More Turmoil In the Job Market

Guide to E-Commerce Technology

By 2001, the dot-com bomb had already blown a hole in most of 2000’s more excessive hiring and compensation practices at e-commerce companies. By and large, the IT sector that supports e-retail said adios to big perqs such as signing bonuses that included BMWs, smaller ones like free lunch, and double-digit pay increases.

But as Yogi Berra said, it ain’t over ‘til it’s over. The events of the past 12 months brought still more changes for the IT employment scene not only in e-retail, but other sectors as well. The economy’s continuing nosedive has more employers tightening purse strings. The turnover rate among IT workers, about 10% to 15% last year, has dropped to less than 7%, according to some industry estimates. Others, based on IT sector turnover rate pegged by some analysts as high as 16% last year, calculate the turnover has dropped even more dramatically, placing it as low as 6% as worried workers decide to hang onto their jobs rather than test the marketplace.

On the one hand, there’s a level of concern this year among some IT workers about finding or keeping jobs; on the other, employers are expressing concern about finding the right workers to fill critical IT jobs in their organizations. The answer to this seeming contradiction is that the IT employment landscape has become almost as volatile as the economy itself.

Demand up, but not pay

Different experts have varying takes on the situation, and different data on recruitment, compensation and turnover rates, depending not only on who’s doing the counting and forecasting but also on the job titles, the experience levels, the industry sector and even the part of the country in question. The turnover rate has dropped, for example, but by different rates, depending on who’s counting. So-called hot skills are in demand—but they’re not commanding the same rate of compensation increases as they were last year.

The tumultuous IT job market has opened a window of opportunity for retail that didn’t exist before, says Marcel Legrand, senior vice president of product for Internet job board Monster.com. Legrand reports that while the volume of traffic from seekers and recruiters for some sectors such as software and manufacturing are down at Monster this year, traffic in other sectors including retail-focused IT jobs is up.

“Despite everything, consumers haven’t stopped spending, so though retailers may be charging lower prices, they still have to keep operations going,” he says. As a result, workers from other IT sectors, facing fewer opportunities there, are considering retail when they may not have done so before. “For example, engineers with analytics experience are adding real value to some of these organizations,” Legrand says. “We are telling employers in categories such as retail and health care that they have the opportunity to source people of better quality than ever.”

But do these conditions amount to a buyers’ market for e-retailers in need of IT staff? Not exactly, says Diane Berry, vice president at IT-focused human capital consulting firm People3, a Gartner Group company. “I still advice my corporate clients not to sit there and get fat and happy because the world will change,” she says. “If you don’t take care of your people, you are going to lose your best and brightest.”

While skilled IT workers squeezed out of other sectors may accept retail jobs, even at lower rates of compensation, they won’t stay without adequate motivation and incentives from the employer. Retailers already know that in the long run it’s less expensive to keep good workers with core skills than to continuously have to recruit new ones. “The last thing you want is someone coming in from another industry and then leaving when things in that industry get better,” Legrand says.

The ups and downs

Mercer Human Resource Consulting’s annual review of average compensation levels for several key job titles in e-commerce showed declines between 2001 and this year. For the most part, salaries either stayed about the same or dropped markedly in the retail sector. The position of e-commerce executive averaged $250,000 for the top jobs in retail and wholesale, for example, which is down from an average $254,000 last year. Average compensation for e-commerce marketing directors dropped to $115,000 from $136,100 last year, while the job of top technical manger for e-commerce dropped from an average $152,400 to an astonishing $108,100. The only job which gained significantly in compensation among those for which data were available both this year and for 2001 was e-commerce customer support manger, which shot up to an average $76,400 in 2002 from $48,000 last year.

Mercer doesn’t speculate on reasons for either upward or downward trends, instead presenting the yearly data as a snapshot of the marketplace. But beyond factors such as shifts in the sample population from year to year, this year’s drop-offs may reflect general economic conditions. Mercer’s pay figures include annual bonuses as well as base compensation. While base pay may not drop from year to year, short-term incentives tied to a company’s overall business performance may be down in a struggling economy.

Though both the precise rate of turnover decrease and the reasons for a seeming decline in e-commerce job compensation remain open for debate, industry watchers are in accord on one point. “While there’s been a reduction in demand for IT workers, there is still a shortage of supply,” says David Van De Voort, leader of information technology workforce effectiveness group at Mercer Human Resource Consulting. “Excellent IT practitioners with in-demand skill sets are as difficult as ever to attract and retain.”

“The number of individuals with the requisite skills continues to lag demand,” agrees Maria Schafer, program director of Meta Group’s Human Capital Management division. “I get contradicted on this by people who tell me they have been looking for a job for months, but if you dig down deep there is usually a reason why the person hasn’t found a job yet. It depends on what skills they have to offer. Through the period of the dot-com boom a lot of people were getting hired for jobs they didn’t really have skills for. That population is part of why the supply side of the labor equation is so large today. It doesn’t necessarily mean there is high quality throughout that supply.”

Some of the most generally sought-after skills have application in e-retail as well as other sectors. Hewitt Associates’ 2001 hot technologies survey defines IT hot skills as those in short supply and high demand, resulting in rapid changes in market value. This year, Hewitt lists among hot skills PeopleSoft application and product services and SAP basis infrastructure, application development and product services; Hewitt identified the same skills as hot last year.

But there’s a significant difference between last year and the most recent data. Last year, salary increases were higher for workers with such skills. The data cut for information presented in 2001 actually reaches back into 2000 and reflects some months of a still-pumped dot-com economy. The median infrastructure for base pay for hot skills went up by 7.5% between two years ago and the year that followed, but in this year’s survey, hot skills were receiving lower pay increases than in previous years, with a median increase of 4% in base pay over the past 12 months, Hewitt reported in July.

More security demand

“The economic challenges companies face are extending to hot-skilled IT workers who traditionally have been less impacted by these factors. Today more than half the companies surveyed are experiencing hiring freezes, reductions in salary-increase budgets and layoffs among these IT professionals,” says Lorraine Dunlap, IT consultant for Hewitt.

People3 also found in its most recent survey that employers reported the most difficulty in finding workers with PeopleSoft and SAP experience. Those skills still are commanding 10% to 15% premiums over base pay, but other specific skills are getting 5% to 10% premiums over base, compared to 10% to 15% in 2001. “The economic challenges companies face are extending to hot skills this year, which shift with the times,” Berry says.

Beyond hot-skilled workers, Berry adds, employers in e-retail and other sectors are having the greatest difficulty this year in finding and hiring database administrators. While those with experience and expertise in database security have long been in demand—particularly in e-commerce operations that must allow the databases to interact with the public—demand has been heightened now due to increased concerns about the security of data in the aftermath of the World Trade Center attacks.

“Database administrator has always been on the list of the top five most in-demand positions, but 9/11 pushed it right up to the top,” Berry says. “Look at computer and IT-dependent businesses and how quickly they had to pack up and move to other buildings. Without proper security and back up systems, how are you going to do that?”

Filling out the rest of People3’s top five were Internet/web architect, project manager, network architect and network engineer. While still the most challenging jobs to fill, they are less so than last year. The hiring cycle for such positions is generally two to three months, but that time continues to decrease, according to People3. On average, the decrease in time to fill the positions was 0.7 month from last year to this year, compared to a decrease of only 0.5 month from 2000 to 2001.

One reason IT workers with certain skills are difficult for employers to find is the rapid pace of technology evolution, Legrand says. “When you pass the bar and become an attorney, you’re an attorney for life. You can update your skills with continuing education courses. But with technology, people who are masters of their discipline in one programming language, for example, can find that the world has changed in five years,” he says.

Legrand adds that few schools teach hot skills, which means that much of employees’ training in such skills must come from the workplace. Investing in such training has become something of a double-edged sword for employers, who fear that training workers may lead to them packing up their newly acquired skills and taking them elsewhere.

Indeed, e-retailers and others dependent on IT support would be well-advised to keep an especially close eye on the staffing of IT operations over the next few years, suggest the findings in another People3 research report. IT staffing needs, including those of web site operators, will accelerate over the next five years, with the workload of the IT function expected to increase by 50% by 2005. “It is absolutely essential for IT and human resource leaders in the organization to have the right programs and policies in place to attract and retain IT staff during the next few critical years,” says Linda M. Pittenger, president and CEO of People3.

Keep on training

Despite the seeming risk of training workers in skills they could potentially leverage for higher compensation at another job, however, IT employment consultants universally encourage their corporate clients to provide such training to promising employees. “The benefits to skill development that result from expanded training and development practices outweigh the risks,” Schafer says. “It costs far less to maintain key employees than it does to hire new ones.”

That means retention strategies are assuming new importance. Interestingly, People3’s surveys rank the use of new technologies, training opportunities and providng a challenging technical environment higher than competitive market-based salaries as effective retention practices. And though pay incentives may be smaller but they still provide motivation.

Even employers with limited budgets should avoid what Berry calls “the peanut butter approach”—giving everyone the same thing. “If my average is a 5% increase I’d still better be giving my best folks 8%. Those that are solid workers that I don’t want to lose get 5%, and everybody else little or nothing, because that sends a message,” Berry says. Meta Group calculates that retention bonuses for IT workers across a broad array of sectors jumped from 12% to 44% during the past year. Across the range of IT skills, the most difficult to retain were those relating to e-commerce, Internet and application development, according to Meta.

The dot-com boom days may be gone, but they’ve left a legacy in terms of workers’ expectations. Employees still are attracted by a more casual work environment, benefits such as flexible time, and on-site services such as daycare or dry cleaning. Meta Group even recommends that to the extent they are able, employers consider incentives such as qualified financial assistance for employees’ personal needs such as car or home loans. It’s also important to give highly skilled IT workers frequent access to training in new technology, as much for their own job satisfaction as for the good of the organization, Schafer adds.

More tech temps

If building IT skills from within the company and beefing up retention efforts to keep those employees is a way retailers and others are staffing those tough-to-fill IT jobs, then using contractors is another. IT contractors with in-demand skills generally command salaries one-half to one-third higher than regular staff who may fill the same function—one reason employees tend to use them only on a temporary basis, such as when launching a major web initiative, for example.

In fact, a joint survey by People3 and Mercer forecasts that the use of IT contractors, off during 2001 as a result of tighter budget and deferred or discontinued IT projects after the first flush of the dot-com fallout, is on its way to a rebound. 35% of companies surveyed said they expected to increase their use of contactors as the economy improves.

But e-retailers may find that in the long run the employees with the most to offer—and those that may be hardest to find—are not so much specialists whose skills are confined to the latest hot skill, but those who continuously use every opportunity to expand their abilities. “There is some change in emphasis year to year, but what I see happening is that the pool of critical skills it takes to succeed keeps expanding,” Schafer says. “A third of the companies we interviewed say they have never slowed down their hiring; it’s just a lot more targeted. Though there may be fewer opportunities out there than there were two years ago, workers with really good skills are still getting jobs.”

mary@verticalwebmedia.com