People who receive job offers consider two aspects of the offer:
Their wage; and
The fringe benefits (non-wage compensation) they’ll receive.
Rarely do people pay attention to the third factor: the potential value of the work experience and knowledge gained from skilled managers and colleagues.
Imagine you are in a job that pays you $6.00/hour. A competing employer reaches out to you with an offer to work for them — they’ll pay you $12.00/hour. You surprise the competitor because you decide to stay at your current $6.00/hour job. Earning more cash seemed nice, but you were only 70% certain that it was a good move for you.
Your decision seems counterintuitive at first. I argue, it’s exactly the right decision for two reasons:
You decided to stay because you believe the value you receive from your $6.00/hour is worth more than the $12.00/hour offered.
The non-monetary benefits, I’m not referring to fringe benefits, weight stronger than cash.
For employers, it’s hard to understate the importance of hiring managers skilled at creating and developing human capital. Go a step further…
Imagine measuring a manager’s performance with some type of metric like “Employee Value Growth Ratio”. EVGR equals the perceived non-monetary value created divided by the actual monetary investment in salaries. Higher EVGRs suggest that managers are effective at creating work environments that foster growth and satisfaction.
After Thought:
A recent study by Hoffman and Tadelis (2021) backs up the idea that managers' people development skills are crucial. They used employee surveys to measure these skills at a big tech company and found that a manager in the top 10% of people management ability had a whopping 60% less turnover than a manager in the bottom 10%. Even more impressive, replacing a bottom 10% manager with a top 10% one cut labor costs by 5% just from lower attrition. The effect was strongest for higher-level employees. Plus, the company rewarded better people managers with higher performance scores, more promotions, and bigger raises. If you want hard numbers showing the huge impact managers have on retention and the value of investing in their people skills, this study is it.