When Are Your Employee Development Costs Underwater?

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 – will cost more, but you don’t have development costs, they will come in and perform at a higher level right off the bat.  Let’s think about an engineer with experience – for $85K

2. Hire lower/no experience Talent – 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 5 years experience within a year?  That’s the $40K question right!?

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% of their headcount with under 5 years of experience, maybe it makes perfect sense to go after the senior talent. 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 – 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 9 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, there both engineers – so we shouldn’t expect different levels of performance.” Yes, we should – one has 1 year, the other has 10 years – they better be performing different – or I’m paying my 10 year guy way the hell to much!

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?


One thought on “When Are Your Employee Development Costs Underwater?

  1. Employee training is essential for an organization’s success.Training is a program that helps employees learn specific knowledge or skills to improve performance in their current roles.
    Employee training is a process focused on communicating with and teaching an employee information and/or instructions. When things get financially tight in business,
    often employee training is the first thing to go.
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