A company is only as good as the talent it can hire and keep. If that’s true, then there’s probably never been a more challenging time to build a high-growth tech company. The demand for talent continues outstripping supply, and the gap created by this tech talent shortage looks like it will continue widening.

“The technology sector is fiercely competitive, and today many qualified candidates have more choice than ever,” says Trisha Borme, senior manager and talent acquisition lead at Genesys. That fierce competition drives fierce business costs.

In its report “Future of Work: The Global Talent Crunch,” organizational consulting firm Korn Ferry predicts a deficit of 85.2 million workers worldwide by 2030. The cost? $8.452 trillion in unrealized productivity due to a labor-skills shortage. The consequences of tech talent shortage look particularly harsh for the U.S.:

“The United States, currently the world’s leading technology market, can expect to lose out on $162.25 billion by 2030 due to sector skills shortages. These talent deficits may imperil America’s status as the global tech center.”

How did we get here, and what does it mean for tech companies who need talent?

The Landscape of the Tech Talent Shortage

By 2020, there will be a surplus of 1.4 million software development jobs reports USA Today, citing the U.S. Bureau of Labor Statistics. That prediction seems to be holding up. At the time of publishing, Code.org reported 570,926 open computing jobs nationwide—but only 49,291 computer science graduates entered the workforce last year.

Why does the demand for tech talent appear to be increasing exponentially?

Every Company Is a Tech Company

Your grocery store is now a tech company. So are daycares. And restaurants. Every business directly or indirectly depends on technology, which means all businesses need tech talent. Consider a nationwide grocery chain searching for developers who can build and launch logistics software. How can a startup compete when recruiting the same talent as an enterprise that can offer higher salary, benefits, and more?

And the competition doesn’t end there. Nonprofits need tech help. So do government agencies. Not only do they need developers, but also related positions that demand a high degree of tech literacy, such as digital marketers and customer success managers.

In such a crowded market, how do tech companies attract the talent they need? And what’s the difference between that talent taking on the risk of a startup and choosing the stability of a larger tech company?

Tech Talent Wants Something Specific

Company culture is the top reason tech professionals choose their employers. When the U.S. Tech Census surveyed eight emerging tech hubs across the heartland, company culture ranked as the most important factor in tech talent taking a new job, followed closely by a passion for the product of service. Compensation never ranked higher than third.

What does that mean? It means traditional recruiting strategies, which are awful at showcasing culture, are dying expensive deaths (more on that below). It means the tech talent in your market may be more familiar with your company culture than your recruiters. And it means everyone in your talent pool probably has a wishlist of companies they want to work for.

Think about it. Every person in your city who’s highly skilled in a certain field (software sales, marketing, development) has a list of local companies to watch. They have to. Maybe their employer will hit an exit. Maybe a pivot stops their passion for working on a particular product. So they continue working on relationships, following the press, and maybe even freelancing on the side. If your company isn’t on any wishlists, good luck, because the situation gets worse.

How Turnover Silently Kills Tech Companies

It’s not just the increasing demand for talent that hurts tech companies. As an industry, technology (especially the software side) has the highest turnover of any business sector at 13.2 percent. That means the tech talent shortage feeds a cycle of spiraling costs.

As talent turns over, expenses balloon. The cost of turnover now ranges from 50 to 250 percent of each position’s salary.

What does that mean for tech companies?

For a SaaS startup in the Midwest, that could mean of the costs of employee disengagement, attrition, and recruiting could exceed its seed round. For enterprises, it means spending seven to eight figures just on recruiting. Consider the annual cost of 50 employees salaried at $70,000 each:

$204,000: Average Annual Cost of Disengagement (CoD)

Calculated using research from Gallup and LinkedIn showing that an average of 17.2 percent of employees are disengaged, and that a disengaged employee is 34 percent less productive.

[$70k avg salary x 50 employees x 17.2% avg disengagement rate x 34% loss in salaried productivity]

$682,500: Average Annual Cost of Attrition & Replacement (CoAR)

Calculated using research from LinkedIn showing an average turnover of 13.2 percent for technology and software companies, and average total business costs of losing and replacing an employee of 50 to 250 percent of their annual salary.

[$70k avg salary x 50 employees x 13.2% annual turnover x 150% midpoint cost of losing and replacing an employee]

$886,500: Total Cost of CoD and CoAR

That’s nearly $1 million per year just to maintain a team of 50, not to build it or expand it. The costs aren’t static, either. One wrong hire can bring a whole team down—or for a startup, the whole company. “For businesses, there is no quicker way to damage your culture than to bring a candidate in that doesn’t share the company’s core values, even if they possess the desired skills, knowledge, and achievements,” says Borme. 

It’s time to rethink how we recruit tech talent, but where do we start? How about by aligning the recruitment and hiring process with what talented tech professionals tell us is most important: A company culture they fit into and want to work in for the long haul.

A New Recruiting Solution for the Tech Talent Shortage

Traditional skills-first recruiting can be summarized as:

1. Post a job.
2. Wait.
3. Hire a recruiter.
4. Wait.
5. Return to step one.

That process is broken. It creates escalating costs in the form of time and money, the two resources tech companies (especially startups) cannot afford to waste. A corporation can absorb the cost of a bad hire; a startup can’t.

The answer: Turn candidates into fans of your culture before they ever see a job post. “It’s not just about the job description anymore,” says Borme. “If a candidate fits the culture, they are more likely to be successful and stay at the company longer. You have to enjoy the work you do, the people you work with, and the way you get things done.”

A culture-first recruiting strategy would look much different than a traditional skills-first approach. It would:

• Attract candidates who are culture fits before they ever see a job post.
• Match talent to your company by ensuring culture fit before assessing skills.
• Hire people who already feel like part of your team.
• Retain them at such a high percent that recruitment costs plunge.

We call this inbound recruiting. It aligns with how tech talent approaches finding jobs, and it creates a funnel for tech companies that reduces costs and delivers highly qualified leads.

Powderkeg is currently helping scaling tech companies execute inbound recruiting campaigns that leverage our community of thousands of experienced tech professionals. This community includes mid-level and senior engineers, leaders, marketers, salespeople, and operations managers. Click here to learn more about our inbound recruiting services.