The IT crowd will have to fight harder for pay rises

14 Feb 2008

As global labour markets tighten and chief information officers and human resource managers look at new financial reward mechanisms, IT workers will have to negotiate a new financial environment that goes beyond raises and bonuses, an analyst said yesterday.

According to analyst firm Gartner, business leaders are looking to IT to help drive business growth in 2008, resulting in increased pressure on human resources to assist CIOs (chief information officers) and IT organisations in attracting, developing and retaining a high-calibre IT workforce.

“CIOs who want to attract and retain top talent in 2008 and beyond must partner more closely with HR to develop competitive pay practices which address IT-specific needs such as skills shortage,” said Lily Mok, research director for Gartner’s human capital management content development group.

“Such practices must respond to key workforce trends, which include demographic shifts in workforce composition, increasing virtualisation and globalisation of the workplace and workforce and a tightening job market.

“Being competitive is more than just adopting market-proven practices. Pay practices which align with and support the changing IT strategy, as well as workforce expectations, result in higher productivity gains, which ultimately improves business performance.”

HR and IT leaders will need to reconsider whether a single, generic pay practice has relevancy as an increasingly diverse workforce, from different generations and with different life-cycle needs, evolves. Incumbent-driven, personalised compensation practices will gain in importance because they offer differentiated value propositions to critical talent in each generation.

As technology integrates more deeply into our work and home lives, HR and IT leaders will face new challenges in managing workplace dynamics and employee relations. Performance management and reward systems will need to recognise and motivate the ‘out-of-sight’ workforce.

The pay-for-performance system therefore needs to be based more on results than on processes. Team-based reward programmes which drive collaboration of virtual teams will grow in importance.

The issue of pay equity versus competitiveness will be more pronounced in an outsourced or multi-sourced environment, the latter using permanent staff, contractors and outsourced staff to perform similar work under very different pay programmes. Incentive plans designed to motivate and reward teamwork may need to take contributions of the non-employee workforce into account, with this stipulated in the service contract.

The more competitive job market will refocus enterprises’ attention on assessing the effectiveness of pay programmes in attracting, motivating and retaining the workforce. It will also become increasingly important to communicate the value of compensation packages to current workers and potential hires.

To recognise individual capabilities and growth potential, a greater number of businesses will consider adopting pay programmes that are more competency- or potential-based, as opposed to job-based, such as career banding.

“Compensation plays a crucial role in creating a competitive total rewards strategy. People want to work for companies which share their success in the form of salaries and incentives. Therefore, changes in pay practices get people’s attention,” said Mok.

“With so much in IT that is changing continuously, HR and compensation professionals should help IT leaders build a business case demonstrating that pay change, which goes beyond raises and bonuses, adds value to the enterprise.

“Used properly, pay can be a powerful communicator in that it guides employees to focus on enhancing individual and business performance.”

By John Kennedy