Why are talents so important for the success of your company? If you are not certain, you should know that Price’s law states the number of employees squared times average salaries squared equals total company cost. In other words, as you recruit more talented staff to work with, it will exponentially increase your overhead costs in terms of salary and benefits. You will also have to hire additional managerial staff to oversee those new talents, which means that you must allocate more money towards managerial salaries too.
A rule of thumb named after economist Alfred Marshall, in which rising salaries lead to more people accepting a job. This eventually creates its own supply-and-demand problem; when salaries go up, people have less incentive to work and maybe look for higher wages elsewhere. Businesses can’t afford high prices without losing profits, leading to understaffing and poor performance as customer service suffers because it takes longer to get things done.
In a talent marketplace where each individual can determine how much they’re worth by having access to several employers at once, companies need to learn how to attract and retain top employees while keeping their talent pool filled with qualified candidates who won’t drive their recruitment costs through the roof.
As any market tightens and prices rise, businesses will find themselves competing fiercely for top talent. To keep from being blindsided by rapid price increases—as well as to maintain a competitive edge—companies must make sure that they understand exactly what makes their employees tick. What motivates them? Why do you think your company should be an employer of choice? What is your approach to internal employee training?
If you want to secure some of those rare individuals capable of producing groundbreaking innovations in your industry, why should you hire them over other potential options? Learn how your company can secure the best possible candidate for a given position, even if other companies try to outbid you on compensation packages.
All too often, companies fail to invest in their human capital. However, there is a strong correlation between hiring great talent and revenue generation: According to Price’s law, a well-known statistical law in economic theory, doubling expenditures on employee salaries and training results in only a 6% increase in productivity per head.
Furthermore, hiring one employee with skills that are rare or non-existent can lead to profit margins several times higher than those generated by his less gifted colleagues. Given that average turnover rates range from 10% to 20%, it is crucial for businesses to capitalize on talented employees by keeping them happy and engaged over their careers at your company.
While it’s easier said than done, you can’t deny that hiring talented employees is essential to running a successful business. From your trusted accountants and lawyers to software developers and graphic designers, your team comprises of diverse backgrounds and expertise that come together to form your company’s unique selling proposition. But what exactly is a talent? How do you go about finding one? And what should you know when trying to attract them? That’s where Price’s law comes in: Price’s law states that in any market economy, as productivity increases output will rise but the price will fall proportionally.
If we apply Price’s law to talent recruitment: The most experienced engineers/designers/programmers will be expected to command higher salaries as their productivity increases over time; however, businesses seeking these candidates must keep costs low by offering lower pay initially, thus attracting less-experienced workers—if they want to hire at all! So how do you balance attracting top talents while staying within budget?
According to a study of Price’s law, also known as Pareto’s Law, 20% of your employees will drive 80% of your sales. That means you should pay close attention to talent recruitment because these employees may be one of your most valuable assets. Research shows that more and more companies are facing a shortage of highly-skilled workers.
The market is changing and businesses must adapt or risk losing out on recruiting talented candidates who go elsewhere instead. It makes sense why some companies try hard to avoid paying high salaries for new hires; however, in terms of productivity, high wages do make an impact, especially in industries like IT where talented individuals have few job opportunities outside big firms such as Google or Facebook.
Instead of just focusing on how much you need to pay an individual, it pays off to look at what benefits you can offer them, such as good health insurance or interesting projects. A good company culture with fun perks can attract both customers and great talent. In addition, when hiring, consider developing a long-term relationship rather than searching for temporary fixes which may cause problems down the road when it comes time to leave.
One of the best ways to secure a talented individual is to go after someone who is already working in a competitive position. The counterintuitive rationale here is that if you want to find an employee that has done well on another team, it’s best to go after someone from one of your competitors. Why? Because they’ve done well and will have plenty of other options. It also helps if you can get an insider from one of your competitors, because then he or she will know all about what went right (and wrong) at their current job, giving you valuable intel about how to attract talent away from your competition.
You might not even need to pay up; it could be enough simply offering something else like prestige, better office space, etc. Often times just being able to say So-and-so works here now opens doors with other candidates. From there, focus on adding value; again it comes down to perception.
If you want to bring people into your organization in droves, create a culture where people feel valued and respected. Also, think about what sort of feeling people come out with when they leave each day. In general, we love coming into work when:
- We’re solving hard problems together as a team
- We feel appreciated by our boss and coworkers
- We see our work having an impact beyond ourselves/teammates
- We feel challenged
The most successful companies go to great lengths to source and retain high-quality talent. In their book, Built To Last: Successful Habits of Visionary Companies, Jim Collins and Jerry Porras studied 18 long-lasting companies—and found that all had an obsession with hiring top-tier talent.
We came to see that it was rare that a company would become great unless they were obsessed with finding, attracting, developing, and retaining first-rate people, write Collins and Porras. This need for prime talent didn’t just apply to CEOs or elite managers—it applied across an entire organization. Collins calls these companies people companies. Talent is how such firms attract customers, generate revenues, and reduce costs. So how can you tell if you have truly talented workers?
Other employees are replaceable. Talents, however, aren’t. Once a company loses a talented employee, they won’t be able to find another person with that specific skill set and knowledge base. Most companies believe that it’s worth giving these people higher salaries because of their usefulness to a company—but as Price’s law shows us, paying more doesn’t necessarily lead to an increase in overall productivity if your business is not turning a profit. Sometimes, paying more can do more harm than good since it will limit your ability to scale up when necessary.
In today’s talent-driven workforce, hiring talented people is a key factor in achieving any kind of growth—not to mention it improves your bottom line. A 2015 study by staffing agency Adecco found that 52 percent of CEOs agree that a company’s most valuable resource is its employees. That number jumps to 81 percent when looking at Millennials (18–34-year-olds). While it may be difficult to measure how much a certain type of employee will contribute to your company and its overall revenue, there are concrete ways you can determine how much a particular candidate would boost your team.
Nowadays, if a company wants to remain competitive in today’s market, it needs to offer excellent working conditions. In fact, some companies don’t even hire talented employees; they buy out their competitors instead. If a particular skill or talent is rare or difficult to acquire and your company doesn’t have enough of them, there will be growing pressure on you to find them quickly in order to remain at least one step ahead of your competition.
Be sure that your recruitment team has solid strategy skills in place; otherwise, it might not be able to attract top talent anytime soon. Only by identifying and attracting new talent can a company hope to survive and thrive amid ever-changing economic circumstances. Talents set companies apart from each other, giving firms an edge over those who don’t understand how to access and retain employees with these special abilities.
If you’re like most small businesses, finding and retaining top talent might be the number one problem you face as an entrepreneur. Facing stiff competition from larger companies, it can seem like you’re always fighting an uphill battle to find and keep the best employees. Fortunately, there are numerous steps you can take to build your company’s reputation among employees and make your company is a place that people want to work for.