Although it may sound absurd, paying the highest market rates can actually ruin your company or project. And this is how it goes:
You have loads of money, starting a new project and want to attract the best guys on the market.
You will make sure your interview process is tough and will offer market rates nobody else can beat (let say 200 - 300 % of market average).
You hire the best guys, plus some guys that are not the best but can talk the talk.
Project started, there is a constructive progress and everybody is happy.
People realize more and more their high (money) status and know that they could never earn that same amount anywhere else.
People start spending their money and get used to their status. Project is still constructive.
After some time somebody will realize, that he would afraid of loosing this great job and he starts to be less constructively critical (as this could maybe threaten his position).
More and more people are less and less critical as they value the earnings more than the need to say what they think should be right.
After some time the project lead/manager/main architect will get used to situation where nobody (or just few) people express concerns regarding his ideas and will actually start to believe that he is always right (also he is earning a lot of money so he must be very good as well).
After some time he will believe so much in his true that he will be annoyed when somebody will oppose him.
The leading guy will have a bad idea (everybody can have a bad idea), but nobody or just a small amount of people will point to flaws of this suggestion.
The bad idea will be implemented. And the guys that will still have the will to point out the bad concepts behind the idea are seen as a threat (to the leading guys ego and to everybody else as being befriended with them could be regarded as risk to current position).
This repeats itself few times.
Now comes the point when the guys who actually still care are becoming frustrated because they realize they can't change things if they are heading the wrong directions.
The guys that care are leaving the project as they can't handle the frustration anymore.
The guys that don't care stay as the money is good.
You're left with a main guy (or guys) with boosted ego and no self control and bunch of people that don't want to oppose bad ideas, just want to do their work, get the check and go home.
More and more bad ideas are being implemented without any constructive conversation.
Project starts to have difficulties. You hire more guys.
Those that criticize the current state are seen as threat and its slowly taken care of them (they have some bad reviews and are being fired or are assimilated and became "silent workers").
After some time you just realize that you have a project that is extremely expensive and is producing (if ever) product of questionable quality and it seemed to get wrong on many levels.
And all of this because you provided rates nobody else could beat (so only those who cared about money stayed and the reasonable guys left).
End of the story.
