Peopleware: The Hiring and Retention of IT Personnel

By, Wynne W. Chin, R. Ryan Nelson, and Peter A. Todd

I can’t hire enough people to keep up with the growth … no matter how hard we try! We hired over 900 IT associates last year and still fell short of the demand from the business units for IT resources. It’s staggering. It really keeps me awake at night because we’re not producing IT graduates through the education system at the rate that demand is growing. And now with the introduction of the Internet and pent-up demand from Y2K my guess is that in the next 3-5 years compensation for the IT world is going to do nothing but escalate … DBAs, developers, systems analysts, project managers, and then all of the support organization – trainers, recruiters, etc. – Jim Donehey, CIO, Capital One (January 21, 2000)

Unfortunately, Jim Donehey’s nightmare has become all too real for virtually all organizations, large and small, public and private, across all industries. The hiring and retention of IT personnel has become the top priority for managers given the following facts:

• Information technology’s share of the GDP nearly doubled between 1977 and 1998, moving from 4.2 to 8.2% (Department of Commerce IT workforce website: http://www.go4it.gov).
• Between 1995 and 1998, computer systems analysts and scientists recorded an annual average job growth rate of 16.4 percent. Thus employment growth for IT occupations seems to be even stronger in recent years than in the past (http://www.go4it.gov).
• Over 80 percent of firms polled said increasing the number of qualified IT workers is very important. 86 percent report the shortage has produced at least a moderate negative impact on business (Information Technology Association of America website: http://www.itaa.org).

Indeed, in the IT labor market demand continues to exceed supply. Although some analysts suggested that this labor imbalance would subside after the Y2K crises, the evidence does not seem to support this conclusion. There is little to suggest that the estimate of 350,000 vacant IT positions in the United States has changed significantly in 2000. In addition, the number of IT positions is expected to grow by almost 30% over the next 5 years, and the growth rate in the supply of IT labor still lags far behind. Furthermore, turnover rates, in the range of 15% in 1999, have moved into the 20% range for many organizations. Top performers are those companies that have managed to hold their turnover just below 10%. Ideal turnover (estimated by many at approximately 5%) has seemed an unattainable goal for IT organizations. With the continued growth in demand for talented IT professionals and with insufficient supply, issues of hiring, developing, and retaining IT talent must be given a great deal of attention.

This white paper addresses the critical peopleware issues that face IT managers into the future. The first chapter gives a detailed analysis of labor market supply and demand issues. In Chapter 2, recruiting, hiring, compensation, and retention strategies are examined, with the objective of providing recommendations to management for the creation of more effective and efficient processes. Chapter 3 takes a tactical view of retention and turnover, providing more than 100 useful guidelines for helping organizations keep their people. In Chapter 4, we focus on turnover management by developing a pragmatic model of turnover based on a synthesis of the literature and our own research. This model provides a framework that links the tactics that are discussed in Chapter 3 to key work attitudes that influence turnover behavior. Recommendations for improving the training and development process are the focus of Chapter 5. In particular, a heavy emphasis is placed on how to conduct an effective learning needs assessment. Chapter 6 contains case studies from nine organizations that are heavily influenced by IT peopleware issues. From these cases, we have extracted key challenges and lessons learned. Finally, in Chapter 7 we present the employee’s perspective, using the results of focus groups and a survey of employee motivation.

Note: The 2000 CMIT White Paper is only available to CMIT Associate Firms.