance, changed its offices and its schedule to adapt to the new realities of being virtual. 15Five updated its tools to help thousands of customers develop better manager relationships.
Promote Transparency, Communication & Engagement
To sum it up, the talent issues that IT is currently facing are not radically different from the talent issues that almost every organization is currently experiencing.
As per Dr. Craig Beach, psychiatrist & workplace mental health Expert & CEO of Open Mind Health, what IT workplaces need is a roadmap that balances the 3 big workplace Ps: Purpose, Positivity, AND Productivity, so that they can:
- Shift from legacy leadership styles to empathetic approaches that inspire, motivate and create meaning in the workplace
- Promote open, authentic, and engaged conversations
- Reduce the stigma around seeking mental health care
- Develop innovative productivity benchmarks that create psychological safety for employees
Personalize & Provide a Multi-Faceted Employee Strategy Experience
“Ask,” says Caroline Cyr, Talent & Organizational Development Partner at Diversis Capital.
The answer lies in your employees’ responses.
What may work for one employee segment may not work for another. The more personalized your approach, the more powerful the outcome.
Most importantly, survey your employees, empower employee resource groups, and figure out how to upskill your leaders.
Abide by John Brownridge, Deloitte’s digital leader, & Mary Guirovich, CEO & career advancement strategists’ advice. Discover how your employees work and interact with your company. Find out how lonely they feel, how connected they are to your purpose, and how this relates to their feeling of belonging.
Then devise a multi-faceted employee experience strategy accordingly.
Final Recommendations
Coasting on having a retention playbook may have worked in the past.
However, it no longer works today.
Power has shifted, and the market now favors the employee.
Thus, to stay competitive in tech, make sure you combine compensation with the notion of remote or hybrid work. Focus on personalized flexibility, commit to DEI, shorten your application process, and provide flexible benefits and mental health resources.
Don’t forget to upskill your workforce and offer plenty of opportunities for advancement.
Last but not least, get your corporate branding right, and always ask your employees what matters most.
After all, the secret to your success lies in your unique bespoke approach.
