How Much Does it Really Cost Your Company to Hire a New Developer?

by Colin Kennedy - Feb 12, 2013

We'll soon be releasing our whitepaper about the true costs of hiring a new developer, here's a little taste of what's in store.


Our upcoming whitepaper will answer many questions, including some questions you may never have thought to ask.

© Neuron Global

During the past couple of weeks, some of our team members have been working on a white paper that focuses on identifying and quantifying the various costs associated with hiring an in-house software developer. Joe (who’s heading up the project) sent me a draft the other day, so I could give it a look and share my comments. Without going into too many of the details, let’s just say that I was taken aback by just how many costs are associated with hiring an in-house developer.

The direct costs such as salary, benefits, headhunters, and training are easy enough to identify, but there are so many non-obvious costs (direct and indirect) that are often hidden – and as a result, they’re often overlooked when senior managers calculate the cost to bring on a new employee. Here are a few examples of the kinds of hidden costs I’m referring to:
 

  • The opportunity cost associated with having to turn away a project because you haven’t yet found the right employee to fill the new position. Speaking of staffing, the 2012 Allied Workforce Mobility Study found that it takes, on average, 51 days to fill a position. What that says to me is that there are plenty of development firms out there that are overloading their programming talent, or they’re passing on revenue-generating opportunities because they lack the ability to execute.
     
  • The cost, in terms of time and energy, of bringing in senior managers and other key personnel to interview applicants. The individuals who are needed to sign-off on a new hire are oftentimes the people who generate the most value for you company. Each hour they spend on activities outside of their core focus hurts.
     
  • The cost of hiring the wrong employee is hard to quantify, but the impact can be profound. There are costs that you can associate a dollar amount to, like severance or unemployment benefits, but how do you account for the damage that can be done to morale and productivity? Or what if they’re a crucial component of a development project and they need to be replaced because they can’t work with the client or the other team members?
     

I understand that these concerns are not exclusive to development companies - these are legitimate issues for almost every business. However, I do think that there’s some truth to the idea that these costs are more painful for a professional services firm, be it a law firm, a consulting group, a software development company, and so on. And if you agree with me, I’d love to hear from you about how you go about mitigating the risks associated with hiring. At Neuron Global, we have our own ideas on the subject, but that’s a topic for another time.

One final comment – we will be publishing the white paper I mentioned in the open at some point in the next couple of weeks. If you’d like to receive it, please contact us and we’ll make sure that you receive it as soon as it’s available!

Written by Colin Kennedy. Colin is a Founder and Executive Vice President of Business Development at Neuron Global