Prepare for Wrenching IT Personnel Changes Now
June 28, 2004 Nate Viall
Over the last few months, several national salary and staffing reports have highlighted the decline in employee morale, especially in the IT sector. Depending on the survey, between 40 and 60 percent of IT professionals indicate a willingness or desire to change companies. For IT managers and corporate executives, the risk of expensive turnover and the resulting decline in productivity grows higher each month as the general economy moves into a recovery. If you are a manager, you should be very concerned, and you should also be taking action now. If you are good at what you do, whether you are a programmer or a manager, opportunities are most likely just around the corner. First of all, IT departments are still attempting to do more with fewer staff. New tools are available to quantify true turnover costs. For IT professionals, that cost figure is more in the range of 75 to 125 percent of base salary. But turnover cost is not the only problem. Nationally, the monthly Department of Labor’s Establishment Survey (larger businesses) indicates that employers have added 1.4 million new jobs since December. Its Household Employment Survey is lesser known but has been on the rise since February 2002. The Department of Labor also projects that, by 2010, the United States will have about 10 million more jobs than people available in the workforce. That date is just a little more than five years away. The projected gap is a combination of a growing economy here as well as globally, and shifting demographics both here and abroad. The global economy is on the move. An article in the Des Moines Register (my local paper here in Iowa) for June 25 had this headline: “Concrete prices surge in Iowa.” U.S. producers make 85 million tons of cement annually, but in 2003 we consumed 107.5 million tons. “That sucking sound in the Southeast and on the West Coast is from China, and it’s pulling supplies out of our markets.” China’s growth is also impacting the price of steel, copper, wood, and oil and is beginning to monopolize cargo ships that would otherwise bring supplies into the United States. Moreover, the first wave of the baby boomer generation, born in 1946, is approaching retirement, but the peak of the boomers, born in 1961, is now hitting the very top of their spending cycle as they reach their middle and upper 40s. Look at the sustained level of SUV sales in spite of high gasoline prices as just one example of baby boomer spending power. Population demographic changes cut both ways. After 1960, the birth rate declined rapidly in the United States. The bottom of the Gen X cycle, those born in 1974, has a population cohort just 76 percent of the peak for the boomers. That trough of people turns 30 this year, and they are a prime target for recruiting. Unfortunately for employers, there are lots fewer of them. Most companies will be caught off guard and unprepared when the turnover starts. A few authors are even suggesting that within three years we will see companies go out of business entirely because of recruiting and retention issues. (Some companies are even talking about instituting a CRO, or chief retention officer, to try head off massive employee turnover.) Who will depart first? In a recovery, expect your very best people to be recruited away first.) Who will depart first? In a recovery, expect your very best people to be recruited away first. What about the iSeries world? As I shared with the subscribers of my own newsletters last year and again this spring, in a new feature called “The Myth of Abundant Candidates,” we have the same potential for serious change not too far ahead. (You can purchase this report on Guild Companies’ IT Jungle online store for $39.95.) In all likelihood, the general and IT employment pressures of the middle and late 1990s were part of a continuing long-term pressure cycle that just happened to be interrupted by the dot-com, telecom, and Y2K excesses and the tragedy of September 11. As the recovery gains momentum, we should plan for all the pressures that come with unemployment below 5 to 5.25 percent, which is considered to be full employment in the U.S. economy. Apply demographic thinking to the iSeries world. Think of our “world” as a nation-state. We have our own language, our own culture, and a set of natural barriers that create a restricted, though porous, boundary between the platform and other IT environments. Our population is aging. As an example, in a comparison of our 1999 data with that of 2004, we have more than doubled the percentage of those who have more than 25 years of IT experience. My data strongly suggests a coming drop-off. The Department of Labor data already indicates that only 52 percent of those in the 60-65 age bracket are still in the workforce. It will likely get worse, not better. At the same time our world is becoming more diverse and more open, with Windows, Linux, and AIX platforms, and Java and .NET applications, in addition to OS/400 and RPG. We are changing. But with change comes opportunity. Our “birth rate” in the OS/400 market has been in decline. Entry-level hiring peaked during the third quarter of 1998 and started into a decline. By the fourth quarter of 1999, it plunged into a steep decline. Like the missing Gen-Xers, IT professionals with experience starting from 1999 to 2004 will always be small. You can’t go back and change the base of experienced people. In a recovery and upturn in IT hiring, management will have fewer recruits with two to five years of IT experience. That will make for more intense recruiting. My research is showing a growing pressure bubble of “excess” tenure within OS/400 shops. People in the first half of their careers have stayed far longer with their current company than at any other time I have been tracking the data. My research goes back to the early 1980s, when the IBM midrange was still the System/38 platform. This potential turnover bubble will surely combine with vesting issues that will further increase the risk of turnover. I have created a new measurement tool for my clients called a Turnover Risk Assessment, which combines experience, tenure, past tenure, and vesting into a scoring system. It is similar to a credit score. It helps serve as a reminder that many of your staff members are primed and ready for departure. If the economy continues to improve, and if IBM and its business partners can have moderate success in putting new eServer i5 boxes into new accounts, it will make for a very different employment situation. Watch the software vendors and your local partners for the first signs of sales success. Think of the game of musical chairs as a comparison; we are not adding people, and we have taken a lot of people out of the game. A few new “chairs” in the game will produce a large increase in turnover. We have seen it three times before: in 1985, 1989, and 1996. Are you prepared? You can order “The Myth of Abundant Candidates” on Guild Companies’ IT Jungle online store, www.itjungle.com. This is a five page report that has six action points and eight historical charts depiciting the changing demographic, IT experience and tenure trends from 1995, 1999 and 2000 for technical staff, managers and PC/network staff. The report includes a sample of the Turnover Risk Assessment tool and a summary of the new 10-point “2004 Entry-Level Trends” report at no additional cost. Get prepared. If you don’t like change, you are going to like irrelevance a whole lot less, as General Erik Shinseki, former chief of staff of the Army, once wisely said. Nate Viall is the president of Nate Viall & Associates, a midrange recruitment firm based in Des Moines, Iowa, and a recognized expert on midrange salaries. E-mail: natev@compuserve.com |