Pricing young employees out of learning

This post first appeared in DNA India on May 11th, 2017.

Recently, a Harvard Business Review report on working for start-ups caught my eye. Nearly 44% of fresh graduates in the US want to work for start-ups, it said. The article provides a reality check for candidates, cautioning them with tales of inconsistent salaries and unstructured workplaces that typify start-ups. The message was that while start-ups seem glamorous, they come with their own set of issues which youngsters need to ponder over while choosing their careers.

This got me thinking about my own experiences in hiring people for a start-up. As a bootstrapped company, it was obvious that I would never be able to attract people by offering a competitive salary. While I was clear in my mind about offering people what their experience was worth, there was a wide chasm between what people ought to be paid and what they were paid in the real world. The first few interviews were incredibly frustrating. I would get resumes from folks working for large IT services companies. The interview would go well with the candidates usually expressing interest in joining because they realised that start-ups provide greater avenues for learning. For most of them working for a large IT services organisation meant working on a small part of a big project with limited opportunities for learning. Their knowledge was restricted to the small domain they were asked to work on. Towards the end, uncovering their expected salaries stunned me. Candidates with a year’s experience would demand salaries over Rs 12 lakh per annum (lpa). On further probing, I realised that they were already being paid in excess of Rs 10 lpa.

Why would any company do that? What makes a fresher worth that much money in the real world, even if that fresher was from the IITs of the world? This seemed like a complete waste of money given the fact that the average tenure for a fresher in an IT company was around 1.5 years. Also, by over-paying, larger organisations are limiting the prospects of movement for these candidates. Within say 4-5 years, their salaries would go up to levels that would eventually deter them from moving out of the organisation.

What the employees didn’t realise was that in effect, their ability to learn was also being curtailed. A candidate told me that the reason she wanted to move to a start-up was because she saw her roommate learn more in a month at a start-up than she did in an entire year at her organisation. However, given that there are very few start-ups (except maybe the unicorns) who can match the salary paid at these large organisations, she was stuck.

So what’s the upshot of all this? I believe that young professionals must assess the impact of a stable job versus the opportunities for growth that start-ups can offer, at least early on in their careers.

Otherwise, they run the risk of being priced out of learning.

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