Great employees are worth a lot more — to your teams, to your customers, and to your bottom line — than average employees.
Anecdotally, Netflix CEO Reed Hastings thinks the best programmers deliver between 10 and 100 times the value of an average programmer. More scientifically, a 2015 study published by Harvard Business School that analyzed data on approximately 60,000 workers, hiring a superstar — defined as a “top 1 percent” employee — saved the average company $5,303.
Yep: At the risk of being Captain Obvious, every business wants to attract, hire, and retain as many superstar employees as possible.
One way to do that, according to a study published in 2020 in National Bureau of Economic Research, is to offer paid family leave.
First some background: The researchers compared neighboring businesses across state lines, where one state mandated paid family leave and the other did not.
What happened when paid family leave was required? Increased access to talented women. Reduced employee turnover. Higher levels of female leadership. Overall productivity levels were between four and five percent higher.
As the researchers write:
On the one hand, providing paid leave for their employees may be costly for firms, in part because they have to accommodate and be flexible during the employee’s absence.
On the other hand, employee benefits help recruit and retain highly qualified employees, which may be especially crucial for firms in competitive labor markets. We show that providing paid leave benefits allows firms to reduce costly employee turnover, shift their marginal hire toward the right tail of the talent distribution, increase productivity, and facilitate the nomination of women to key executive positions.
While that’s a lot to unpack, in simple terms it makes sense. If I plan to have children, I’ll gravitate towards companies that offer paid family leave. Once I start having children, I’ll be more likely to remain at a company that offers paid family leave. And if I’m talented, the experience l gain will help me rise through the ranks.
Where I can make an even greater impact on company results.
So while offering paid family leave is expensive, so is the cost of employing less talented people. (Much less toxic employees — defined as “workers that engage in behavior harmful to an organization, including either its property or people” — that one study shows cost the average company at $12,489 per year, not counting the decreased overall productivity that can result from their effect on the morale of other employees.)
Superstars have options. For talented people, the job market is a seller’s market. Because they’re in demand, they can — to a large extent — choose where they want to work.
And where they want to stay.