Man power at a company is easily the most important equity you have. It’s not the awesome state-of-the-art server rack, it’s not the worthless software patents you hold, it’s the people. For this resource to operate at peak efficiency, you must keep the people happy. An employee who is happy about the working conditions and foresees a future with the company will produce significantly better and substantially more work for you.
I’m continually surprised when decisions are made that are a detriment to the employees to save a few dollars in the short term. You should be spending MORE money to provide your team with the best environment possible. Large work areas with substantial personal space, computers that are top of the line (go above and beyond what you believe the developer will need). The best chair you can get, the best food in the break room, etc. Per employee this probably adds a couple thousand dollars more a year than you would get otherwise. But, I guarantee you will make that back and then some by employees who are happy and feel appreciated.
The MOMENT you start cutting corners at the employees expense you are creating a long term expense that you may not be able to recover from. Resentment will swell and is contagious. People will start doing the minimum to get by and not get fired. You will lose any of the work that people do that go above and beyond the requirements, and that is the work that push a product from being good to being great. Higher management usually seems oblivious to employees losing that drive (they must be oblivious to have made the decisions in the first place). They don’t see many people quitting, so feel that everything is good. However, an unhappy employee quitting is not the worst thing that can happen, an unhappy employee staying is. An employee who feels under appreciated and beaten down will contribute very little to the whole, and will often times enlighten employees who are less aware of the poor treatment.
There is such an easy fix for the whole issue. Don’t treat your employees like shit, give them the absolute best, never cut corners, never treat them like whiny ungrateful sods. Never assume that one complaint is an isolated event, but assume that it is a complaint shared by everyone. Spend more money up front, and treat it as an investment in the greatest capital you have that is guaranteed to pay off dividends.