The Lowdown on IT Salaries

By Courtney Macavinta

IT professionals have been on a career rollercoaster ride over the past decade. During the dot-com boom, they were being offered five-figure signing bonuses, stock options, and down payments on houses. There were even rumors of luxury sports cars being used as incentives. But after the bust, some IT workers lost their jobs to corporate cutbacks, IT outsourcing, the off-shoring of jobs to less expensive regions, or the rise in packaged applications.
 
Now the IT job market is percolating once again. CIOs are back to hiring and investing in development as many organizations shift from maintaining to growing business through, in large part, IT-driven initiatives. For instance, CIOs are investing more in security, infrastructure-like service oriented architectures (SOA), and Web services. And this investment is trickling down into the IT staffing pool.

According to a CIO Magazine poll in April, IT compensation (including salaries, benefits, and bonuses -- but not stock options) has increased 4.4% over the past 12 months. Forrester Research, meanwhile, reported in March that there would be a 2% increase in IT department staff and a 4% increase in average salary and benefits.
 
Most CIOs are getting an increase too, according to Baseline's 2005 CIO Compensation Survey, which studies the proxy statements for the 1,000 largest companies in the United States. Driven by hefty bonuses, 30 out of the 51 CIOs whose compensation was listed in their company's latest proxy statement -- from Bell South to Northwest Airlines and Amazon.com -- received on average a 45% boost in overall pay compared to 2003, Baseline reported.

So for CIOs, who are often being offered these lucrative bonuses based on their ability to impact the bottom line, it has become even more critical for them to recruit, hire, and retain IT staff. But with a close eye still on overall spending -- and with more so-called Millennials entering the workforce who want to be valued and work in new ways -- experts say CIOs will have to take a new tack when it comes to compensating and retaining talent.

• Focus on skill sets "Nobody should pay job titles anymore, they should pay people," says David Foote, president of Foote Partners, an IT compensation and workforce management research firm. CIOs should focus more on the experience and skills of recruits, he says, not just their past titles. For instance, those who have skills related to supporting customers, infrastructure deployment, storage management, and database administration are currently in high demand. On the other hand, certifications are losing their luster, Foote says. "These days [IT staff] need not just tech skills but business skills, interpersonal skills, and other soft skills," he says. "If you're willing to pay more for certain skills, you need to know that -- you need to be able to put talent on projects when you need them."
• Know the market rates Either by using a recruiting or consulting firm, or doing homework on their own, it pays for CIOs to know what the market is paying for the skills they need for their IT team. Foote suggests that CIOs not only look at salary surveys or market research, but examine their company's historical data to pinpoint who has left the company, what skills they took with them, and at what point in their employment they moved on.
• Think about bonuses It can be complicated to change a company's job title structure each time a CIO wants to better compensate an employee or recruit new, much-needed talent. "If they raise base pay, they have to move their job grade," Foote says. It's better to use more flexible bonus plans, he says. "Bonuses can change from year to year. And you can differentiate the people you want and reward them because they are effective in a certain area."
• Offer career paths When headhunters lure employees away, Foote says they ask questions like "Are you happy?" "Do you know what you'd like to be doing two to three years?" and  "Can you get there in your company?" He says CIOs need to think the same way when trying to recruit and retain talented people. In other words, CIOs should offer IT recruits and current employees not just market pay but stimulating career paths, learning opportunities, training, and a manager who will invest in them. Foote also suggests that CIOs promote networking within the company so IT staff can see where they can go career-wise.
• Motivate and reward existing talent "Internal people need to be stimulated to perform better," Foote says. He says CIOs need to plan for what kinds of talent they'll need in the future, and better utilize who they already have instead of hiring contractors in a pinch. So CIOs should take inventory of their teams' skills, better match people to projects, and use the same incentives they would to recruit people, such as bonuses. Offering bonuses not only helps CIOs stay competitive in retaining IT talent, but it can help them avoid not getting projects done on time or missing windows to increase revenue potential. Also, CIOs should think about how to recognize people and help them feel more connected to the company's success. "Offer coaching, mentoring, and incentives to managers to do this stuff," Foote says. "Retention is about trust and loyalty."

Foote says the key to navigating the IT compensation landscape is not to focus on offering high salaries. After all, before the bust many IT workers were compensated well and still expressed great dissatisfaction with their jobs.

"You can't just flash money in front of them," Foote says. "The average IT person who got through the recession is very conscious of their career and they are thinking, 'Where will this get me next and lead me?' Don't let workers get root-bound -- change soil and add some water. Think of what they could be, not just their pay."

Courtney Macavinta is a Silicon Valley-based business and technology writer. Her articles have appeared in CNET News.com, Business 2.0, Red Herring, Wired News, and The Washington Post.