Great Resignation or Great Raise?
I’m sorry for the shameless clickbait.
There’s so much b.s. on the great resignation that it’s becoming annoying. But hey, you are reading this so I guess it’s an important topic.
Perception is especially changing as economists emphasize that it’s not about people quitting just for more money – they’re leaving for more purpose in their work, leaders they believe in, opportunities to work with awesome people, and yes, probably more money.
One pass through Glassdoor salaries (with a huge grain of salt) proves just how much talented developers and engineers can demand in this environment. Alarm bells are ringing for anyone hiring software engineers as they scramble to attract and retain top talent. For digital services companies where the people are the product, it can be especially challenging to keep up without squeezing all the margin out of our services.
For those trying to balance rising salaries and costs with the economics of running a business, one thing is abundantly clear – the professional services service model is under immense pressure.
Problem: Profit margins are tight, making frequent raises difficult
It’s clear that most professional services companies can’t afford to drastically raise salaries without an equally drastic increase to hourly rates.
I invite leaders to consider your pricing model: are you billing the same (or similar) rates for work from employees paid $60,000 annually vs. those at $80,000? Across the industry, we discover many businesses earning their highest margin on more entry-level positions. The problem? Those people want to see career and salary growth year over year, but current pricing models make this tough.
Think about your best employees. Those you wish you could “clone.” Those who care deeply about performance and are a huge asset to their team. These driven people are trying hard to advance their careers; they want to provide value to your business and be recognized for it. To keep them, we need to expand our thinking and adjust accordingly.
The answer isn’t employing an exclusively entry-level crew or dismantling budgets to afford great talent. The solution lies in your company’s ability to evolve services in a way that matches the needs of both customers and employees.
Solution: Build a talent that’s aligned with your go-to-market strategy
We know that admirable companies are those that can adapt. I advise owners to revisit service models: are your offerings still fitting the needs of customers? Where can you provide more value and position your services differently to command a higher price level?
Ideally, we can direct the aspirations for professional development of our people toward those evolving high-demand services and capabilities. This fosters trust, loyalty, and engagement. (We recently wrote a piece further diving into this approach.)
To accomplish this, leaders need to spend less time reacting to the growing salary expectations and more time capitalizing on the evolving needs of their customers. In the technology industry, our customers’ needs are changing just as fast as the talent market is evolving. Ideally, leaders can be ahead of the market by innovating their methodologies and expanding the capabilities of their teams.
Consider asking clients for their input on your business model – maybe this conversation leads to new opportunities for you to better serve them. Framing your mindset toward finding solutions helps spark new ideas and encourages better work overall.
Once these new solutions are identified, emphasize employee education and empower your teams to confidently deliver. You can now charge more for these in-demand services while establishing a culture of growth and evolution.
Times are tough out there, but the future is bright
Dave and I founded Parallax to help digital services companies unlock the potential of their tools and their people. We believe that by integrating the tools you already use across sales, delivery, project management, and finance you can immediately optimize your operations, drive profitability and create better alignment and trust across teams. Combine this with a culture that rewards growth and adaptation, and your business will not only stay ahead of the competition and evolving needs of clients, but you’ll be able to meet more than just the monetary needs of your team – helping them (and you) thrive.