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Stop-gap Measures for the IT Staffing Crunch

May 1, 1999
Related Topics: Workforce Planning, Featured Article
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Desperate employers are sick of the technical staffing shortage. First, there weren t enough IT workers to fill the openings. Now there aren t enough technical recruiters to fight over the limited talent that exists. It s a frustrating situation that leaves many of us cursing the strides of technology.

But like it or not, technology will continue to progress at breakneck speed, and at least for the immediate future, the IT staffing shortage will continue to be the bane of every recruiter s existence. A sad reality, certainly, but before the crying towel gets too soggy, take comfort in two things: the shortage won t last as long as you think, and you can ease the pressure through a variety of stop-gap measures.

Sure, there are alarming reports that indicate this "IT crisis" has legs—statistics that suggest it will run forever and exhaust everyone s resources. The "Help Wanted 1998" study released by the Information Technology Association of America (ITAA) and the Virginia Polytechnic Institute indicates there are currently 346,000 vacant IT jobs nationwide, with an average of 90,000 openings being added yearly.

Dramatic statistics like these catch everyone s attention. However, both logic and history suggest this information may be overstated. For example, IMS programmers were scarce in the early 80s, and the shortage triggered similar alarms that suggested the problem could potentially paralyze the business world. But when IBM introduced their first relational database only a few years later, suddenly the market was glutted with IMS programmers.

Many expect a similar scenario with COBOL programmers, who ve been in high demand for Y2K projects that will wane significantly after the bulk of the project work is completed in the next 12 months. History tells us that every business condition is cyclical, and the IT staffing shortage is a predictable dynamic in this process.

So how should HR be responding to this current but potentially short-term problem? The best advice is to take action through a number of strategies that will help ease the current pain, but don t completely restructure your internal systems around what will likely be a temporary shortage.

Cast a global recruiting net for ITworkers.
One way to increase the supply of IT workers is to look outside of the United States. You can enlarge the talent pie by bringing skilled professionals into the country from overseas. The U.S. Immigration and Naturalization Service issues H-1B visas, which allow "specialty occupation" workers to enter the United States for employment.

Specialty occupations—jobs for which no U.S. citizen is available because of the supply and demand imbalance—include such professions as information systems and engineering specialists.

There are two good things about H-1Bs. First, they allow you to travel the globe while you identify technical professionals who want to work in the United States. Second, the H-1B is valid only for the employer who arranges it. If you bring a technical professional into the country and he or she decides to jump ship, it s likely that the ship he or she will have to jump on is the one that s going back to the home country. If the person wants to come back, he or she has to start the immigration process all over again. As a result, most H-1B visa holders demonstrate remarkable loyalty.

History tells us that every business condition is cyclical, and the IT staffing shortage is a predictable dynamic in this process.

There are some drawbacks to H-1Bs, too. First, the overseas trip can take you away from your job for several weeks, is expensive, and you may very well come home empty handed. If you recruit for two weeks, a lot of time goes by after you come home, wait through the 6 to 12 week Immigration and Naturalization Service processing time (if the INS isn t backlogged), make the offer and wait the customary four-week European notice period. Candidates often fall out of such a lengthy process. Your company s business conditions may also change mid-stream, leaving you with overseas help you may no longer need.

Then, in September 1998, the biggest problem with H-1B visas was that there weren t any. Visas are allocated on a first-come, first-serve basis and the 65,000 visas allotted for 1998 had been used up by May. In October, however, Congress passed a budget bill that significantly increased the H-1B allotments for 1999, 2000 and 2001.

According to the American Immigration Lawyers Association (AILA), a Washington, D.C.-based national bar association of more than 5,200 attorneys who practice and teach immigration law, reported that as of February 28, 1999, 81,000 of the 115,000 H-1Bs available for fiscal 1999 had been used.

The AILA went on to say that approximately 10,000 H-1B petitions were being approved each month and they believe that 35,000 H-1B petitions are pending with INS. These figures suggest that the 1999 allotment will run out in May again, four months before the beginning of the new fiscal year when more will be available.

Don Allen, COO of the Pro4 Division of Glovia International, an El Segundo, California-based software company, has relied heavily on the H-1B process for recruiting IT talent. Ninety percent of Pro4 s software developers are on H-1Bs, having come from Japan, Korea, India, Russia, Mexico, Ireland and Britain.

"There s great competition for H-1Bs. We ve been successful because we have been diligent," says Allen, referring to working the applications through the INS. "On the other hand, employees who are on H-1Bs often want you to sponsor them for permanent resident status, so the $3,000 cost for the H-1B visa can grow to $9000 to $12,000 when you add the cost of the Green Card."

Outsourcing IT work overseas has risks and rewards.
On the other hand, your IT department isn t the only place where your company s IT work can be done. While there are many overseas workers who want to come to the U.S. to work, there are just as many who want to stay home and take on outsourcing projects.

The ITAA reports that 16 percent of the companies in its "Help Wanted 1998" study outsource some of their IT work overseas. This practice isn t without its challenges. The individuals doing the work are on the other side of the planet, which means you relinquish a lot of control over the project, and communication can be a big issue, especially with a workforce that s typically asleep when you re awake. Then there are potential language and cultural barriers to work through.

As daunting as these challenges seem, they can be successfully managed, and the payoffs can be big. For instance, work done in India, the Philippines, Singapore, Malaysia or several other countries can cost as little as half the cost of doing the same work in your IT department.

Outsourcing IT work overseas can also have a positive and dramatic effect on recruiting. Ed Trainor, CIO at Los Angeles-based Paramount Pictures, adopted a clever strategy. He explains, "We attempted to outsource the less interesting and challenging mainframe work to India. We kept the new technology and interesting development work here. When we recruited locally, we recruited mostly for those jobs, and that gave us a competitive advantage in the labor market."

Recently, partly because they reduced their dependence on the mainframe systems that generated most of the work sent to India, Paramount ended its outsourcing program.

Trainor strengthened the company s recruiting position by sending a significant portion of the less desirable work to India, which made it easier for his recruiter to do her job. Not only could the recruiter sell candidates on good pay, modern technology and the glamour of working on the Paramount lot, but she could also promote the fact that the less interesting work had been sent elsewhere, leaving mostly the leading edge, career-enhancing work to be done in-house. This was a very attractive package for many candidates.

If you can t find em, train em.
Since a global search isn t a feasible option for many organizations, the best way companies can ease the technical talent shortage is to increase the supply of capable individuals who are trained in the required technologies.

The problem companies face with training is that as soon as old technology programmers are trained in particularly popular software, they become very valuable and become the targets of headhunters. Companies either prolong their agony by refusing to train—thus continuing the shortage—or they train and watch some of their newly trained employees leave. However, training may be coupled with retention. Your training investment doesn t have to walk out the door.

When you have IT workers, how do you keep them?
Of course, turnover is the killer. The impact of trained, knowledgeable and productive IT employees taking their skills to a higher bidder is severe.

Though pay is important, money isn t the primary reason technical employees leave or stay. Other matters—matters related to the work itself, the workplace and your management—are often more important. Cathy Shepard, performance and rewards practice leader for Mercer Consulting Group s Los Angeles office, describes the bad news. "Responding to talent shortages with pay can be done quickly, but it s expensive. Changing other attraction and retention factors can help you avoid some costs, but the fixes take a long time and a lot of effort. While pay is a quick fix, it does not retain employees over the long haul. Challenging and career-enhancing projects, good management and quality of work/life takes longer, but has a better probability of improving employee retention."

Many studies have been done about retention, and they all say the same thing: career development opportunities, challenging work assignments, high-quality supervision and leadership, and good work environments are what attract and keep high-tech talent.

Compensation strategies that don t affect position evaluation or base pay will produce less regret when the shortage is over.

What can you do about career-development opportunities? You would think that the silver lining of turnover would be that it creates promotional opportunities. But Shepard points out, "Without extensive training, companies are reluctant to promote employees to positions they may not be entirely prepared for. When they have turnover, they go to the outside to try to hire candidates they view as already trained." And if your turnover is low, ambitious employees will leave before they are promoted.

Plus, Shepard points out, flatter organizations mean fewer promotional opportunities. What companies can offer instead of promotions are challenging and career-enhancing projects. But do this only if you have leading-edge technology and interesting projects. If you don t, you have a problem.

Unfortunately not every company is in a position to offer glitzy projects and cutting-edge technology. And the CIO is unlikely to respond to the recruiting staff s request for a PeopleSoft or Oracle conversion so they can offer candidates "sexy" work. So what are your options?

  • You can embark on major selection projects to help you hire people who like you and your organization s work.
  • You can embark on a major management-training project to help your IT management move from a bits-and-bytes orientation to a people-sensitive orientation.
  • You can embark on a major quality of work/life intervention to fix whatever is wrong with your environment.
  • Or you can whip some quick money fixes on the problem while you re working on the other stuff.

Pay interventions could provide a good short-term band aid.
The most important thing to consider when applying a pay fix to the technical staffing crunch is this: The shortages are temporary, remember? Before too much time goes by, client/server, Windows , Oracle, PeopleSoft and all the other critical skills will be abundant.

If you reevaluate all your technical positions and regrade them today, you ll have a mess in a few years. Abundant talent means technical pay will return to normal. Your technical jobs will be misgraded, and you ll be having an unpleasant discussion with your technical employees about why they shouldn t expect a merit increase for their remaining years with the organization—or at least until your pay structure catches up to their inflated, and no longer market-justified, salaries. Here are some pay interventions you won t regret later:

Signing Bonuses:
These average 8 percent of salary, according to several unpublished Mercer studies. Retention bonuses average 8.5 percent. Some companies are combining them. All or part of the signing bonuses will be paid out only if the employee stays for an agreed-upon time. Others pay out gradually over the agreed upon period.

Short Term Incentives and Product Bonuses:
Short-term incentives average 12 percent of salary, according to Mercer. Some are tied to group performance or project completion, others to individual performance and some to the performance of the entire department.

Hot Skill Bonuses:
One of the most intriguing pay options, hot skill bonuses can be separated from pay in employees minds by paying quarterly. Surveys can be done quarterly to gauge the demand for hot skills, and the results can be used to vary the amount of the bonuses from quarter to quarter. As the skills become less hot because more people have them, the bonuses gradually drop to zero. Making training available to employees who don t have the hot skills will help avoid staff discontent on the part of those who are not receiving the bonuses.

Aggressive IT Merit Increases:
Though this may be the first solution in many people s minds, moving pay higher in the range will produce a backlash later on when some employees pay is red-lined and others increases are close to zero because they are so high.

Whatever you do, remember: Compensation strategies that don t affect position evaluation or base pay will produce less regret when the shortage is over.

If you re a high-profile employer of choice with lots of aggressive and smart recruiters, you re probably coming out on top in the recruiting game, and maybe even having some fun doing it.

But if you re an average company, you re probably just holding your own. So take a look at all of your options, and remember, if it helps you keep your recruiting ship afloat, a short-term fix might not be such a bad approach.

Workforce, May 1999, Vol. 78, No. 5, pp. 58-58.

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