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View from Washington: How unfairness costs tech $16bn a year (part 2)

The second part of a dive into the detail of the Tech Leavers Study by the Kapor Centre for Social Impact.

The Kapor Tech Leavers Study is an attempt to analyze “what drives engineers and other technology workers out the door”. You should begin by reading Part One here.

As the previous article noted, the study makes a number of observations. This series focuses on five in particular, here the final two.

They are:

  1. The whole world (well, 85 per cent) is watching (Part One).
  2. Technology workplaces are considered more ‘unfair’ than average (Part One).
  3. Our efforts on diversity still have a very long way to go (Part One).
  4. Three principles that improve the workplace require backing for five initiatives.
  5. Kapor may have understated the financial cost of the problem.

Kapor’s main objective is to help technology address the impact of unfairness and mistreatment on staff turnover. It estimates that those factors currently cost the US technology sector $16bn (£12.4bn) a year.

  1. Three principles that improve the workplace require backing for five initiatives.

To combat perceptions of unfairness, particularly related to race, gender or sexual orientation, Kapor identifies three principles.

  1. Implement comprehensive diversity and inclusion (D&I) strategies.
  2. Create inclusive cultures.
  3. Develop effective and fair management processes.

It then offers five specific steps that will enable these concepts to be realized in the business.

(i) Appoint a D&I director.

(ii) Set explicit diversity goals.

(iii) Pay bonuses for employee referrals of candidates for underrepresented backgrounds.

(iv) Conduct unconscious bias training.

(v) Establish Employee Resource Groups (ERGs).

To the extent that it largely avoids consultant-speak, this is not a bad list – though, also like most such lists, a lot of what it proposes is still just common sense.
The more subtle observations within the report include the need for this kind of programme to be supported by internal research.

This is a US study and a broad one. It needs to be viewed carefully with regard to other international cultures, but it is also true that there are companies already at various stages of implementing such measures.

For a UK technology company, the Kapor research raises two issues. First, ‘Unfairness’ causes more US staff to leave (37 per cent) than either career opportunities or headhunters and carries a significant cost. Second, although many British companies are aware of internal imbalances and morale issues, there is little comparable research looking at the UK technology workforce.

Given that, the best way forward may not be to treat these as cookie-cutter recommendations for universal consumption, but rather as stimulating the need for more detailed local audits. There is nothing stopping an individual company first benchmarking its existing operations.

A further consideration here is that even if UK staff turnover trends were to be similarly researched, the auditing process cannot stop there. Those steps that are taken have to be an ongoing, permanent part of the workplace culture. That implies continuous auditing.

Such a regime carries a cost in itself, but remember: this isn’t just about being ‘nice’, it is a way of addressing a potentially serious bottom line issue.

  1. Kapor may have understated the financial cost of the problem.

How did the researchers come up with their $16bn figure for unfairness?

Kapor bases its estimate on an average replacement cost per technology employee of $144,000. This assumes a $100,000 salary and is broadly consistent with a 16 per cent-213 per cent* replacement cost range proposed by the Centre for American Progress (CAP). CAP’s wide range implies variation largely according to how highly trained each new recruit must be.

A lower turnover rate of five per cent has then been applied. Turnover due to unfairness is in turn 37 per cent of that, as found in the survey.

Kapor’s headline number stretches across the US technology sector, but the report also applies the formula to a single company. For a large one with 10,000 engineers, it observes, “that company alone would lose $27m per year [due to unfairness].”

However you read them, these figures pull you up short - but what if the actual costs are higher?

This week’s issue of The Economist also looks at the challenges in retaining key engineering staff. It quotes Laszlo Bock, Google’s head of human resources, as saying that a lead engineer “is worth 300 times more than an average engineer”. The article details the lengths to which ‘superstar’ companies go to retain staff by creating attractive workplaces and through their promotion schemes.

It is also true that skill shortages continue to afflict much of the engineering recruitment market. In the US, there is the ongoing debate about the quota cap on H-1B visas for skilled immigrants. In the UK, there is understandable concern about the post-Brexit immigration regime and how that might make it more difficult to harvest talent globally.

Obviously, these are issues that arise generally, but do they arguably also make the ‘unfairness’ issue a more pressing concern?

Conclusion

The findings in the Kapor study need to be treated with caution. This is the first time such an exercise has been carried out that specifically concentrates on the technology workforce. As such, the methodology almost certainly can be refined, assuming the research team revisits the subject during the next few years.

However, the relative data is still significant. It attaches a cost penalty to frustration in the office and shows it to be a greater factor in staff turnover than those more traditionally associated with the technology sector.

This is therefore not just about being happy-clappy or politically correct. Minorities have a right to equitable treatment at work, for a start. Cost penalties may be a blunt instrument in that and other regards, but if the research can reduce even what some might call ‘benign neglect’ (and others ‘ignorance’), it does look like all sides can emerge as winners. And you don't have to agree with all its conclusions to appreciate that it does provide food for thought.

*The range really is this broad. CAP’s research included all types of employment, from supermarket shelf stackers right through to Wall Street CEOs.

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