What is your TAC – Talent Acquisition Cost

Photo by Jen Theodore on Unsplash

Despite the front-page news of layoffs at Big Tech, there is a shortage of tech-qualified staff in the real world outside of Silicon Valley. 

The reasons are many. I believe the pandemic pause, which here in Québec lasted almost 24 months, derailed many people’s career plans. There are the direct and ongoing effects of that period on physical and mental health. And most importantly, the accelerating pace of technological change means that more companies of all sizes are hunting for the same people.

As an emerging startup, the investment required to build your team must be at least as significant as your investment in finding capital and customers. You cannot find and hire people at a moment’s notice. They are not lining up outside your door. Even when you hire them, they can leave at a moment’s notice, forcing you to start the process again while slowing your development and deployment efforts.

Understanding your Talent Acquisition Cost

The financial investment in acquiring talent is substantial. Your Talent Acquisition Cost consists of two direct expenses:

Finding talent: Beyond the passive expenses of posting on job boards and social media, you need to be proactive and get out of the building to find the people you need. Another cost centre is “HR Marketing”, a concept I learned from Julie Hubert of @Workland, or positioning your venture as an employer of choice. This means expenses around job fairs, working with recruitment partners and other outreach strategies. The cost of finding more senior talent, which you need to balance your team, can be significantly higher than for more junior talent.

Onboarding talent: These expenses include selecting and integrating new team members. There is training and mentoring, which takes a time investment from your current team, reducing overall productivity. The probation period of new hires should be treated as an expense because of their lower initial productivity and the possibility that they leave because of poor fit or a decision on their part. New hire churn is natural, especially at early-stage ventures that do not have mature systems to onboard talent. Other direct onboarding costs include skills upgrading and professional development. This last point is important enough that where I live, in Québec, there is a law mandating employers with payrolls over $1M to dedicate 1% towards learning and skills improvement.

You’ve got to keep them, too

Indirect expenses also add to your Talent Acquisition Costs:

Building the culture: Creating a team requires significant time, money and energy investments. In the post-pandemic context, this is more important than ever.

Building the systems: Costs related to how your team communicates, collects and shares information, and coordinates work. Your technology stack should encourage accessible and open communication. 

I look for your talent acquisition and retention strategy in your financial statements. Then, your cash flow projections communicate your hypotheses and assumptions around talent acquisition and retention. I rarely see specific lines related to talent acquisition management, but when I do, I am reassured that you understand the efforts needed to find and retain a strong team.

While tech can scale quickly, scaling people is much more difficult. Your ability to build, grow and renew your team to meet the challenges of tomorrow is the most important competitive advantage you can develop in these unpredictable times.