How do I Increase Software Developer Retention?

Howdy, Upstarts!

One of the biggest challenges facing lean startups is the challenge of incentivizing and retaining talented software developers. One of the key advantages of a lean startup is the ability to pivot quickly in response to the market, and without a reliable engineering team, a startup simply cannot move as quickly as it needs to.

A Touchy Subject

In my experience, this is a delicate subject, because Software Developer turn-over is a massive problem facing startups. In a competitive market, it can be stressful to retain your Software Developers.

By far the most effective way for a Software Developer to increase their salary is by getting a competing offer and either accepting that offer to change companies or leveraging that offer with their current employers. This is a result of the free market; and although it can be troublesome for a startup, each employee has the right to determine their destiny, and as long as these issues are handled with respect then they can be beneficial for both the employee and the company.

Unfortunately when a Software Developer appears to use an offer as leverage with a startup, it is far too common for people to react with hostility and aggression.

More so than anyone, startup CTOs understand how significant of a threat employee turn-over can be to a burgeoning software engineering organization. It can be easy to see a negotiation as a contest, or as combat, which makes it easy to see the person across the table from you as an opponent, or as an enemy. Although this might create a healthily aggressive mindset for negotiations between different companies, it also creates a toxic environment when used against members of your team.

It is critical to avoid such toxicity and hostility when building a startup!

But to approach this matter with maturity, we must define a productive framework of understanding, and this is what distinguishes the game-changing CTOs from the dilettantes.

Identify the Competing Values

I know that I am beginning to sound like a broken record, but this point deserves repetition:

Software Developers will receive competing offers.

You will never be able to eliminate Software Developer turn-over; but, with the right strategy, you will be able to manage it.

At the end of the day, your employees are responsible for taking care of their families and they owe you nothing more than the services that they pay for. The employment relationship is a business relation, and it depends on ensuring the best outcome for both parties, your employees, and your company. To approach your employees with anything less than this level of maturity will inevitably foster toxicity and hostility in your startup. With this in mind, we can analyze this question.

I need for you to understand that your relation with your Software Developers is transactional: in exchange for their services, you provide them Value. That means that this competing offer is the same proposition: in exchange for their services, the Software Developer is being offered Value. If your Developer is considering this competing offer, then there must be some marked difference between these two transactions. As a rule of thumb, the services that are expected from a Developer are universal across the board, which logically implies that the difference between these two transactions lies in the difference between the value being offered to the Developer.

So when it comes to Retaining a Developer with a competing offer, the challenges of handling this competing offer lies in identifying the Value being offered.

The Key to Success - Maslow’s Hierarchy

So the matter boils down to identifying the differences between the Value being offered to your Developer, so we have to create a framework of understanding that empowers us to assess Value and to create an effective Developer Retention Strategy.

When it comes to analyzing Value, I find that the most important tool in your tool belt is good ole Maslow's Hierarchy. Maslow’s Hierarchy is a psychological theory that arranges the fundamental needs of every person into five Tiers of increasing importance, with each Tier dependent on the one before. The lower the Tier, the more fundamental the need. The core idea is that humans must fulfill the Tiers in order: that means that a human will not worry about the Second Tier if the needs of the First Tier are not fully satisfied. Thus, it forms a natural hierarchy of needs (Hmm… Maybe that is where the name comes from… )

These Five Tiers are:

1. Physiological

2. Safety

3. Belonging

4. Esteem

5. Actualization

If we apply this concept to our compensation package, then we can analyze Value by how it addresses each of the Five Tiers of Maslow’s Hierarchy, and we can identify creative (and cost-effective) ways to address each Tier.

As an Engineering Leader, I can address each of these Five Tiers in different ways. address the Physiological Tier with a competitive software developer salary. I address the Safety Tier by providing a positive, non-working environment, in which my Software Developers feel safe, healthy, and without an overwhelming amount of stress. I address the Belonging Tier by defining a company culture that has clear and positive values, and by fostering a sense of company and ownership amongst my Software Developers. I address the Esteem Tier by awarding Job Titles and by recognizing the work of my Software Developers as publicly as possible, taking the time to personally thank them at every opportunity. I address the Actualization Tier by working with my Software Developers to create personal development plans and provide one-on-one mentoring opportunities so that my Software Developers always have what they need to enhance their skills.

Your Software Developers will always select the offer that provides him the greatest ability to address all Five Tiers of Maslow’s Hierarchy.

So to build a successful Employee Retention Strategy, you must address Maslow’s Hierarchy, in a cumulative sense.

In general, a competing offer will provide the Software Developer with a higher Salary. Salaries address the Physiological Tier of Maslow’s Hierarchy. Every one of your employees needs enough money to live and to support their families, without which they simply cannot survive. So a competing offer with a higher salary is addressing this Tier. If you stop your analysis there, then managing competing offers for your Software Developers becomes a bidding war, and you trap yourself in the world of numbers. And unfortunately, startup salaries (at least during the earlier stages) will never be able to measure up to the larger Software Engineering companies.

However, by using a framework of understanding that centers around Maslow’s Hierarchy, we open up three additional methods of counter-attack against a competing offer for our Software Developers.

Let’s look at some examples.

Let us say that your Developer received a competing offer for a higher salary, in the same industry, at a company of similar size, and a better job title. This competing offer better addresses Maslow’s Hierarchy in two ways: by providing a higher salary, it better addresses the Physiological and Safety Tiers; and, by providing a better job title, it better addresses the Esteem Tier.

However, this offer addresses only two Tiers and you have all five Tiers with which to play!

A counteroffer might include a smaller salary raise (addressing the Physiological and Safety Tiers), a plan to work more closely with an influential team member (addressing the Physiological and Safety Tiers), and a plan, based on this work (addressing the Esteem and Belonging Tiers), to move towards a similar job title (addressing the Esteem Tier), while offering some additional privileges, such as work-from-home flexibility (addressing the Esteem and Self-Actualization Tiers). Oftentimes, such a counter offer has helped me to retain some key Software Developers, while only costing some of my time and not breaking my budget.

Although a simple example, the key to crafting such an effective counteroffer is by working within the framework of understanding provided by Maslow’s Hierarchy.

Focus on Value, not on Cash

It is important to understand that competition is a natural consequence of a free market, and that this also means that there will be competition for the best Software Developers. To ensure the success of your startup, you need to be very strategic when creating your employee retention plan.

It is important to understand this and to approach these conversations with calm hearts and level heads. If you allow yourself to become frustrated, then you put yourself in a position in which you cannot focus on the situation at hand.

Keep calm, and focus on identifying the Value Difference presented by the competing offer and use Maslow’s Hierarchy to create an effective Developer Retention Strategy.