Toss a Coin to your Junior (Oh startup of plenty)
The Israeli High-Tech ecosystem craves for Software Engineers and Product Managers. As Israel shifts from ‘start-up nation’ to ‘scale-up nation’, and as more venture capital flows into Israeli companies, the demand for talent keeps increasing. Salaries have skyrocketed accordingly, and it takes longer to hire, since every job seeker is now being approached by dozens of eager companies and head-hunters.
“Software Engineer shortage!” cries the economic media. “We’ll shift development off-shore!”, threaten local tech executives.
There are multiple ways to mitigate the shortage, but I want to focus on a baffling paradox that is arguably the lowest-hanging fruit.
Fresh graduates are not getting a break.
Every year, there are hundreds of Computer Science and Software Engineering grduates in Israel. Aren’t they enough to hydrate the thirsty market?
My LinkedIn feed is filled with final-year students and recent grads looking for — begging for — work. Some have been looking for months. Their posts are mostly ignored, while posts from engineers with merely a couple of years of experience — or 8200 graduates — get literally hundreds of comments.
As an experiment, I recently posted on LinkedIn, asking my colleagues to share open positions for recent grads in their companies. I even tagged 13 recruiters and sourcers from major companies such as Facebook and Gong.io . I got 850 views, 11 likes… and 0 comments.
I followed up by looking at the Israeli career pages of major companies such as Facebook, Google and Salesforce, and also the companies appearing on media outlet Calcalist’s list of ’50 startups to watch in 2021'. I found less than 10 open positions for recent graduates (not counting student positions).
It sounds crazy, right? Companies would pay ludicrous compensations to engineers with just a couple of years under their belt, but would largely ignore talented graduates.
However, once you put yourself in the hiring companies’ shoes, it actually makes sense. Let’s take a closer look at the root cause of this “Junior Engineer Paradox”.
Why tech companies aren’t hiring recent graduates
The true, hidden cost of hiring junior
Let’s get right to it. This is the big one, the real reason why — in my opinion — juniors don’t get hired.
The real cost of hiring junior engineers is, the toll it takes on the experienced engineers in their team.
Time is money.
A recent graduate is — naturally — less independent. There’s a learning curve, and it’s OK. The thing is, that in order to ramp up, they need the assistance and mentorship of the more experienced engineers on the team, and that takes time.
Time the experienced engineers are not spending doing their job.
So, as a hiring manager, when I consider hiring a recent grad, it’s not just their salary I’m going to spend, but also 10%, 20% or even more of the salary of an experienced engineer, who will surely spend that fraction of their time working with the juniors. Plus the additional cost of context switches.
Even if the compensation fairy decided to pay the junior engineer’s salary in full, it’s still not certain that their production in the first year or two will justify the time spent mentoring them.
In terms of resources, it’s just more sensible to hire expensive, independent engineers and not distract them with mentorship.
Unfulfilled Investment
Let’s say we regard this first year as an investment, then. What if we were willing to pay the junior developer AND take the hit by spending time mentoring them. Wouldn’t that be worthwhile, so that we’ll end up with a usable engineer that can carry their own weight a year from now?
On paper, that sounds like a win-win deal to both the company on the recent graduate, but there are two main factors why this is often not the case.
The first is, that startup companies are running on short time frames. As a startup, you’re always running out of cash, looking feverishly for the next investment. Any money you spend needs to go towards achieving the goals set by the board of directors, and it’s harder to justify long-term investment in personnel.
The second, and more important one, is this:
Do you know what engineers become after you invest two years in mentoring and grooming them? Engineers with two years of experience.
And that makes them a big, fat poaching target.
Most likely, you will either have to match the offers that poachers make to your now-sophmore engineers, or lose that engineer to another company. Loyalty is a rare commodity.
Isn’t it more sensible to just hire experienced engineers in the first place, then?
Lessened Productivity
Circling back to an implict assumption we made. In the real world, it’s extremely challenging for recent grads to carry their weight. They can be excellent coders (Many universities and colleges do a decent job with practical computer science courses) and solve your average Facebook-style coding interview question.
But performing an actual engineering task takes much more.
The university does not teach you to dig into Stack Overflow, or how to use Git, or how to debug a problem, or how to manage your tasks; There are a thousand little things that can only be gained by working on real-life tasks, day in and day out.
Subsequently, it can take years for a talented person to make the leap and become an independent team member with net-positive value. It’s not the junior’s fault. It is what it is.
The first year cliff
Finally, some people don’t make that leap. They discover — the hard way — that real-life software engineering is not for them. Perhaps they don’t have the skill-set to begin with, or perhaps it’s not the kind of work they enjoy.
No profession is for everyone and that’s OK.
Hiring a junior holds the risk of realizing that they’re a ‘dud’. An engineer that passed the initial baptism-by-fire, in contrast, had the chance to discover whether the profession is a good fit for them, and will probably not rage-quit their job because they realize their destiny in life is becoming a carpenter.
High entry-level compensation
Let’s say that as a hiring manager, you’re willing to invest in a junior engineer and take your chances despite all of the above.
“My company is great; They’ll stick around”, you think.
“I’m great at interviewing and identifying raw talent, I’ll avoid the duds”, you say to yourself.
And let’s say you found a great candidate, and they passed all of the interviews, and are a very promising match to your company.
Do you know who else interviewed that candidate, and their friends? The big-tech companies, who offer the best salaries in the business and inherently can tolerate a drop-out rate of junior engineers.
Your talented candidate will most likely expect a GAMFA-level compensation. Their friend got it in Microsoft. Why should they make less?
So either you overpay (And then, why not just hire an experienced engineer, even for 50% more?) or you yield.
Solutions to the Junior Engineer Paradox
It all boils down to incentives.
So how can you counter all of these great reasons for not hiring recent graduates?
Here are a few possible approaches on tackling this ‘market failure’.
Let the ‘unseen hand’ of the market resolve the issue.
That’s the current approach. Not very successful so far, is it?
The main problem is that while the industry at large has an incentive in. investing in junior engineers, specific companies and the academy do not.
So, for the next suggestions, let’s assume that Israel has an incentive in resolving the Junior Paradox. It does, because the income from direct and incirect tax from increasing the experienced tech talent would be worth it.
So — if Israel dedicated a budget for resolving the paradox, how could it be used?
Make internships commonplace
Consider this internship contract: the engineer will be paid a relatively low salary for 12–24 months, then — contractually — their salary will be boosted automatically to a pre-determined, above-market level. Possibly adding a one-time bonus between periods, to compensate for the low salary up until that point.
From the company’s perspective, this means a more reasonable monetary investment. And you can part ways with the less-successful prospects without much of a financial hit
Also, an engineer with two years of experience who is also familiar with the company and its codebase is probably worth the above-market salary.
From the junior engineer’s perspective, they get precious experience and the certainty that if all goes well they’ll have some monetary compensation for the low-paying period. And if they don’t ‘pass the internship cliff’? They’re still better off than they were when they had no experience.
This does not solve the ‘hidden cost’ of mentorship and assistance, but it sweetens the deal.
Also, it’ll only succeed if this kind of contract becomes widespread, otherwise, recent grads might feel ‘cheated’.
Incentivizing the Tech companies
Alternatively, if companies can’t avoid making a competitive offer to recent grads, it can be subsidised by the state.
Something along the lines of “If you hire over X engineers who are within 2 years of graduation, and they are employed AS software engineers, the state will pay Y% of their salary for a period of Z months”.
This could be either hard cash or tax refunds.
Of course, the downside is that you’ll need to set up a bureaucratic mechanism for avoiding fraud. But this already happens today, as the Israeli Innovation Authority offers funds to R&D companies.
In fact, the Innovation Authority can add a condition to these funds, requiring companies to hire recent graduates in order to receive funds; The problem with this approach is, that companies may hire juniors they don’t really need, and these juniors will need to be given substantial work and did not gain significant experience.
So if we go down this road, details need to be ironed out.
I vaguely recall seeing the Innovation Authority offer something similar in the past, but honestly, if I couldn’t find it with my Googling skills, I doubt such a fund is commonplace knowledge among Israeli tech CEOs.
Practical experience during college
Here’s another paradox:
- The brightest minds enroll at the Universities for technological education.
- Universities are mainly research institutes, so they are incentivized to optimize research, not education.
- Furthermore, universities have no practical software-engineering know-how, because they are research institutions and not tech companies.
- The university-based education is optimized to prepare students to a career of academic research, and is not practical.
The result? The most promising students don’t get a decent preparation for a career in software engineering, and it takes longer for them to make the transition!
The mirror image of the universities is hands-on-oriented bootcamps and training courses, such as Infinity Labs, John Bryce, HackerU, Experis, and more. Unlike universities, their primary target is to prepare students for the software industry. But, they often attract students who either were not accepted to the universities and top colleges, are unable, or are unwilling to put in the time and efforts required by a 3-year degree.
How do we cut this Gordian Knot?
The state can incentivize — or force — universities to offer practical experience to their student. Be it by software projects, career consultation etc.
Some universities do this today, but it’s honestly half-assed — because they are not incentivized to do it and don’t have an appropriate teacher with industry experience.
Imagine a mandatory practical project (much like some engineering degrees have today), guided by teachers who recently worked in the industry and are paid industry-grade compensation to accompany the students.
Such guides will offer:
- Code reviews
- Aiming students to study contemporary technology.
- Have students use methodologies that are commonplace in real life.
- And, most importantly, provide professional feedback.
The main challenge here is to find professional guides, but I actually think that this offers something the software industry rarely does: a part-time job that pays well.
This could be great, for example, for parents (such as myself) with small children, who could use a break from a 10-hour-long workday for a year or two.
The other challenge is ‘who watches the watchers’, and how do we ensure that the guides actually provide meaningful education and guidance.
All of the solutions above offer complexities, and none of them are magic bullets.
But, given the current situation, where the ‘unseen hand’ of the free market fails to bridge between hiring companies thirsty for talent and recent graduates hungry for work, perhaps it’s time for an intervention.
If you’re reading this and you’re an Israeli policymaker (either government or Tech), I’d love to talk with you further about this challenge and how to resolve it. Please, do not hesitate to reach out!