Hourly Rates are Like Cereals

July 25th, 2013

Most companies and recruiters compare developers based on hourly rates. They'll hang up before getting to know a developer just because the rate is out of their range. Little do they know of the opportunities and deals that they miss. See, hours mean nothing, because efficiency of a developer is variable, and not just by a few percent.

I'll explain this with cereal boxes. Say you need to buy 2kg worth of cereals. You find two formats at the store: 0.5kg boxes at 2$ each and 2kg boxes at 4$ each. Notice how the price is not proportional. This is common when you buy "family-size" supplies. Of course, if you're shopping for number of boxes, you'll make a poor choice. You'll take 4 of the smaller boxes and pay 8$ overall. The better deal would have been to take the bigger box and pay 4$ overall. That's a 50% saving! Let's look at this scenario in terms of IT projects.

Say you need to build a project within 10 weeks. You find two contractor types: average developers at 100$/hour and efficient developers at 200$/hour. Notice the price gap. If you're shopping for number of hours, you'll make a poor choice. You'll need 4 average developers and pay 160,000$ overall. The better deal would have been to take the single efficient developer and pay half the price. Additionally, less developers mean less management and faster communication.

Is it possible to find a developer that is worth four in terms of efficiency? Absolutely, although they're much harder to come by. You'll have to be lucky or know the right people. I have been on small teams of 2 that shipped projects an order of magnitude faster than teams of 12. The thing is, a person's efficiency is not as evident as a weight label on a cereal box. This is why you should stick around and listen, even if the hourly rate is 10 times what you expected. In the end, you need to finish the project on time, not produce CO2. Find out how efficient the person is. Perhaps you'll save your company 5 or 6 figures on the project and then get a promotion.

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