The cost of keeping good people

August 11, 2010

The nonresidential construction boom keeps rollin' along, and AEC firms are rollin' in dough, as our Giants 300 ranking for 2006 clearly indicates. Paradoxically, one of the chief restraints to continued growth is a direct function of the industry's current success: There are so many jobs out there, AEC firms can't find enough qualified professionals to run them.

Many firms are experiencing a huge shortfall of talent, especially for seasoned professionals who can take a job by the horns and go with it from start to finish. Recalling the painful recession of the early 1990s, management at these firms has been reluctant to chase too much new business for fear of having to lay off a lot of new hires when the bubble bursts (and someday it will).

Take, for example, Seattle-based NBBJ, ranked #4 among architecture firms on BD&C's 2006 Giants list. NBBJ's chairman, Friedrich Böhm, says "the most important word" he uses these days is "No! No! No! I'm saying that about 95% of the time." Böhm was referring primarily to international projects, but his cautionary approach is echoed by management at most major AEC firms these days.

Nor is it all that easy to buy or steal talent, even if you can get it. Participants in a recent CEO conference run by management consulting firms A/EFCG (www.efcg.com) and the Greenway Group (www.greenway.us) gave remarkably different responses when asked to estimate the true cost of hiring a professional employee.

At the low end, one-fourth of the firms pegged the cost at about $15,000, including recruiting fees, training, management and HR time, severance, and advertising.

The median figure, $30,000, included all of the above expenses, plus the cost of forgone revenue, lost productivity and production, relocation fees, and inefficiencies related to getting the new employee fully up and running.

But for the top quartile of respondents (the group that is probably most akin to the firms in BD&C's Giants 300), the real cost of replacing a skilled professional is $50,000. In addition to all the expenses listed above, there will almost always be a higher salary for a new employee than what you were paying the lost employee.

On top of that salary bump, though, are the really high-ticket intangibles: the clients that experienced people take with them; the damage to your firm's image and brand ("What's going on over there? Can't they keep good people? Maybe we should rethink our relationship with them"); the lost knowledge base, from the years your firm spent training and educating the lost employee.

Worst of all, you may find out that lost employees weren't quite the star performers they appeared to be, and you're stuck with the added cost of rework on their projects.

Fifty thousand dollars. Think about that the next time a valued employee asks for a raise.

         
 

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