In recent conversations, many of you have asked what to expect from the information technology job market in 2006. Changes in the job market become evident very quickly as I observe the hiring practices of a large number of clients across varied industries. From my vantage point, I can tell you that 2006 is shaping up to be a dramatically different year from 2005.
The first two months of the year alone signal we have a whole new ballgame ahead of us. I have witnessed significant evidence of a tightening market that will escalate competition as demand for technology resources outstrips supply. Employers who want to avoid considerable challenges in maintaining technology resources should make some adjustments ahead of the trend in the way they retain and recruit contract or full-time employees.
Industry watchers have been discussing the issue for some time on a global scale. In a late January survey conducted by Manpower Inc., 40 percent of 33,000 employers surveyed across 23 countries and territories indicated difficulty in filling positions due to a lack of talent. In The McKinsey Quarterly Global Survey of Business Executives, all of the executives surveyed consider a lack of talent to be a major issue. Technology executives surveyed said a lack of talent is their biggest managerial challenge.
Domestically, the indicators are similar. The Bureau of Labor Statistics just reported that unemployment has dipped to 4.7 percent, the lowest unemployment rating since July 2001. This dip is not attributed to individuals leaving the workforce but rather to job creation — and economic growth projections are not slowing. Most forecasters predict a surge in first quarter economic growth to more than 4 percent from 1.6 percent in the fourth quarter.
If you haven’t yet felt the change, it may be because Dallas lags the trend. Recovery in North Texas has been slower than the national average. But rest assured, change is coming. The Federal Reserve Bank of Dallas reported in the January 18, 2006, “Beige Book Report,” “The labor market continues to slowly tighten, with more reports of hiring and rising wages. Workers with specialized skills remain in short supply, such as to supply the energy industry, trucking and some areas of manufacturing and information technology.”
Locally, a dramatic increase in job offer rejections due to multiple offers from competing firms and aggressive counter offers from current employers signifies that the market is beginning to tighten in our area at a surprising rate. In 2005, only around five percent of technology specialists rejected offers extended by The InSource Group on behalf of clients. In January 2006, 15 percent of job candidates rejected offers, and in the month of February, that number soared to 33 percent.
One project manager to whom we extended an offer this month received the most aggressive counter offer I have witnessed in some time. The current employer countered with a $20,000 raise, a bonus, a new reporting structure, change in people responsibilities and her own office. Such instances are becoming more common.
So how is a business to respond? What can you do differently to adapt to these changes?
The first adjustment should be to acknowledge that it is no longer a buyer’s market. In last five years, high unemployment numbers and an abundant supply of job candidates caused some employers to become complacent in their approach to retaining and recruiting talent. In addition to asking prospective contract or full-time employees, “why should I hire you?” it is time once again to address their question of, “why would I want to work here?” Companies that develop an aggressive retention and recruitment strategy will remain more competitive in the hunt for technology resources than organizations that fail to make the shift to a seller’s-market mentality.
A comprehensive assessment of how you rank against your competition will help hone your retention and recruitment strategies. Compensation reviews are a good way to understand whether or not your current work force is underpaid and therefore at risk of being lured away. Retaining current contract or full-time employees is critical. Although it does little for my business, I recommend retention efforts as your first line of defense against a shrinking talent pool. Attracting new talent, whether contract or full-time, is still an imperative. In the case of contract, competitive hourly wages is key. For full-time, whether or not you have a competitive compensation package will be critical. Do you offer 401(k) matching, tuition reimbursement, bonuses, or stock incentives? Any of these elements can enhance compensation offerings and should be thoughtfully considered.
Beyond competitive compensation, a key element in selling your company to current and prospective contract or full-time employees will be the opportunities you provide for growth and development. In a slow job market, companies can be more selective and hire people with the skill set and experience to match the job. As the job market heats up, you will be competing for candidates who are seeking opportunities in their field to progress and learn new skills. Training and mentoring programs will be increasingly important in making your company attractive to the workforce. Allowing employees or contractors to grow into a position can help you avoid paying premium salaries that will be required for the perfectly qualified candidate.
In addition, prospective contractors or full-time employees will not wait long for your offer. Solid talent will receive multiple offers in a relatively short amount of time. Streamlining your hiring process will ensure that you are among those companies considered. Companies that thoughtfully trim the selection process to enable a sound decision within 48 hours will often trump companies with a longer decision process.
As the market changes, previously viable hiring alternatives may no longer be productive. Consider the contract-to-hire position offering. In a market in which prospects are currently unemployed, this arrangement makes sense. A trial period seems a prudent approach for employers. But when everyone who wants a job has a job, the rules change. IT professionals are not likely to leave full-time positions for a temporary situation with only the possibility of full-time employment. In a tight job market, workers will expect a greater commitment from potential employers before leaving one position for another, or before passing up other offers for yours. There will always be those who prefer to work on a contract basis. Offering contract and full-time positions remains viable. Contract-to-hire positions will most likely become less and less attractive to potential employees and therefore, more difficult to fill.
Although most of my recommendations make sound business sense in almost any job market, they become more critical as the demand for technology resources escalates. In my experience, I have not witnessed such compelling evidence of a coming change in the technology job market. I don’t believe the tightening market is simply a short-term situation that can be weathered without significant adjustments.
A recent report by the Associations for Computing Machinery, a professional development organization for information technology specialists, stated, “Information technology appears as though it will be a growth area at least for the coming decade, and the U.S. government projects that several IT occupations will be among the fastest growing occupations during this time.”
A more competitive job market does not have to be a negative. Companies willing to adapt quickly can use change to their advantage. Outpace your competitors by being among the first to analyze how you compare against the competition and make the necessary adjustments. As others sit complacently by, you can be developing a winning retention and recruitment strategy that will carry you through the job market shift without damaging your technology resources.