Align Pay Practices with IT Strategy to Attract and Retain a High-Caliber IT Workforce, says Gartner

Business leaders are looking for IT to help drive business growth in 2008, resulting in increased pressure for human resources (HR) to assist chief information officers (CIOs) and IT organizations in attracting, developing, and retaining a high-caliber IT workforce, according to Gartner. Gartner has identified 4 key workforce trends that will have the greatest impact on the sustainability of an IT organization.

“CIOs that want to attract and retain top talent in 2008 and beyond must partner more closely with HR to develop competitive pay practices that address IT-specific needs such as skills shortage,” said Lily Mok, research director for Gartner’s human capital management content development group. “Such practices must respond to key workforce trends, which include demographic shifts in workforce composition, increasing virtualization and globalization of the workplace and workforce, and a tightening job market. Being competitive is more than adopting market-proven practices. Pay practices that align with and support the changing IT strategy, as well as workforce expectations, result in higher productivity gains, which ultimately improve business performance.”

According to Gartner, understanding these 4 key workforce trends can help CIOs and HR leaders revive IT pay practices to improve their effectiveness:

Demographic Shift in Workforce Composition Will be One of the Top Issues to Address in 2008 and Beyond: HR and IT leaders will need to reconsider whether a single, generic pay practice has relevancy as an increasingly diverse workforce -- from different generations and with different life cycle needs -- evolves. Incumbent-driven, personalized compensation practices will gain importance because they offer differentiated value propositions to critical talent in each generation.

Technological, Social and Economical Pressure Will Drive the Adoption of a More “Virtualized” Workplace and Workforce: As technology integrates more deeply into our work and home lives, HR and IT leaders will face new challenges managing workplace dynamics and employee relations. Performance management and reward systems will need to recognize and motivate the “out-of-sight” workforce. The pay-for-performance system thus needs to be based more on results than on processes. Team-based reward programs that drive collaboration of virtual teams will grow in importance.

Outsourcing and Offshoring will Gain Momentum as Enterprises Try to Drive Efficiency by Tapping Into the Global Resource Pool: The issue of pay equity vs. competitiveness will be more pronounced in an outsourced or multisourced environment, the latter using permanent staff, contractors and outsourced staff to perform similar work under very different pay programs. Incentive plans designed to motivate and reward teamwork may need to take contributions of the nonemployee workforce into account, with this stipulated in the service contract.

The Job Market Will Become More Competitive as IT Organizations Shift Their Priorities and Seek to Fill Openings With Better Qualified People: The more-competitive job market will refocus enterprises’ attention on assessing the effectiveness of pay programs in attracting, motivating and retaining the workforce. It will also become increasingly important to communicate the value of compensation packages to current workers and potential hires. To recognize individual capabilities and growth potential, more enterprises will consider adopting pay programs to ones that are more competency- or potential-based than job-based, such as career banding.

“Compensation plays a crucial role in creating a competitive total rewards strategy. People want to work for companies that share their success in the form of salaries and incentives. Therefore, changes in pay practices get people’s attention,” said Ms. Mok. “With so much in IT that is changing continuously, HR and compensation professionals should help IT leaders first build a business case demonstrating that pay change -- which goes beyond raises and bonuses -- adds value to the enterprise. Used properly, pay can be a powerful communicator in that it guides employees to focus on enhancing individual and business performance.”

About this study

Contact Gartner for more information on the Gartner Quarterly Trending Report, "Revitalizing IT Pay Practices: Challenges and Alternatives.” The report includes examples from private and public/nonprofit organizations to showcase alternative approaches to base pay and short-term incentive/bonus program designs for IT.