This report looks at data from several of my Fortune 500 clients and compares to developing national economic hiring trends. The summary analysis is that as the economy continues to improve, the leverage in the labor market has moved swiftly from the employer to the candidate. This has significant implications on the approach employers must take – that extend well beyond the traditional considerations of Human Resources & Recruiting. Specifically, to be competitive, employers must present:
- Job Descriptions & postings that clearly show the specifics of the position
- Clear job advancement opportunities that show future potential (Job Ladders)
- Compelling business initiatives that show the growth potential of the company in their sector
- Awareness of competitive pressures for sought-after talent, and a timely recruitment process
- Adoption of new technologies and demonstration of the ability to remain technically relevant
- Awareness of competitive compensation & benefits
- Proactive management of internal culture & external perception and reputation of the company in social media
The above is not only necessary to attract new talent. Surveys in 2009 conducted by Challenger, Gray & Christmas outplacement firm indicated that as much as 50% of the staff interviewed were dissatisfied with their current position and remained with their current employer solely due to the lack of other opportunities. In 2014, the economic outlook has improved to the extent that most firms indicate significant current & planned future hiring. Retention of valued staff must therefore be a critical component of strategic planning.
The first step in ensuring competitiveness in recruitment & retention is to ensure all hiring managers truly understand the current employment landscape & future outlook.
Q2 employment landscape – National
Overall, unemployment was reported at 6.7 percent in March 2014, unchanged from the previous month, but according to the Bureau of Labor Statistics, has remained fairly steady since December 2013. For context, at the end of the recession (June 2009), unemployment was 9.5 percent, and peaked at 10.0 percent (October 2009).
The U.S. jobs outlook for the second quarter is similar to last year’s forecast, but certain industries are expected to outperform the national average for hiring. The number of manufacturing employers planning to add full-time, permanent headcount increased three percentage points over Q2 2013 and beat the national average for this year’s forecast by seven percentage points. Information Technology, Financial Services, Professional and Business Services and health Care are also among industries projected to lead in job creation.
Looking ahead, 26 percent of employers plan to add permanent staff in the second quarter, on par with last year. Given that employers historically have been more conservative in estimates than actual hiring activity, the number may come in higher at quarter’s end. Eight percent of employers expect to downsize staff, down from 9 percent last year. Sixty-one percent anticipate no change while 5 percent are undecided.
From an industry sector perspective, Financial Services is the #2 industry expected to surpass the national average for growth in hiring:
From a compensation perspective, thirty-one percent of employers anticipate no change in salary levels in the second quarter compared to the same period last year. Forty-one percent expect there will be an increase of 3 percent or less. Nineteen percent expect their average changes will be between 4 and 10 percent and 2 percent predict an increase of 11 percent or more. Three percent anticipate a decline in salaries and 5 percent are undecided.
In reviewing data for job offers DECLINED, some notable trends have emerged.
The clear trend is that is becoming more pronounced is that competitive offers (internally or externally) are driving up the demand, and based on the expected strong job growth, this is not likely to change any time soon. In particular, 71% of internal recruiters indicated that applicant’s salary expectations were higher than the company was able to offer.
Q2 employment landscape – Local
In April, the Portland area’s seasonally adjusted unemployment rate was 8.5 percent, according to the Oregon Employment Department. A year ago, the rate was 9.2 percent. The metro area added 4,100 jobs during month after losing 3,600 jobs in March, and has added 10,800 jobs since the beginning of the year. The data for Q1 2014 industry sector growth is not yet available, but as of Q3 2013 the following results were tabulated:
Note: the methodology used to define job classifications differs from state to national reporting, so it is not clear that the results in Oregon for financial services can be compared to national statistics. It is more appropriate to review this at an aggregate level and include Professional & Business growth with the financial sector to get a closer comparison. Other indicators, however, (especially the reasons given to decline job offers) is almost exactly mirrored locally to national trends.
To address the competitiveness in the labor market, companies must really embrace the sea-change in the leverage that now favors candidates, and consider how the company is perceived externally.
Job Descriptions & postings
The adage of the importance of a good first impression holds true in attracting staff. If the boilerplate website corporate overview is a component of every job posting, it is irrelevant to the actual position and does not add value. The job posting is an advertisement for the company AND the position and as any good ad, must stand out and compel the candidate to apply. Boilerplate is immediately evident and detracts from that goal. Similarly, the posting should be a subset of the job description. If job descriptions are generic, not only does it not provide clarity to employees about expectations, but it conveys a perception of indifference. If management is not invested enough in the individual’s success to be specific about the role, responsibilities, activities, measurements, and expected outcomes from a position, the individual will not be either. From a recruiting perspective, the job posting should be created from a solid understanding of the project, the technologies used, relevance to the strategies of the organization as well as the specific job description of the position. Success in attracting and retaining talent is directly tied to the individual’s understanding of their place in the company, and how they directly contribute to the goals the company has. The posting and job description is the first impression, and as such, the best opportunity to convey why the individual would want that job.
Career Ladder Definition
The ability to clearly communicate the upward mobility within an organization is key to a long term strategy. This is as true regarding technology career path as well as organizational hierarchy paths.
Job ladders can take the form of the traditional migration from analyst through developer to management, but should also provide branching options. The classic model below is fine & good if people want to move in that direction, but not all good developers are good people managers. A classic mistake is to outline only ONE career development path, and effectively communicate to their staff that if there is no interest in the path defined, there is therefore no upward mobility in the organization.
A more nuanced approach is to consider a career framework that can be used to map a path based on where individuals are in context of their future goals. Movement within the framework can be:
- lateral from one level in a ladder across to a different ladder at the same level
- diagonally from one level in a ladder upwards to a higher level in a different ladder
- upwards from one level in a ladder to a higher level in the same ladder
Movement from one position to another is determined by acquiring the skills, experience and competencies required for the new position and the availability of the position in the organization
We have compiled data from the last twenty years of doing business with Fortune 500 companies, tracked our candidates’ career paths, and cross referenced against public profiles to ensure accuracy. The trend clearly supports the matrix above. Careers tend to group along three distinct lines:
The key distinction is defining a technical career development path as well as traditional organizational management path. The matrixed ladder approach allows for the flexibility as people change career interests, as well as clearly communicating to the workforce that there is recognized value in both technical and managerial careers. It is common for people to move horizontally and vertically as their careers progress, if the career paths are overly restrictive or PREscriptive, the organization will experience attrition at exactly the worst time – when experienced, knowledgeable employees are looking for a change and no options are presented.
Compelling business initiatives
Recognize that every candidate and employee, whether they admit to it or not, are entertaining other offers. Good recruiters and good recruiting companies focus on ‘passive’ candidates. People who are employed and not actively looking for their next job. These are typically the best candidates, and are therefore actively solicited. Often, the ability of companies to compete for (and retain) IT talent does not come down to compensation, but rather ‘intangibles’ – key among them, the work the person will be doing on a day to day basis. The quick litmus test for whether the existing team (and talent acquisition team) have truly internalized the importance of their position and role ask for the ‘elevator pitch’. In 3 sentences or less, describe the project, the relevance to the company, and the goals of the initiative. If the individuals cannot clearly articulate this, they are at best emotionally disconnected from the company. Referrals are key in any company’s recruiting efforts, and people will not refer close associates if they are not clear on their contribution, or their context to the organization. With the overall source for applicants via referral at close to 16%, this direct link cannot be ignored.
In 2013, 39 percent of companies surveyed reported that top performers had left their company. In understanding the reasons, it is important to identify the workforce. Older workers (35-55) tended to leave for financial, benefits, or perceived lack of upwards mobility. However, in surveying over 18,000 professionals, the “digital generation” (born after 1980 – “Generation Y”)– overwhelmingly values job fulfilment over financial reward. Specifically, the research showed that Generation Y need to feel that their work has a strong economic or social purpose. They need to feel proud of their organization and the work what it does. Incremental pay increases will not, on their own, motivate and retain Generation Y employees.
As the workforce ages and these ‘new values’ become more prevalent, organizations must clearly articulate their goals and purpose.
Understand competitive pressures for sought-after talent
Key to acquiring new employees is the recruitment process and cycle time. The number of job openings has increased to levels not seen since the height of the financial crisis, but vacancies are staying unfilled much longer than they used to — an average of 23 business days today compared to a low of 15 in mid-2009. (US Labor Department data, December 2013). Note, this statistic relates to OVERALL openings. IT related statistics are even worse.
One hugely important trend has been growing post-recession is for companies to turn to contract and temporary help to meet their hiring needs. This allows them to have flexibility in their workforce, so that as market demands change, they can dial up or dial down staffing as needed. Forty-two percent of employers plan to hire temporary or contract workers in 2014, up from 40 percent last year. Of these employers, 43 percent plan to transition some temporary employees into full-time, permanent members of their staff. Key to understanding the importance of this overall impact is that the Great Recession completely disabused employees of the myth of full time employment stability. Prior to the recession, there were really two workforces – Contract, and FTE. The concept was that contractors were interested in short term opportunities at higher compensation rates, while FTE’s valued the perceived stability and job security over the more volatile contract roles. Now, the workforce tends to be far more flexible, and will consider contract or FTE roles on the relative merits of the opportunity. The cycle time for contract positions is typically much shorter than FTE hires, so this puts corporate recruiters at a significant disadvantage when effectively pursuing the same candidate pool. In IT, salaries are up significantly over 2010 levels, and the average time to fill contract roles is 12 days. Unless corporate recruiters can dramatically reduce their cycle time, they will continue to lose ‘market share’ to contract or contract to hire opportunities.
Above shows across ALL industries the % of contract to FTE employees. Statistics for the Portland metro area are not readily available, but our experience in this market over the last 5 years indicates that in the Fortune 500 space, the percentages are closer to 50-50%. In the last 2 years we have seen the mix of open orders swing from predominantly contract to a heavy weighting to FTE. However, Just in the last six months we are starting to see an awareness in the market that the labor force is no longer fragmented (in what kind of position they will consider) and there is a greater flexibility to consider contract to hire opportunities in order to attract talented candidates. Additionally, companies are finding that it is easier to fill requisitions opened as contract, the HR process for filling FTE roles has not yet caught up with the shift in the market conditions, or shift in workforce attitudes. Within the process, Interviews and offers are now much more bi-directional – the candidate is often interviewing the company, and with multiple offers, often wants to ‘try before they buy’ before making any long term commitments.
Regardless of trends in the labor market or the economy, one critical component to understand is the need to develop relationships in the local market. Whether it be sponsoring meetups, user groups, hosting webinars or hosting happy hours for employees, recruitment & retention is fundamentally based on human interpersonal relationships. There is no substitute. The largest source of competition for talented employees is their trusted social network. To remain competitive, therefore, it is imperative that the company takes an active role in maintaining a high level of engagement locally.
Adoption of new technologies and technical relevance
Attracting and retaining IT professionals requires companies stay current in the technologies they are using & deploying. Previous, we discussed the breakdown on reasons why candidates decline job offers. Under the covers of those statistics, however, is the reality that candidates often do not pursue opportunities even to the interview stage if the opportunity is not compelling. As anyone in the field knows, the only way to advance your career is to remain current in the current toolsets in the market. This has very important nuanced implications to Sr. IT managers & CIO’s. If the technology is stale, the architecture is outdated, and the project is effectively maintaining or incrementally improving previous products, it will be impossible to keep IT professionals engaged for any period of time. This effectively means that a CIO has to build an aggressive Application Lifecycle Management (ALM) and technology refresh model into the ongoing operation of the company. Allowing the ALM to be dictated by product vendors will not suffice, and understanding the ripple effects on product marketing & management, and the entire strategy of the company’s product line is critical to maintain any stability in staff. This can leave the uncomfortable feeling of the ‘tail wagging the dog’, but if technology products are in any part of the company’s value proposition or supply chain, the rate of change of the products deployed needs to have some level of correlation to the rate of change in those technologies. This does not mean that the company needs to revamp it’s products and absorb the risk of bleeding-edge products just to appease the IT workforce. However, the other extreme is just as unacceptable. It is impossible to attract quality IT candidates to projects based on outdated or stale technology platforms.
Awareness of competitive compensation & benefits
Human Resource-driven Salary bands, caps, and the desire to define jobs by established job descriptions is by far the largest barrier to a company attracting talent. Managers inflate position levels to get the salary to match market conditions. Job requisition approvals are delayed because HR has no job defined for “SDET” or “SEO Optimization” or “Big Data Developer”. Candidates get offers in the ‘mid point’ of salary grades so there is a perception that the employee will have ‘room to grow’ in the role, even if the offer is not competitive. Companies want to develop leading edge products to remain competitive and increase market share, but when the products require integration with leading edge technologies, often internal HR job classifications create barriers to attracting the talent needed to build the products.
A good case in point is mobile application development. The national average for a developer with 5-7 year experience overall, and 2-3 years in mobile development is $144,000, up nearly 8% from 2013. The typical HR team and management team balks at the idea that someone with 2-3 years in a particular area is ‘experienced’ – yet it is obvious to all that you cannot establish ‘first-mover’ advantage with people who have many years with new technologies. This requires a change in mindset of what managers & HR considers ‘experienced’.
As another example, “Big Data” is by far the fastest-growing segment of the IT job market, yet the current applications and mainstream vendor support did not exist until 2010. A developer with 4-5 years-experience with this technology therefore, would have been involved literally at the onset of the adoption, and within IT circles, would be considered one of the pioneers in the field.
The previous section discussed the phenomenon of the merged IT workforce. No longer are contractors and FTE’s a separate labor pool. As such, compensation needs to be understood to be more competitive. The traditional approach companies used of paying less for FTE’s with the implicit assumption of increased stability has been completely debunked with the recession. The following chart depicts ComputerWorld’s 2014 Salary Survey:
Note: this numbers depict a nation-wide MEDIAN. When you drill deeper & understand that there are regional differences that swing 145% of that median (New York, San Francisco) it becomes clear that the typical salary bands offered by many large companies simply are not keeping pace with the leading edge companies that are serious about attracting talented IT staff. (For reference, the Portland market is 103% of the median).
Of another concern is benefits. Again, understanding the workforce demographic is critical. Medical insurance, for example is not typically viewed as valuable by the Generation Y workforce, for that demographic, the benefits of the office environment, perks such as in-house exercise rooms, gourmet cafeterias, and flex work schedules carries far more weight. Regardless of the demographic, surveying the competition in the local market, understanding the competition and what their benefits package is, and staying competitive with that is critical to retention.
Manage the culture, and social media
Are you aware of the reviews your company has on glassdoor.com, goolti, Yelp, myvisajobs.com, etc.? Are you on the list for Fortune Magazine’s best & worst to work for? Which side?
Candidates considering opportunities often are. One critical component of the HR practice should be to gather unbiased AND biased feedback on the company. Exit interviews, external reviews, follow up phone calls with candidates that did NOT get a job offer, etc. are all aspects of managing the perception of the company that is critically important in attracting prospective employees. Is the office visually appealing? What does the parking lot look like at 8AM and 5PM? There are many aspects to a company’s ‘culture’ – some tangible and some not. But the culture of a company is something that takes active management. This is especially important in large multi-site or international companies. There needs to be an intentional plan as to how much of the culture will be defined intentionally by corporate-mandated centralized policy, vs. flexibility in the geographies to conform to local characteristics. There is no right answer, but it is important to be intentional in action, and understand the culture of a company is what management allows or intends it to be. Creating a positive, energetic, results-oriented culture can do one of two things; either extend the brand of the company and influence the reputation of the company, or it can be used to offset variables outside the control of the team. Not every company can afford to offer amazing benefits and top salaries. But research has shown over & over that people will STAY at a job, and refer friends, and positively endorse the company if it has a healthy culture. Conversely, as pointed out earlier, with the Generation Y becoming a larger percentage of the workforce, the emphasis is less on compensation & more on lifestyle and balance. An amazing can offset deficiencies in other areas, but the inverse is not often true. And over the long term, is almost never true.
For companies to compete in the IT labor market today, they must holistically address many components, not just the obvious things HR focuses on. Ensuring the company offers competitive salaries alone will not suffice to both attract and RETAIN a skilled workforce. Often, management takes a very narrow view of compensation & benefits, and does not consider the cost to backfill a position, the ‘soft cost’ of knowledge transfer and loss, and the loss of momentum to the project team that attrition causes, or the impact to unfilled positions on product development timelines. For HR recruiting efforts to be successful, they must educate management about the true cost to unfilled positions and turnover. With some research, the case can easily be made that the hidden costs to the organization far outweigh the cost to building an organization with compelling products, compelling career development opportunities, competitive compensation, and a positive culture. The argument can be made that by not reconciling these concepts together and creating integrated strategic plans, the organization cannot succeed for any protracted period of time. Every company’s success is contingent on the strength of its employees. And companies that understand what it will take to truly compete for and retain excellent IT resources should be more than able to offset the cost to those programs by the increased market share and revenues those companies will produce.