The hidden costs of tech tenure

And why it's time to start tracking employee tenure value

Sep 12, 2024

👋 Hey, Toni from Growblocks here! Welcome to another Revenue Letter! Every week, I share cases, personal stories and frameworks for GTM leaders and RevOps.

On the podcast this week

Make sure to follow the show on YouTube, Apple, and Spotify.

I recently learned that Google has an average employee tenure of 1.2 years.

That’s mind-boggling.

One of the world’s biggest tech companies can’t keep their employees for more than 2 years on average.

Especially when you think about all the money invested into taking care of their team, training, development, salary, and perks and benefits.

And the thing is, Google is not alone.

In SaaS, our numbers aren’t great either.

You’re looking at 14 months for SDRs and 2.8 years for AEs (though that will greatly vary by company).

There are thousands of legitimate reasons for this, including economic pressure, other opportunities in the market, and even a generational gap (just look at the comparisons between tenure for boomers, millennials and Gen-Z).

And full disclosure: I’m not an HR expert by any means.

But as a former CRO/RevOps, I think we need to start thinking of our tenure problem like we do anything else in the bowtie.

In essence, let’s think about employees like we think about our customers.

And if we’re obsessed with our customer lifetime value? We also need to think about employee tenure value.

Once you put it into this kind of context, you begin to realize a few things.

The hidden acquisition cost

No matter how you do it, finding employees is a lot of work.

In this case, let’s assume that your process is super efficient, you have a great employer brand, and you don’t need to do the crazy top funnel work to get people to apply.

Even with all of the above, you’ll still probably spend 15% of the first year salary of the candidate to get them hired in the first place.

And sure, you can save on some manpower and hire a recruiting firm to get that employee in…

But every prospect will have to talk to the hiring manager, then a round or two with several other managers up the chain, and then add an assessment or two?

Suddenly, you’re spending valuable management hours hiring for that one role.

Oh, and you're probably shortlisting 5 folks along the way. So add that multiple.

All of a sudden, the acquisition costs become much bigger than you think.

Ramp time vs peak performance

Once you’ve hired, the job isn’t close to done. Because someone still needs to sit there and teach them everything.

But if you’re looking at just your ramp time, you’re missing the bigger picture.

For the sake of argument, let’s say an AE should be ramped after 6-9 months. There’s some math behind it, and it’ll depend on your sales cycles, but that’s generally the number you’re looking at.

And that’s great, but when will they reach peak performance? Because even if you have an AE that’s ramped after 6 months, they probably won’t be part of the leading pack by that point in time.

The real ramp is actually a lot longer.

And that’s not only for AEs. You can translate that to any role in your business.

Whether it’s a marketing manager, RevOps or project manager. They can all be great at what they do, but it’ll take time for them to build up the organizational and relationship capital to make them successful.

And in some cases, that may take longer than 2 years. So if your average tenure for the job is 2 years or less? Then I think you know where I’m going with this.

Tenure and your GTM

At the end of the day, the tenure of your folks who work in revenue-generating roles across your bowtie will affect your performance.

Think about it like this. If you have an AE that's fresh, will their conversion rates be higher or lower than the average?

Lower, right?

And if you were to map it out, there will be a direct correlation between tenure and other KPIs across the funnel. The longer the tenure, the more likely they will be successful.

That means if nobody reaches high tenures, it’ll lower your throughput efficiency.

This will be the same for anyone in sales, marketing or CS.

If you don’t have it under control, you're basically missing out on revenue.

In case you’re new or haven’t subscribed yet, here are the latest best posts you may have missed:

The Revenue Letter

Discussion about this post