2007 InfoWorld Compensation Survey: Personal gains and personnel woes

Just as pay shows signs of taking off, IT departments struggle to compensate for headcount hardships

Working in IT today is a tale of two trends: the best of times, as pay climbs precipitously; and the worst of times, as morale suffers due to declining staff and longer hours.

[See also: Salary survey by the numbers | Survey in PDF]

last year’s moderate gains, overall IT compensation surged 8.8 percent this year, thanks to bigger salaries and even bigger bonus checks. Reduced competition for jobs and brighter prospects for company growth are spurring pay hikes across the spectrum of IT positions, flushing the post-millennial doldrums of subinflation raises from recent memory and replacing them with dreams of earning even more.

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According to the 2007 InfoWorld Compensation Survey of 1,886 IT professionals, pay is inarguably on the rise. Nearly doubling

Yet personal gains have not slowed the downward slide of morale in most organizations. Difficulty convincing the suits to increase IT headcount tops the list of frustrations, as the erosion of perceived respect for the value of IT at many companies continues unabated. And to meet staffing needs on the cheap, the majority of companies are going overseas: Offshoring will accelerate past a symbolic tipping point by mid-2008 as more companies will rely on the controversial staffing model in the next 12 months than not.

IT pros may finally be partly getting their due, but they’re still dogged by the legacy of tight times. Lean staffs, years of low investment, and rising tensions along the IT/business divide threaten to prevent many organizations

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from capitalizing on new opportunities in a reasonably healthy economy. To wit, only 43 percent of tech professionals surveyed believe current investments in IT are adequate to support business goals, by far the lowest vote of confidence in the 10 years InfoWorld has conducted the survey.

Senior IT: Rising incentives

The unmistakable message of this year’s survey is more money. Better than three in four respondents received a raise this year, and for those who did, the bumps were bigger, at 9.7 percent vs. 7.4 percent a year ago. Ordinary IT staffers topped the chart of salary hikes this year, with an average raise of 11.5 percent. But being king still reigns, as tech exec compensation packages blended bonuses and salaries to the tune of a 12.1 percent take-home gain – the best overall return among the three employment categories (senior, midlevel, and staff).

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Sure, senior manager salary growth slowed this year to 6.3 percent, from 8.8 percent a year ago. But typical for those close to the corner office, bonuses proved key for senior managers looking to earn more. With 15.2 percent of total compensation -- $20,273 on average -- resulting from incentive-based pay, expect many top IT execs to promote game plans to buoy company performance.

“My bonus is based on the company meeting corporate goals,” says Bar Wiegman, senior director of IS at GlobalSpec, a vertical search, IS, and e-publishing company. “It is important that my team works closely with all of the different departments and project teams to ensure the underlying projects and work efforts are achieved.”

Wiegman, whose bonus increased significantly this year due to major company growth, exemplifies how pay incentives and effective collaboration between business and IT can combine to affect the bottom line.

“Executive management sees the value in how technology can be leveraged as a competitive advantage,” Wiegman says. “And for me, the biggest sense of satisfaction comes from knowing that I am materially contributing to building our company. The projects I lead and the performance of my team has a direct impact on how well the company succeeds in reaching its goals.”

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IT is proving central to turning around the outlook at many companies. Profit-sharing now tops the chart of bonuses for senior IT managers, who were 12 percent more likely to have received a slice of the pie this year than last. For many, longstanding efforts to align business and IT are finally paying personal dividends.

For others, however, especially those in down markets, having significant portions of pay tied to incentives can sting -- even as IT sings.

“I have continued to build additional revenue for the organization through technology-related initiatives in our developments and homes,” says a vice president of IT at a large homebuilder. “Even so, the glum outlook of the market did not recognize the additional revenue streams in my compensation.”

In fact, despite the windfall across upper IT ranks, only 31 percent of senior managers received an increase in bonus pay this year. Moreover, they were 12 percent less likely to have received a bonus this year than in 2006, the lowest mark in four years. The upshot? Tremendous growth (203 percent) for the minority of tech execs cashing in on incentives; status quo, or worse, for the majority.

This disparity results in frustration, especially among those who feel IT has been neglected to the detriment of the enterprise as a whole. “Upper management has focused all its efforts on the business groups and removed itself of any responsibility for effective IT solutions,” the homebuilder’s VP of IT says, underscoring the uphill battle faced by many IT execs.

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For many, the continuing need to convey the message that IT is a core competence -- vital for attaining competitive advantage -- means an overhaul in mindset, one that requires meeting the business side halfway.

“The most important skills going forward are not technical, but a willingness and ability to understand the business needs and environment,” GlobalSpec’s Wiegman says. “You can’t just be a technology order taker. You have to work with the various lines of business and figure out where, if, and how technical solutions can be used to help achieve goals.”

With that recommendation in mind, senior managers should expect the trend of business literacy for IT to continue. As our survey shows, this year’s crop of top tech managers is 52 percent more likely to hold an M.B.A. than a master’s in computer science, up from 39 percent last year.

Midlevel IT: Accountability pays off

Reversing last year’s trend of less reward for more work, midlevel managers this year found their added responsibility accompanied by more pay. Moreover, they’re drawing notice on par with those higher up the IT chain of command, as opposed to last year, when midlevel managers were 47 percent less likely than senior IT managers to have received a raise commensurate with an increased workload.

“I moved from a team of architects on a large financial transformation project to the lead architect on a midsize project, which resulted in more responsibility and accountability,” says Joe Elliott, consulting IT architect at a large financial services company. The transition, which translated to a bigger raise this year for Elliott, was not uncommon among midlevel managers this year, as new market opportunities had many companies shifting resources in order to capitalize.

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And capitalize many midlevel managers did. Earning 5.2 percent more per week, up from 3.5 percent more in 2006, IT managers also received increased pay recognition in the form of personal performance bonuses. Midlevel managers were 31 percent less likely than senior IT managers to have received a bonus last year based on individual incentives, but they closed that personal performance gap this year to the tune of a 15.6 percent growth in overall bonus pay, up from no growth at all a year ago. For many midlevel managers, getting noticed is more likely to result in a well-deserved reward.

For others, however, senior-level attention begets added anxiety. And although the combined compensation growth of 6.0 percent (up from 3.3 percent last year) is welcome, middle managers are 60 percent more likely to believe making too much money is a cause for job-security concerns. Whatever the reason, expect movement in the middle in the coming year, as only 23 percent of midlevel managers are content to stay put, a dramatic shift from 41 percent in 2006.

Staff IT: Work more, earn more

IT staff compensation grew 9.2 percent this year, nearly triple the 3.7 percent growth of a year ago. But whereas senior and midlevel IT managers were 29 percent more likely to have received a merit-based boost and 47 percent more likely to have benefited from promotion, for IT staff, new skills and responsibilities proved the key to taking home more pay.

Of course, after years of layoffs, offshoring, and workforce attrition due to improved opportunities elsewhere, what choice is there really for those who remain?

“My salary has increased mainly due to other IT staff leaving and the company gaining new contracts,” says Paul Richter, an application developer at a software company.

Richter, who has taken over a DBA role in addition to his development duties, says the threat of outsourcing led several developers to leave the company. His story is no anomaly. IT departments everywhere have shrunk since the heydays. To capitalize on opportunities as they arise, IT must navigate higher levels of technical complexity with a skeleton crew.

“We are pulling together more these days because we are a much smaller team and in order to succeed we have no choice but to work together,” says Richter, who reports that this teamwork was key in seeing a product he’s worked on for 20 years “finally attain a stable hold in the marketplace.”

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Nonetheless, 50 percent are more likely to believe issues with management or co-workers are jeopardizing their job security. Clearly, some IT staff are finding the close-quartered call for collaboration less than optimal and are polishing their résumés. Expect department morale at some organizations to continue withering as even more colleagues migrate to new employers. This year, one in 12 staff-level IT personnel profited from a lateral move to a different company, twice the number of last year’s survey.

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For those job hunting, prospects remain moderately upbeat. Behind mean budget increases of 15.8 percent, employers are twice as likely to be hiring at higher salaries this year than to be looking to save cash on new blood. Moreover, competition for jobs has cooled in the past several years, as only 20 percent of senior managers cited a competitive market as reason to hire for less, down from 38 percent last year and 68 percent in 2004's survey.

But one sure thing awaits the 29 percent of IT professionals with sights set on switching gigs: The companies hiring are asking for more. “The job market is good for those with applicable skills, but very unforgiving in terms of the expectations of the prospective employer,” says one systems analyst who wished to remain anonymous.

“I see job posts for one person to do the work that two people used to do,” adds a systems administrator, summing up the sentiments of several survey respondents.

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And, not surprisingly, companies are discovering that finding the right fit is no cakewalk. To wit, 34 percent of employers reported an inability to fill all open IT positions this year -- the top staffing issue two years running. And many remain cautious, fearing that settling for the “best available” will sap team performance.

“Incompetent staff can hurt you more than not having enough staff, mainly due to the rework and strain they create on the rest of the staff,” Richter says. “The chief obstacle we face going forward is getting the right new staff members on board now so they can be trained before the new round of business directives comes through.”

GlobalSpec’s Wiegman agrees, “We are always hesitant in adding people too quickly. Our tendency is to become over-reliant on existing staff. This typically causes slippage in project schedules.”

And here’s the hiring rub: how to bring new personnel into a short-staffed environment rife with technical complexity, without reducing adaptability as new market opportunities arise. For many, such as Wiegman, the answer is to stress the intangibles when hiring: creativity, project management skills, the ability to communicate and lead, and willingness to accept change as the company morphs over time.

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For others, it is that all-too-familiar stopgap: increased reliance on outsourcing and offshoring.

Offshoring majority

Practiced by 48 percent of this year’s respondents’ employers, offshoring will reach a tipping point of sorts in the next 12 months, as for the first time more than half -- 53 percent -- will employ the staffing strategy.

Tech providers remain offshoring’s biggest proponents, with 67 percent expected to tap the model in the next year, up from 62 percent presently. Jobs in business sectors, however, will be moving offshore more rapidly in the coming year, as 59 percent of general business organizations will port positions overseas next year, up from 51 percent today.

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