InformationWeek

Stretched To The Limit

By Marianne Kolbasuk McGee
Issue date: Dec. 2, 1996

Federal Express Corp., lauded for its many technology innovations, still can't attract enough skilled IT workers. The competition for today's hottest skills is that tough. FedEx's location, in Memphis, Tenn., doesn't help. Apparently, an outing to Graceland isn't every programmer's idea of a good time.

So FedEx, determined to attract the IT talent it needs, is opening several regional data centers in other states. There, the company hopes, t alented programmers, systems analysts, and others can work for FedEx without having to move to Tennessee. The first two centers are in Colorado Springs and a suburb of Dallas; a third will open this month in Orlando, Fla. "We're looking to provide enticing work environments," says Julie Yancey, the shipping company's managing director of development services, "and these are good places."

Sound extreme? It's not. Recruiting and retaining IS staff has never been so difficult. CIOs complain that qualified technical people are hard to come by. The candidates companies can find are finicky and demanding. Colleges and universities have failed to train more computer-science students. Computer vendors, systems integrators, outsourcers, and consulting firms compete for the same people. And companies' HR departments set pay policies that make it difficult to attract top talent. All this is happening as corporate managers have finally realized that IS and the business are inseparable.

"There have been shortages of skills before," says Paul Pechersky, VP and CIO at PacifiCorp, a utility in Portland, Ore. "But this is among the worst in a long time."

The situation will probably worsen before it improves. Nearly all of the 300 CIOs surveyed by InformationWeek in August said they have problems finding employees with specific skills--even though only about half planned to enlarge their IS staffs this year. "I don't see any relief coming soon unless there is a slowdown in Silicon Valley or a downturn in the economy in general," says Gary Walden, director of IS at Trimble Navigation Ltd., a navigational-equipment maker in Sunnyvale, Calif.

Too Successful?
Ironically, the IS talent shortage is in part a result of the success of IS. "Every company in nearly every industry has finally realized the value of technology and how it can improve productivity and profitability," says Larry Panatera, CIO at Snap-On Inc., a tool maker in Kenosha, Wis. "That means everyone's got major IT initiatives going on at the same time."

Adding to the jumble is a new and unexpected demand for, of all things, Cobol programmers, which is being spurred by the year 2000 crisis. Mainframe programmers are needed by virtually every company to fix date fields in applications before the decade's end. "The joke is that IS shops will need recruitment programs at the retirement homes in Florida just to find Cobol programmers," says Stan Johnson, IS director at the Port of Los Angeles ( see story ).

IS managers in a wide variety of industries say one of their biggest challenges is recruiting. With distributed client-server environments being the rule, demand is huge for people with experience in networking, Oracle databases, Unix, Windows NT, PowerBuilder, SAP R/3, Baan financial applications, corporate intranets, and the Internet.

For example, one PowerBuilder programmer at a book publisher says people in his group get at least one job offer a week. Adds Jim Woodward, senior VP at Cap Gemini America, an IT consultancy in Iselin, N.J., "Nearly every company we talk to worries about being unable to find people with the skills they need."

Making matters more difficult, it's not just IS shops that are trying to recruit these people. Consultants, systems integrators, and vendors want these skills, too--and they're willing to raid IS shops to get them. "In the old days, IBM wasn't even allowed to talk to your programmers if you were a customer," says PacifiCorp's Pechersky. "Now, companies like Oracle come in and hire your programmers."

The change comes as the industry increasingly moves to offering services rather than simply selling products. Oracle, for example, derives nearly 40% of its revenue from services, according to Ray Lane, the company's president. To support that, the database maker has pumped up its consulting workforce from 800 people to 6,500, and its service organization from 500 to 2,500 in recent years. "And we still hear complaints that we don't have enough consultants," say s Lane.

In fact, by year's end IBM will have hired more than 10,000 people into its service organization for jobs in consulting and outsourcing, says a company spokesman. Many of those new service employees will actually be people acquired from IS shops with which IBM has signed outsourcing deals, while others will be new recruits.

Fewer Grads
On top of that, college grads with computer-related degrees are getting scarcer. U.S. colleges and universities awarded about 35,000 degrees in computer science in 1994, the most recent year for which figures are available. This marks a drop of about 15,000 from an all-time high in 1986, according to the National Center of Educational Statistics in Washington. Admittedly, more advanced degrees in computer fields were earned in 1994 than in 1986--11,000 vs. 8,400. But that wasn't enough to make up the gap in bachelor's degrees: Only 24,000 undergraduate degrees in computer fields were awarded in 1994, compared with 42,000 in 1986, according to the NCE S.

Recruiting hot IT talent is even harder for IS shops at little-known companies or in less-than-glamorous industries or geographic regions. "If you're just a run-of-the-mill type of company like ours, you're competing against all the big names that everyone wants to work for," says Michael Osterhout, director of IS at Waste Management Inc., an environmental firm in Oak Brook, Ill.

Pechersky of PacifiCorp says it took him nine months and a nationwide search just to find someone to fill his telecommunications manager spot. One reason for the long search: Candidates said they weren't excited about working for a utility.

Boonie Blues
Discount retailer Wal-Mart Inc. finds that its Bentonville, Ark., location makes it hard to fill IS positions. The company wants to increase its application development team of 400 to about 650 and add dozens of telecom specialists by next August. But with the IS organization centralized at company headquarters, Wal-Mart's search is focused on college studen ts in Arkansas and three nearby states: Kansas, Missouri, and Oklahoma. Attracting young people is hard, too: Arkansas is more appealing to people with families than to singles, admits Kevin Turner, Wal-Mart's VP of application development.

Companies more centrally located are also having a hard time finding IT talent. When Kraft Foods Inc. recently closed an office in White Plains, N.Y., the food processor offered the facility's 150 IS staffers a chance to relocate to company headquarters in Chicago. "But none of them wanted to go," says James Kinney, Kraft's CIO. "They had plenty of offers for new jobs from other companies in the New York area."

Even companies in Silicon Valley are feeling the pinch. Trimble's Walden recalls that when he was IS director at Triad Systems in Sunnyvale, Calif., he had to fly one networking job candidate and his wife in from Salt Lake City to Sunnyvale three times, as well as have someone in his office produce a video showing local houses for sale, before the candidate accepted the job.

To overcome these problems, companies are trying different approaches. In Columbus, Ohio, for example, several companies have banded together to sponsor a new marketing campaign to convince high-tech workers to relocate to the city. The companies include BancOne, CompuServe, Lucent Technologies, and Sterling Commerce. Their effort, led by the Columbus Chamber of Commerce, includes a Web site listing high-tech jobs and highlighting regional quality-of-life attributes and cultural perks. It's believed to be the first effort of its kind by a U.S. city.

Other companies are stepping up recruiting efforts by loosening telecommuting rules for certain jobs. Apparently, the option to work at home is something that job candidates want. It makes sense mostly for programmers, call-center workers, and other jobs that don't require on-site interaction with users.

Consultancies, vendors, and IS managers have also ramped up their college recruitment efforts. "IBM actually raised the salary offer it made to one student because it wanted to hire her so badly," says Harvey Shrednick, director of the IT center at Arizona State University in Tempe and the former CIO at Corning Inc. "That wouldn't have happened in the past."

Federal Express has increased college recruitment efforts at 40 campuses, says Yancey. Kraft offers students a sign-on bonus if they commit to the company before they graduate, and it has doubled the number of IS interns it accepts.

Some of these innovative approaches are working. Capital One Financial Corp., a credit-card company in Richmond, Va., has hired 250 IT people since February. "We put a tremendous effort into building an entrepreneurial spirit with our people," says Richard Fairbanks, Capital One's chairman and CEO. For new workers, Capital One offers a compensation package that includes performance-based bonuses and stock options.

Staying Power
Recruiting, though difficult, is just the beginning. Once technical workers are on board, the next big cha llenge, say IS managers, is retaining them. The situation has been worsened, some say, by years of downsizing and layoffs. The result: a lack of loyalty. "If staffers get a better offer from elsewhere, they don't have the loyalty or security to want to stay," says Susan Yule, VP of the New England division of the Eliassen Group Inc., a national IT job-placement firm. "People don't buy into the idea anymore that their company will take care of them."

The most common way to try to hold on to good employees is to throw more money--both in salary and bonuses--at them. "We're at the point where we're paying many technical people more than the managers," says Osterhout of Waste Management. To hold on to valuable techies, employers often promote them to management positions before they're ready, say some CIOs.

But some corporate HR departments make it difficult for their IS managers to bid up salaries to attract and retain good workers. Also, some CIOs protest that standard HR policies are out of sync with g ood business logic. "At companies of any size, it's often OK to get a consultant for $200,000 a year, but you can't hire a regular employee at $80,000," says Trey Bradley, CIO of the Dallas cosmetics maker Mary Kay Cosmetics Inc. "The fear is that if you hire key talent as employees, you'll have to keep them forever."

Even when CIOs get the nod to offer big bucks for certain kinds of technical skills, middle IS managers who are actually in charge of the hiring often have their own personal conflicts to contend with. "If one of my managers is making $70,000 a year and I tell him it's OK to hire a techie at $75,000, that manager's got a mental block to get over--he's hiring someone under him who'll be making more than him," says Pechersky of PacifiCorp.

Even when IS shops are willing to make huge salary offers to attract or keep talent, it doesn't guarantee staff will stay. "We hired a guy with PowerBuilder skills and gave him a 24% pay increase over what he was making at his previous employer," says Cl eaburne Fritz, VP of IS at Atmos Energy Corp. in Dallas. "Six months later, he went back to his old company for another 14%."

Another technique for retaining workers is to offer lots of solid training in the latest, hottest systems. In fact, 85% of IS managers surveyed by InformationWeek in August say they expect to spend more on training by the year 2000.

For some companies, that means developing IS staff talent beyond the latest technology skills. FedEx's training programs encompass courses that target several nontechnology areas. "Our goal is to help our people become well-rounded, with business savvy, technology expertise, and personal growth," says FedEx's Yancey. "The incentive is to develop people and keep them."

Yet training can present its own set of problems. For one, it's time-consuming and expensive. "You take a $45,000 asset, spend some time and money training him, and suddenly he's turned into an $80,000 asset," says Mary Kay's Bradley.

For another, once employees are trai ned in a hot new technology, they're suddenly more attractive to other companies. This is a problem even with recent college grads. Says Mary Ann Luczak, a VP at First Chicago, a financial services firm in Chicago, "We put $10,000 and a couple of years into training these kids, and the consulting firms come in and hire them."

To counteract that problem, a few companies, including Kraft, are weighing whether to require employees who leave shortly after being trained to reimburse the company for the cost of their training. EDS has done this for many years, and some companies do this for MBA-related tuition. Pechersky of PacifiCorp even asked one worker to sign an agreement to stay with the company for a predetermined length of time after returning to the United States from an Oracle and SAP project overseas.

While the competition to attract certain technical skills intensifies, a number of IS managers are acknowledging that finding technical talent and keeping it is a losing battle. That's why increasin g numbers of IS managers depend on outsourced help.

No Panacea
But outsourcing can lead to its own problems. The desktop manager for a chemicals maker that has announced plans to outsource IT says he's losing staff so fast, he'll need to hire workers on an interim basis. "People will be transferred to the outsourcer at their existing salaries," he says, "but they have offers for 30% to 40% more from other companies--including our suppliers."

Also, in the past year there has been a flurry of activity of traditional "office help" firms acquiring smaller technical staffing firms. These mainstream agencies are building teams of temp workers to supply some of the basic, yet much in demand, help in certain programming languages, networking, etc. In a record acquisition of this type, temporary staffing firm Accustaff in Jacksonville, Fla., this fall purchased competitor Career Horizons in Woodbury, N.Y., for $900 million. Both companies had spent the previous year acquiring dozens of smaller tech nical-staffing firms.

Some desperate IS shops are even looking at temp help to fill permanent spots. But with so much work out there, few are biting. "Despite everything, these shops are still trying to keep their dollars down, so the contracted workers can often make more money by working independently or for an agency," says Eliassen's Yule. Sometimes, the best way to attract and retain IS staff boils down to convincing workers that their efforts will not go unrewarded. That means giving staffers new challenges and career growth opportunity.

Or you could try Stan Johnson's solution to the people shortage: He plans to retire from the Port of Los Angeles early next year.

See related story: " Cobol Spoken--And Paid For--Here "

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