Why Companies Overspend on Recruiting and Underspend on Retention
I’ve been stewing over this for a while, because the disconnect is absolutely mind-boggling. On the one hand, companies shell out massive amounts of cash to snag new hires—signing bonuses, cushy relocation packages, recruiters working overtime. On the other hand, they’ll practically watch their existing talent walk out the door without lifting a finger to keep them around.
Short-Term Thinking: A Vicious Cycle
It’s ridiculous how many organizations focus on short-term headcount goals or quarterly performance metrics rather than the long-term health of the team. Seriously, the same companies that complain about attrition are the ones refusing to offer a modest raise or better working conditions to employees who’ve proven themselves for years.
My take? They’re addicted to the next shiny thing—the new hire who “must be better” because they’re fresh talent. Then they act surprised when their core team members feel undervalued and leave for the competition. This short-term, knee-jerk thinking leads to a never-ending churn cycle.
Budget Silos and Baffling Math
The corporate budgeting fiasco is mind-numbing:
- Recruitment Budget: Lined with gold. There always seems to be money to hire a new engineer at an inflated salary.
- Retention Budget: A black hole of imaginary numbers. Ask for a retention raise, and suddenly the company’s broke.
This is classic “penny-wise, pound-foolish” behavior. They’ll pay $180k to a brand-new developer, but heaven forbid they give the existing person a $40k bump to match industry standards. I’ve seen this in real life—it’s like burning money just to let a new face walk in the door.
HR & Management Disconnect
I often wonder if HR genuinely thinks retention isn’t their job or if they’re simply powerless. Maybe HR tries to push for retention policies, but management shoots them down because it doesn’t directly impact the next quarterly report. Either way, we end up with the usual “Everyone is replaceable” mantra. It’s incredibly shortsighted—especially in highly skilled tech roles where losing institutional knowledge can disrupt entire projects.
What We Lose When People Leave
- Institutional Knowledge: A departing engineer takes away months or even years of product insights, undocumented processes, and project history. Good luck training that from scratch.
- Team Morale: When your star coworker leaves for a salary bump, you start wondering why your own compensation lags behind. Domino effect, anyone?
- Continuity: Ramp-up time for new hires kills productivity. Can’t we just keep the strong people we have and avoid that nonsense?
My Proposed Fix
- Level the Playing Field: Unify budgets for recruiting and retention. If we can pay top dollar for a stranger, we can pay top dollar for proven performers.
- Real Managerial Check-ins: Instead of haphazard “How are you?” chats, managers need to seriously ask: “Are you being paid enough? Are you challenged? Is your workload tolerable?” If the answers are “no,” do something about it.
- Promote Actual Growth: People don’t just want more money—they want growth, learning, and the feeling that they’re valued. Create real promotions and meaningful roles, not just lip service.
Bottom line: If companies invested even a fraction of their recruiting budget in retention strategies, they’d save themselves a mountain of headaches, keep essential knowledge in-house, and maintain team morale. But let’s be real—until the mindset shifts from short-term bean-counting to actual long-term planning, we’ll keep watching this absurd cycle play out again and again.