[Note that there was a recession during the period when the number of CS graduates declined.]

http://www.computerworld.com/home/print9497.nsf/all/SL26labor3
(Print 06/30/97)



IS labor drought will last past 2003
Julia King



The IS labor shortage isn't temporary. Forecasters say it will be a fact of corporate life for the next six to 10 years.

And its going to cost a bundle.

Number cruncher Howard Rubin figures the talent shortage could cost as much as $15 billion per year in higher compensation costs, plus as muchas $500 billion per year in lost corporate revenue from uncompleted information systems projects.

``It's very real, and there is no one quick fix'' for the staffing shortfall, said Charles Popper, vice president of corporatecomputer resources at pharmaceutical giant Merck & Co. in Whitehouse Station, N.J.

So IS departments are overhauling everything from recruiting practices and training programs to IS project schedules and outsourcing plans.

Meanwhile, the costs are piling up. There are referral bonuses, signing bonuses and other recruiting costs to find IS talent. Companies will pay headhunters up to 30% of an IS professional's annual salary, for example. That is an additional $16,500 for every staffer hired at last year's average salary of $55,000.

Then there is the cost of higher salaries, bonuses and better benefits to retain staffers. Rubin, an IS labor analyst and benchmarking expert at Meta Group, Inc. in Stamford, Conn., estimates that an IS professional who makes $55,000 will receive additional compensation premiums next year totaling as much as $11,000.

There is also the hidden cost of software projects that are short-staffed or never even get off the ground because of the labor crunch.

Lost sales or inadequate inventory caused by an unfinished sales automation or supply-chain system, for example, can cost millions of dollars every day.

For every dollar spent on IS salaries, a company can expect to generate $43 in revenue, Rubin said. Under that assumption, a company could lose $2.4 million per year for each IS professional it can't hire. That means up to $500 billion in lost business revenues nationwide, he said.

One big reason for the shortage is the 43% decline in U.S. computer science graduates from 1986 to 1994. Experts also cite the slow rate at which companies can retrain workers in new technologies.

``It's very much a long-term issue,'' said John LaFrance, an industry expert at the U.S. Department of Commerce in Washington. The agency recently set up a task force to recommend ways to cushion the impact on the U.S. economy. Items up for discussion include changing immigration policy and giving tax deductions to people who enroll in IS training programs.

GOING TO COLLEGE

In the short term, employers are scrambling.

For example, Merck and other companies are dispatching IS managers to college campuses on recruiting missions.

``Experienced talent stays only a couple of years, then moves elsewhere, which means recruiting all over again,'' Popper said.

Another large drug firm, Philadelphia-based SmithKline Beecham Corp., has a different plan: IS workers who stick with the company over the next three years stand to earn salary bonuses and stock options worth up to 90% of their base salaries.

The two-part goal is to reduce employee turnover costs and limit defections while SmithKline Beecham is in the midst of a major year 2000 program.

Other companies focus on retaining staffers with newly fattened benefits packages, flextime and ``soft benefits,'' which range from verbal praise to on-the-spot monetary bonuses.

``These are the psychological paychecks words of encouragement, compliments, sitting down and talking with people and understanding them,'' said Greg Tolander, chief information officer at Sprint PCS in Kansas City, Kan. ``You can't minimize the importance of sharing a cup of coffee or sitting down to lunch.''

But money also talks. IS workers at Houston-based American General Life Insurance Co., for example, sometimes get salary increases on the fly. The tactic helped cut IS staff turnover from a high of 20% last year to 5% this year.

``People feel good if you give them an unexpected market-value adjustment. They feel they've got value and that the company has a strategy for retaining them,'' said Rebecca Campbell, vice president of organization development.

The following case studies highlight two leading-edge companies that saw the labor shortfall coming several years ago and took dramatic action.

Nynex Corp.

New York

Five years from now, Nynex hopes to reap the rewards of its $50 million investment in 1,000 technical employees currently enrolled in its Next Step program.

After completing 60 credit hours at a community college, the employees will receive an associate degree in applied science with a focus on telecommunications.

The degree was designed specifically to help unionized workers fill new high-tech jobs five years from now. Nynex wants a new breed of field service worker with the computer skills needed to access customer and switching data stored in mainframe systems.

Each week, Next Step students get a day off with pay from their regular jobs as technicians, customer service representatives or operators to attend classes. They also complete additional academic work over an extensive Lotus Notes network that links the students with the program's 220 professors. Each student is given a laptop computer, at the company's expense.

Without their own computers, students would require more time off the job to complete the necessary laboratory work. ``So by having them do lab work at home by computer, we more than paid for the laptops,'' said John Abeles, executive director at Nynex University, the company's training and development arm.

So far, about 25% of the enrolled students have dropped out. Some didn't want to trade higher-paying overtime work hours for study hours. Still others couldn't find an additional 20 hours per week to study, besides meeting family and community commitments, Abeles said.

Total SystemServices, Inc.

Columbus, Ga.

As a credit-card processing company that handles about 80 million accounts monthly, Total System Services relies heavily on massive mainframe computer systems and hundreds of mainframe programmers.

A key supplier of those professionals is an accelerated, applied computer science program sponsored by Georgia's innovative Intellectual Capital Partnership Program (ICAPP). Students accepted into the six-month program receive a $10,000 education loan, which is forgiven if the graduate works four years in a computer-related job anywhere in Georgia.

The program graduated 80 students in March, 79 of whom will join Total System Services this summer.

A college degree or prior computer experience aren't required to enroll in the program or apply for any IS position at Total System Services. Instead, the company prefers to grow its own IS talent internally, a strategy that has led to more loyalty and an IS turnover rate of 8% to 10% half the industry average.

``People ... feel like we gave them a chance, so they're going to work with us and stick with us,'' said Mary Stewart, senior vice president of IS. ``I feel like we're in better shape than most companies because of what we've done.''

Robin Skipworth, a 41-year-old former elementary school teacher who went through Quick Start, a predecessor of the ICAPP program, has been promoted three times in her three years at the company.

``I really feel like the sky is the limit to grow,'' she said.

Behind the numbers

$15 billion Last year, there were 1.2 million IS jobs in the U.S., each paying an average annual salary of $55,000. But IS salaries are increasing as much as 20% per year, vs. 4% for other industries. So employers may have to pay up to $15 billion more in IS salaries next year, according to calculations by analyst Howard Rubin.

$500 billion For every $1 that companies spend on IS salaries, an IS worker could support $43 in business revenue, Rubin said. Multiply $43 by 200,000 unfilled IS jobs by the average IS salary of $55,000, and the total cost of lost business opportunities works out to $473 billion.

On the other hand Several IS executives said salary premiums of 20% are reserved for those IS professionals with the hottest skills and aren't applicable to all IS professionals. They said Rubin's figures are a worst-case scenario.