InformationWeek

henever I read about an American executive complaining about the high-tech employee shortage, it's a reminder of just how anti-free market most executives are.

Not too long ago, a VP told me how impossible it was to hire the staff he needed for a big 18-month project. I asked him if he could get enough qualified folks if he offered $5 million, excellent benefits, and an 18-month no-cut contract. His first reaction was contained outrage; his second was to do the accounting. "We could easily find those people," he said. "But the returns wouldn't be high enough."

That's the free-market crux of the staffing shortage--the willingness to pay a dynamic market rate in a high-demand labor marketplace. Seen from a less politically correct point of view, this staff shortage is really a willingness-to-pay shortage.

Executives who pay lip service to free markets lose their enthusiasm when they have to up the market-driven ante. These complainers would do better in the old Soviet system, in which central planners would have responded to the need for enterprise resource planning systems by creating a five-year plan and marching hordes of people to C++ drill camps in order to belch out cookie-cutter contributors who would be universally available at a low price.

The reality is that sellers of skills have the same kinds of leverage buyers do. In an imbalance of supply and demand, the price changes. In this situation, either the willingness to pay a market-clearing rate (the amount you'd have to pay to get talent) is lacking, or the project doesn't generate sufficient return if you pay a market price for talent.

One solution is obvious: Pay the going rate for the talent you need. I see this happening more. My neighbor was offered more than $500,000 to lead a financial company's enterprise application integration effort. At that rate, the company will have its pick of qualified personnel. If the project doesn't generate enough return with that kind of cost, it's the market's way of telling you to delay, downscale, or deep-six it.

The second solution is a bitter pill, especially among executives who've made their mark in the "disposable employee" culture, and it won't even solve the problems overnight. The dominant business culture likes trained and experienced employees but doesn't want to invest in making them. Training requires extra expense and gives the hired help more salary impetus and career mobility. Better to follow a cuckoo strategy: Let competitors do the spending and reap the benefits at the back end.