The IT pay squeeze


Tim Ramsay faced numerous challenges in his search for a security manager for the University of Miami late last year. For starters, the tight IT labor market in southern Florida was forcing the university to compete with international banks, travel companies and other organizations for the same scarce talent.

Moreover, although Ramsay’s ideal candidate was a seasoned security chief who could set a vision and create policies for the university, he realized after the first handful of interviews that it would be difficult to find someone who had all the qualities he was looking for.

But Ramsay also faced a more far-reaching problem. Once the Coral Gables, Fla.-based university extended a nearly six-figure offer to a candidate, Ramsay would need kid gloves to handle the reaction from IT staffers, who would know the salary range based on the job title and grade. “There’s no easy way to be competitive with new hires without running the risk of creating an internal morale problem with incumbents in the same job class,” says Ramsay, the university’s associate vice president of IT.

Ramsay is referring to the compensation squeeze play that he and other IT leaders are currently facing. As demand for certain types of IT competencies has heated up, particularly for niche skills in areas such as industry-specific ERP technologies or upper-echelon .Net development, companies have had to pump up their offers to snare the right people.

At the same time, CIOs are under enormous pressure from senior management to hold down their IT labor costs. Executive uncertainty about the economy has kept overall salaries down, and the increased use of lower-paid IT workers overseas has helped depress wages for developers, help desk technicians and other technologists whose jobs are vulnerable to outsourcing, notes Craig Symons, an analyst at Cambridge, Mass.-based Forrester Research Inc.

In fact, the average salary budget increase for IT employees has barely kept up with inflation. In 2006, the average IT salary rose just 3.1 percent, according to Computerworld’s latest salary survey. And Gartner Inc. forecasts that 2007 IT staff budgets will rise just 3.5 percent, says analyst Diane Berry.

So while IT leaders are whipping out their checkbooks to court coveted candidates, they’re also trying desperately to find ways to keep their top performers from moving to greener monetary pastures. “You constantly have to worry about it,” says Dan Demeter, CIO at Korn/Ferry International, a Los Angeles-based executive recruitment firm. “If you bring someone in at the higher end, you don’t want [IT staffers] wondering why a new person has been brought on for so much money.”

New worries

This situation is different from that of the recent past in several ways. It’s more complex than the frenzied IT labor market during the dot-com boom, when hysterical demand lifted wages for many IT workers across the board. And though employers in the late 1990s were also looking for specialized IT skills, today’s companies are looking for IT workers with combinations of specialized skills, says Jim Lanzalotto, vice president of strategy and marketing at Yoh Services LLC, a Philadelphia-based provider of talent and outsourcing services.

“It used to be ‘Go find me a CRM specialist,’” says Lanzalotto. “Now it’s ‘Go find me a CRM specialist who has expertise in the pharmaceutical industry.’” Such candidates don’t come cheap.

But the pressure to keep the existing workforce happy is also intense because it’s getting harder for CIOs to find — or replace — certain skills. In the IT organization at Tokyo Electron America Inc. in Austin, for example, turnover is still relatively low, at 5 percent to 7 percent. “But the 5 percent to 7 percent that leave is very painful, because these are very important skills that are hard to replace,” says CIO Russ Finney. So Finney uses various nonmonetary techniques to keep his staff engaged. “We’re putting a lot of energy into making sure our people feel good about their jobs,” he says. One method is stretch assignments, or projects that challenge them. This might include taking someone who has worked on a component of an ERP implementation and placing him in charge of an entire ERP project for one of the company’s seven U.S. operating companies, says Finney.

Finney has also made an effort to give as many of his IT staffers as possible an opportunity to travel to Japan to visit Tokyo Electron’s headquarters. There has to be a business rationale for the trip, of course, but it’s still considered a perk, and Finney tries to distribute the trips equitably. “We try not to limit this to a select set of people,” he says.

In some cases, retaining critical performers requires creativity. Last year, Mohegan Sun CIO Dan Garrow was in danger of losing one of his top programmers, an employee with extensive gaming systems skills who was well-versed in the casino company’s quality assurance and testing requirements. The programmer moved to Spain because his fianc

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