employers are paying premiums to workers with IT ... - Foote Partners

7 | 2012 The Magazine of WorldatWork©

More employers are paying premiums to workers with IT-business skills.

The Enterprise Resource Planning Sol­u­tions Group in one of the world’s largest aerospace and defense contractors consistently earns one of the highest scores in the company in the annual employee engagement survey conducted by Gallup. The popular survey, which nearly 90 percent of the company’s 75,000 employees fill out, measures how content the employees are with the company as a place to work and how engaged they are in teamwork. “I get calls from people all over the company asking me how I do this,” said the group’s director. “The truth is,

By David Foote, Foote Partners LLC

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it all starts with our compensation practices. The overall process we’ve developed for determining pay drives me to think about my staff as people: what they’re doing, whether they are happy or not, and especially their marketability. It forces me to do all the important things necessary to retain them.” A critical element of his compensation process is identifying and paying cash premiums for critical information technology skills held by his otherwise business-savvy staff. And he’s not alone: Tech-skills pay is becoming one of the most popular tools for attracting and retaining a growing population of workers with unique combinations of business and technology skills. Known as hybrid IT-business professionals, but typically identified by traditional job titles, these distinctively multitalented individuals are among the most sought-after employees in business today.

Figure 1 

But they are giving frazzled compensation depart­­ments throbbing headaches. It’s not easy to determine exactly how much you need to pay them, and even when you do, pay programs are often too inflexible to accommodate their eccentricities. Predatory recruiters have been exploiting this weakness for years as clueless employers watch some of their best impact workers walk out the door without warning. Most likely this is the subtext of the calls the director receives from his colleagues.

Here Come the Hybrids The role of IT in an enterprise is now so pervasive that managing it is no longer entrusted to one group: It is split among every department, line of business, product group and a variety of enterprise strategic and operational functions. Each entity determines how to best use technology to produce

revenues and enhance profitability, build market share, ensure satisfied customers, control costs, innovate solutions and generally stay competitive in its industry. With technology and business skills collapsing into each other, millions of business professionals with superb technology acumen (and vice versa) have found homes in every corner of the enterprise, in levels of responsibility ranging from administrative to executive. They’re arguably doing some of the most cutting-edge work in their companies, including “new normal” business analytics and complex forecasting; creating social-mediaenabled products; designing new business processes and capabilities; redefining risk analysis, measurement and management; and delivering product and service innovations. The numbers tell it all: Less than 20 percent of all technology

|  11-year IT Skills Premium Pay Trends: Noncertified versus Certified Skills

What is an individual skill or certification worth? Average median pay premiums, quarterly since 2001 (expressed as percent of base salary) Note: Values are expressed as ‘% of base salary’ but may or may not be paid as part of salary. 11%

10%

9% 8.25%

8.05%

8%

8.25%

8.07%

8.26%

8.3%

8.2%

7.73% 7.74% 7.83%

7.79% 7.84%

7% 6.76%

7.14% 6.61%

7.53%

8.51% 8.49%

7.45% 7.19%

6.85%

6.88%

6%

5%

4%

1Q

20

0 1 0 0 1 0 0 2 0 0 2 003 0 0 3 004 0 0 4 0 0 5 0 0 5 006 0 0 6 0 0 7 0 0 7 008 0 0 8 0 0 9 0 0 9 0 1 0 0 1 0 0 1 1 0 1 1 0 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1Q2 Q2 1Q 3Q 1Q 3Q 1Q 3 Q 1Q 3 Q 1Q 3Q 1Q 3 Q 1Q 3 Q 1Q 1Q 3Q 1Q 3Q 3Q 3  90 noncertified IT skills 2 (median average for a single skill)

 50 certifications (median average for 2 a single certification)

Source: Foote Partners' IT Skills and Certifications Pay Index™ , 2001-2012 editions © Foote Partners LLC

26  | workspan  july 2012

 .S. unemployment rate U (at end of each quarter)

professionals employed today — about 4 million U.S. workers, according to the Department of Labor — work in traditional IT departments. Another 20 million to 24 million tech-infused hybrids can be found elsewhere in the enterprise, blending subject matter expertise, business acumen, social skills and solid technology talent and experience in a variety of roles. Energizing the demand for hybrid workers has been the relentless adoption of new technologies, the heightened competitive pressures of globalization, increased merger and acquisitions activity and senior management’s expectations for fast and flawless execution. The economic turmoil of the past four years also has contributed to the increased demand. Forced to quickly reduce operating costs, employers moved to cloud computing, mobile technology and externally managed services that allowed them to replace millions of technology jobs with contractors, consultants, part-timers and the new hybrids. The skills marketplace came alive to support the acquisition of countless permutations of newly defined IT and business skills. With human-capital investment strategies now focusing more on skills than on jobs, HR departments and compensation consulting firms that advise them have struggled to keep up.

Skills Pay to the Rescue Determining correct market pay levels for IT-business hybrids creates problems for compensation staffs that often cannot find appropriate job matches in salary surveys they have used for years. Without the ability to clearly define and implement competitive pay levels for these workers, employers have seen employee retention rates seriously erode. With no desire to create dozens of new job titles or engage in endless job evaluation, many employers are choosing hot-skills pay programs as the easiest solution.

A global retailer’s ability to hire key talent significantly improved, and employee retention rates dramatically rose, after it introduced a hot-skills pay program to bring total cash compensation in line with market realities. The retailer identified in-demand technology skills and selected appropriate individual skills pay premiums using the author’s IT Figure 2 

Skills and Certifications Pay Index (ITSCPI) of 540 surveyed certified and noncertified IT and business skills. The premiums appear as separate line items in workers’ paychecks and are evaluated periodically to adjust for shifts in local market pricing. Workers receiving skills premium pay are notified in internal communications and in their offer

|  H ighest Paying Certified and Noncertified Technology Skills

Shown by category, in descending order including ties. Data through April 1, 2012.

Noncertified Skills

Certifications

1. Information security skills

1. (tie) Cisco certified design expert

2. (tie) SAP HANA



PMI program management professional

Virtualization



Open group master architect



Predictive analytics and modeling

4. (tie) Microsoft certified architect



Complex-event processing



GIAC security leadership



Infrastructure architecture





Oracle e-business suite/fusion

Certified in risk and information systems control



Project management professional

8. (tie) Risk management

Apache Hadoop



SAP NetWeaver BW/BI



SAP FS (insurance)



Security architecture and models



Oracle exadata/exalytics



IT governance



8. (tie) Oracle DBA administrator certified master

PMI risk management professional



Certified information security manager



Certified information systems security professional



CISSP information systems security engineering professional

TOGAF (enterprise architecture)



Cyber security forensic analyst

Business process management/ modeling

14. (tie) Certified secure software lifecycle professional (CSSLP)

17. (tie) SAP MDM (tie)



Cisco certified network professional — security



Hewlett-Packard master accredited systems engineer



ITIL expert certification 11



GIAC reverse engineering malware



GIAC secure software programmer — Java

Unified communications/messaging



Open group certified architect

SAP HR-PA



CISSP information systems security architecture professional



SAP IS-U (utilities)



SAP NetWeaver PI



SAP oil and gas



Business objects



TIBCO enterprise message service



SAP FI – FSCM



26. (tie) SAP PLM

SAP retail



Teradata 12 certified master



NetWeaver — all



Security certified network architect



SAP solution manager



Juniper Networks certified internet expert



SAP BPC



Cisco certified design professional

31. (tie) Epic systems applications



Cisco certified internetwork expert

Puppet



Check Point certified master architect



Agile software development





Clarity PPM

GIAC secure software programmer — .NET

35. (tie) Oracle WebLogic Groovy/Grails

Master data management



Web Sphere

HTML5 Source: Foote Partners' IT Skills and Certifications Pay Index, 1st Quarter 2012 data edition.

july 2012  workspan | 27

letters, which underscores the importance of their specialized tech skills to the enterprise. A Houston-based health system with 6,000 employees also pays extra for specific tech skills and highlights this in their paychecks. The health system closely monitors market dynamics and adjusts premiums up or down, even eliminating them if the skill is no longer relevant to a worker’s responsibilities. It calculates each skill payout as a multiplier applied to salary range midpoint rather than the employee’s base salary. “Our

Figure 3 

workers seem to like receiving skillspay premiums. The only time they complain is if we haven’t checked the market pay levels of their skills for a while,” notes compensation manager Clay Whitehead. “Technology goes through various surges and retrenchments in terms of talent movement. We cannot afford to lose people, so we need to get them paid correctly. Skills pay is an essential part of how we do that.” The aerospace and defense contractor’s director takes a different approach. He developed an overall

compensation planning process that takes into account not only special technical skills but also performance ratings, employees’ process knowledge, their value in critical activities and overall value to the company. He begins by gathering base salary, bonus and skills-pay levels using both ITSCPI data and salary surveys from the author’s company and job codes that define and benchmark traditional IT and hybrid IT-business professional jobs. He identifies and applies skills-pay premiums for 27 skills specific to tools and

|  Two-Year IT Skills and Certifications Premium Pay Trends

Note: Skills premiums may or may not be paid as part of base salary. Data through April 1, 2012. Average Pay – Single Skill (expressed as a % of base salary) No. of Skills Surveyed

Q1 2010

Q1 2011

Systems/networking

47

7.08%

Noncertified IT Skills Categories

Change in Average Premium Pay by Category

Q1 2012

% change 3 mo.

% change 6 mo.

% change annual

% change 2 years

7.30%

7.32%

2.6%

1.7%

0.2%

3.4%

Messaging and communications

8

6.00%

6.00%

6.38%

4.1%

6.3%

6.3%

6.3%

SAP and enterprise business applications

94

9.51%

9.69%

9.55%

0.3%

-1.7%

-1.5%

0.4%

Apps development tools and platforms

35

7.78%

8.17%

8.34%

1.7%

3.5%

2.1%

7.3%

Web/eCommerce development

47

7.53%

7.80%

7.40%

-2.7%

-2.6%

-5.0%

-1.6%

Database

19

7.29%

7.33%

7.47%

2.5%

4.0%

1.9%

2.6%

Operating systems

12

6.70%

7.09%

6.75%

2.5%

0.0%

-4.8%

0.7%

Management/ methodology/process

28

9.89%

10.78%

11.11%

1.0%

0.2%

3.0%

12.3%

290

8.20%

8.49%

8.51%

0.75%

0.13%

0.22%

3.77%

All noncertified skills surveyed

Average Pay – Single Skill (expressed as a % of base salary)

Change in Average Premium Pay by Category

IT Certifications Categories

No. of Certifications Surveyed

Q1 2010

Q1 2011

Q1 2012

% change 3 mo.

% change 6 mo.

% change annual

% change 2 years

Foundation level and training

5

3.60%

3.40%

3.00%

0.0%

0.0%

-11.8%

-16.7%

Apps development/program languages

31

6.47%

6.36%

6.26%

2.5%

-0.4%

-1.6%

-3.3%

Database

18

7.18%

6.88%

6.89%

0.8%

-1.6%

0.1%

-4.0%

Web development

11

3.70%

3.60%

3.36%

5.7%

2.8%

-6.6%

-9.1%

Networking and communications

69

7.64%

7.15%

6.74%

-4.1%

-5.0%

-5.7%

-11.8%

System administration/ engineering

48

6.34%

6.20%

6.00%

1.0%

-2.7%

-3.2%

-5.4%

Information security

58

9.48%

9.12%

8.50%

-1.6%

-2.8%

-6.7%

-10.3%

Architecture/project management/ process

10

10.14%

10.33%

10.30%

0.0%

1.9%

-0.3%

1.5%

All certifications surveyed

250

7.45%

7.19%

6.88%

-1.14%

-2.30%

-4.31%

-7.64%

Source: Foote Partners' IT Skills and Certifications Pay Index

28  | workspan  july 2012

Research Methodology Foote Partners continuously gathers confidential information on IT salaries and skills-pay premiums in 83 U.S. and Canadian cities through research partnerships with 2,350 employers. More than 100 discrete compensation survey segment reports and market trends analyses are published and regularly updated, with coverage constantly expanding as new jobs and skills evolve in the dynamic marketplace for technology talent. Multiple validation and reliability mechanisms are used to ensure accuracy and consistency in processing compensation data covering more than 127,000 IT professionals. Interviews are conducted quarterly with between 500 and 600 executives and decision makers for insights into human capital management strategies, technology investments and related skills acquisition, and labor market trends. Included in the research demographics are private, public, educational and not-for-profit organizations of all sizes representing more than 40 industries.

technologies purchased from SAP, the primary enterprise resource planning vendor he uses. Workers then are assessed and numerically rated according to their technical skill proficiency in several areas critical to performing job tasks, ranging from conceptual, transactional and configurational to understanding vendor product specifications. He also rates each worker’s value in performing recurring and nonrecurring (project-based) activities and ranks each person in three areas: process knowledge, market value and value to the company. All ratings and rankings are used to compute an “overall impact” ranking for each worker. Further subjective judgments are made regarding educational background and annual performance reviews. Finally, everything is taken into account for the director to establish a base salary target and appropriate additional cash payouts from various pools of merit pay, extended workweek pay, project bonuses and timely award cash allotments. While he is executing his process, the HR department compensation staff is performing standard comparatio analyses using alternative

industry salary survey data and job codes. The two groups meet to negotiate final salary and variable pay, resulting in agreement on cash compensation for each employee encompassing all pay elements.

Pay and Demand Trends for Tech Skills Market values of certified versus noncertified IT skills have been on diverging paths for nearly six years as employers have offloaded more “pure technology” work to contractors and services firms in favor of building a technical workforce more seamlessly integrated with business operations. According to the author’s compensation benchmark research, which has monitored and recorded pay premiums for IT skills and certifications since 1999, the average cash value for 290 noncertified skills has risen more than 21 percent in the past six years to the equivalent of an additional 8.5 percent of base pay. (See Figure 1 on page 26.) Not so for 250 technology and business certifications: Their average market value fell almost 17 percent in the same period. Workers can now expect to earn only an extra 6.9 percent of base salary, on average, for a certification.

Why the difference? More employees are choosing to validate skills prowess with on-the-job performance and not simply by a score on a proctored certification exam. The context in which a skill is applied and the employee’s versatility are more important to many employers, who will offer more generous compensation packages to IT-business hybrids than to those who may have identical job titles but lack the same technology contribution. Two of the best indicators of skills demand are how much employers are willing to pay and whether that number is moving up or down. The highest paying skills and certifications are listed by category in Figure 2 on page 27. Figure 3 displays premium pay amounts by category and pay trending over the past two years.

What’s Ahead Successful talent acquisition in 2012 and beyond — best characterized as individuals with hard-to-find combinations of IT-business hybrid skills — is separating winners from losers like never before. “People are our most important resource” is no longer just a platitude. If it is, your company is in trouble at a time when your competition is transforming how they manage technical labor resources. It might take years of workforce transformation before all the dots are connected. In the meantime, employers can use skills pay to create the flexibility they need to pay some of their best and most strategic workers what they are truly worth.  David Foote is co-founder and CEO of Foote Partners LLC in Vero Beach, Fla. He can be reached at [email protected].

resources plus For more information, books and education related to this topic, log on to www.worldatwork.org and use any or all of these keywords: ❙❙ IT workers ❙❙ IT skills + pay ❙❙ Compensation planning.

july 2012  workspan | 29