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Reflection – Daylen Thane

by on November 27, 2007

Keep the old or hire the new?

Traditionally, organizations that are considered evolving and agile have placed heavy emphasis on retaining long-term employees in an effort to retain their tacit knowledge assets. This has become accepted, but is it right? In the world of Information Organizations, what is more beneficial for companies: to hire new employees or to keep the veterans around? What is our job as Information Managers when it comes to making decisions regarding the staff with seniority (i.e., to keep them around or to hire new employees).

Hiring and training new employees is extremely expensive for companies. The cost of turnover rate can reach 150% of the employees’ annual compensation figure.1 Hiring and training new employees takes a lot of time from the management staff, occupies advertising and interviewing resources, and it causes productivity loses to the company. Up to the first year, the cost of new employees outweighs the benefits of hiring them. The cost of hiring new employees equals to “Employee Cost” (Annual Base Salary + Benefits Cost (estimated at 30% of base salary)) + “Loss of Productivity from Other Employees Filling in for Vacant Position” + Cost to Hire (HR/Manager hours spent on looking for an applicant, writing job description, and interviewing, etc.) + “Training Cost” + “Days to Productivity” (Time required for the new hire to reach 100% Productivity) – “Salary Savings” (Amount of unpaid salary and benefits during position vacancy).2

Although hiring and training new employees can be expensive, paying veterans’ salaries is also very costly for organizations. Veterans’ salaries are usually high due to the years of experience and expertise they possess and to the years of hard work spent at the company. For example, as a certified Medical Technologist (MedTech) I got paid up to $15/hour less than MedTechs who have worked at the company for 15 years. However, I perform exactly the same tests as the other more experienced MedTechs, work exactly the same number of hours, and have the same responsibilities. If only salary (and cost of benefits) is taken into account, one would think that it is in my company’s best interest to recycle MedTechs every couple of years.

Because managers spend a lot of time destroying employees’ old habits to create innovation, many organizations believe that a solution to this is to hire new people with new ideas. I believe this is true. But, I also believe that it is the manager’s duty to produce incentives so that current employees create fresh and innovating ideas. Managers can send veteran employees to conferences and courses so that they stay on top of their technological skills, learn about exciting and new technologies, and come back with fresh ideas. However, the best incentive employees can have to produce innovating products is for them to be happy at work and with the project they are working on. Diego Rodriguez, from Business Week, says, “The perfect work assignment for someone who needs to be innovative is one that balances clear, achievable goals with just enough task challenge to ignite the fires of creativity that lies within all of us.”3 He also mentions that personal happiness is the solution to creativity and innovation. “Help happiness bloom [at the work place], and innovative behavior will follow.”3 Interesting enough, we were discussing this exact same topic in my project management class; our instructor was informing us of a research study in which different project managers and team members were surveyed regarding important factors for them at the workplace. Most of the interviewees agreed that being content at work, and having a challenging, friendly, and nice work environment was what kept them coming back to work everyday.

Veterans have many good qualities. One of them, which I consider extremely important, is loyalty. Organizations need loyal employees to keep the company’s culture fun; these employees are usually very excited about what they do. Loyalty means giving to the organization for more than money. It means working at this company because you really care and appreciate what you do. Loyalty is a quality that is only acquired with time, and new employees will most likely lack of it.

Experience and tacit knowledge are great qualities of veterans that cannot be passed on to new employees. Experience is acquired by years spent working in the field. Tacit knowledge is the knowledge only known to the employee, and it is hard to share; when this employee leaves the organization, this knowledge is lost as well.4

In conclusion, Information Technology (as well as others) Organizations should (and I am positive most of them do this already) weight the risks and benefits or hiring new employees versus keeping the veterans. The benefits of hiring new employees include fresh and innovating ideas, creativeness, and savings from lower salaries. The benefits of keeping veteran employees include savings from the cost of hiring and training new employees, the veterans’ loyalty, experience, expertise, and tacit knowledge.

References:

Bliss & Associates Inc. “Cost of Turnover”. http://www.blissassociates.com/html/articles/cost_of_turnover15.html
Caliper. “Cost of Employee Turnover Calculator” http://www.caliperonline.com/solutions/turnover.shtml
Diego Rodriguez. “Happiness in the Art of Innovation” http://www.businessweek.com/innovate/content/mar2006/id20060306_579621.htm?chan=search
Selamat, M.H. & J. Choudrie. (2004). The diffusion of tacit knowledge and its implications on information systems: The role of meta-abilities. Journal of Knowledge Management, 8(2), 128-139.

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