Employees or Customers?

Starting from a very first experience in IT, you probably know the primary goal of customer-oriented businesses: “Customer is always right” or “We are here to serve our customers.” And (surprise) we agree with that. Customers define if a project will stay alive or die in a year, whether your company will grow fast from a small startup to a substantial worldwide corporation, or stagnate trying to survive between investment injections. Every second entrepreneurship book is saying: “Customer votes for your product with its wallet.” But let’s try to dive deeper into this statement.

Who Your Customers Are?

It doesn’t matter if your business is providing end-customer products or services that support other products. Your customers are people who use your deliverables. And all the companies, regardless of size, dream of having employees obsessed with the idea to serve those people. Why? Let’s bring some common sense to help us here. From the beginning of trading, people understood that it is much more profitable to convince many people to spend a tiny bit of their money rather than focusing on a small group of people ready to invest more significant resources. That’s why each idea should pass a list of procedures (aggregated under the words Market Analysis) before becoming a business to identify how many people may be interested in it. Those people will be the primary source of your business income.

But let’s hold a dream about being a successful business owner and face a bit of reality. Having a good idea is usually not enough. You need initial capital to kick off the business. And here come Investors (customers committed to your product even before its creation). All the people who worked on early-stage startups know: investors are sometimes more critical customers than real ones. Those people are giving resources to a business because they do believe in the possibility of your success. And since those people are limited, losing their trust in the early stages becomes more critical than losing usual customers. This is the place where significant conflict is happening. Investors want to see growth in numbers, but customers don’t care about numbers and starving to see improvements that fit their needs. Good news: usually, improvement in customer satisfaction leads to growth in numbers investors are interested in. Bad news: currently, the market is overfilled with offers of products and services, and it may take time for a customer to find your business and come up with an idea to replace its currently used solution with yours. Companies are starting to promote their deliverables early to get feedback as fast as possible and spend vast amounts of money to collect customer needs. Also, investors are pushing projects to release in the early stages (to analyze risks of non-returning investments). But still, businesses should bring a solid solution to the market to ensure success and get first customers. Sounds like a race condition? Yes, it is. It is a pure race with judges represented by investors and users, and the main participants are Employees.

You may want to say, “Wait! Why are employees highlighted with Bold font? Don’t you want to say that they are also customers?”

Yes. And let us try to prove that.

First of all, employees commit to a product they are working on. They are investing the most valuable resource they have in their life — time. Instead of spending it with family and hobbies, they decide to join your project. Yes, they are compensated with salary and other benefits, but please look around, and you will see many other companies that they can be part of. From a variety of businesses going around, people choose the one they committed the most. And this choice makes them Customers.

Employees are not usual customers compared to end-product users and investors because they may not be interested in your product and your business’s revenue. They consume another type of deliverable — a culture.

What questions do potential employees usually ask or are interested in during interviews?

For sure, the first place will belong to compensation-related questions, just because the primary purpose of work is to get some resources to survive.

But right after it, you will hear questions like:

• Describe to me how a workday usually goes in your company/unit?
• What products are you working on?
• What methodology are you using to manage the workload?
• What is the structure of the team, and how many people work there?
• Do you have any team-building activities?
• How are decisions usually made in the company and the team?
• What the company values the most in its employees?

etc.

You see, candidates are trying to find cultural aspects that resonate with their understanding of how “The Best Employer” should look. And since many employers and projects are going around (considering that salary ranges for the same position are more or less the same across the market), The culture is becoming a highly valuable attractor.

Let’s spend a tiny bit of time and see how different types of companies usually compete for employees:

• Startup. Usually, a small-size organization with a high dependency on investors and a high focus on end-customer deliverables. It is pretty easy to identify a startup just by reading a position description. You will find many “must-have” requirements related to the technologies they are using (just because they don’t have time to teach you and searching for a specialist that will contribute from Day 1). Startups usually don’t care much about their culture. Still, they have it because a small number of people can self-organize, and the result of such self-organization usually looks like a big family or group of friends. On the other hand, joining a startup is risky and stressful. Companies have to provide bigger salaries to attract specialists. Value of each employee for the company: very high (critical in some cases).
• Small and Mid-size companies. Less dependency on Investors. The size of a company is too big to have a productive self-organized culture. That is why companies are starting to care about the creation of their own culture. Job descriptions of such companies require deep knowledge in mainly used technologies and include requirements of behavioral patterns company values (can afford teaching specialists in minor areas). Less risky to join. Salaries are around the market median. Value of each employee for the company: moderate. Can afford leave of some amount of employees without consequences for a business.
• Big-size companies. Usually have dedicated teams of specialists who work on constant improvement of the culture. But from the inside, it is starting to look like many startups that follow the same cultural values and tightly collaborate. Cultural values are publicly exposed and working as an attractor. Primarily interested in new specialists with proven ability to learn (this will ensure company success in the long run) and behavioral patterns that support their cultural values. Can propose higher than median salaries. Value of each employee for the company: minor. Can afford termination of an entire sub-project.

In summary: mainly, employees committing to startups because they share the goal of a project and expect family-like openness; big-size companies are objective of people starving for new knowledge and career; small and mid-size companies are valued for their safety and stability.

But attracting specialists is only one part of the job. Same way as with customers, each company wants to keep them with the product for as long as possible because losing an employee costs a lot.

For example, let’s take a look at software development engineers leaving the company and try to calculate how much it will cost for the company:

1. Tree months of handover. A developer, most likely, will not move the project further but will work on knowledge transition and documentation. (Cost: 3 months gross salary)
2. A company will start a hiring campaign to fulfill the gap in human resources. If a company has internal recruiters — they will initiate a searching and advertising campaign that will cause a massive chain of interviews. On average, it will take ~23–30 days. But we will not count it as one month of gross salary. If internal recruiters are involved — it will be even more.
3. It is usually hard and costly to start your advertising campaign to attract new candidates. That’s why many small and mid-size companies collaborate with external recruiters. A compensation agreement is usually 30–50% of the developer’s yearly gross salary (4–6 months gross salary) for each hire.
4. And the final step: onboarding. It takes time for a new hire to get into all the processes and start contributing to company goals on the same level as the employee who left the company. For SDE, it usually takes 1–3 months and extra effort of other developers to support new joiner.

In total: 9–13 monthly gross salary loss just because one developer decided to leave.

Let’s scale it for a small company with 50 SDEs, and each developer stays in the company on average for five years. We will have direct losses of 10x1 gross salaries per year. If we assume a gross base salary of 60,000 EUR for mid-SDE total number will be impressive.

Conclusion

As you can see, employees have all the same attributes that usual customers. The only difference is that instead of using company deliverables, employees consume another product each organization produces — culture. Functionally, a company’s structure is very similar to an organism — for example, a human. Doing sport, following a healthy diet commits you to a healthy lifestyle culture. As a benefit, fewer diseases and different types of pains in the future, followed by expensive treatments and therapies.

Later on, we will discuss the way how to build a company culture.

For now, take care of all the customers you have and stay healthy.

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