Salaries rising, hiring heating up, and less relevant salary surveys

Cloud is hot, salaries are increasing, demand for hot tech skills is really getting big but what should a company do? If your firm is thinking of launching raids on a competitor for hot skills, read this first. You may have a bigger, long-term and structural problem instead.
Written by Brian Sommer, Contributor

"Psst ... hey buddy, can I interest you in changing employers for a nice signing bonus?"

In HR circles, there's been a great argument going on for years about the War for Talent. Essentially, there are those lamenting the lack of trained personnel for key roles. Some people blame schools/educators (for not teaching market-relevant skills), some blame the employees (for not re-skilling themselves), and others blame employers (for failing to invest in their workforce). On the other hand, there are people (like me) who see plenty of blame to go around for everyone. But what most miss is that jobs are becoming obsolete with ever greater speed, and new skills are needed at an ever greater pace.

With rapid job destruction/obsolescence and job creation come serious dislocations of employees and employers. And when an economy is heating up (something that's been a distant memory lo these many years), the pain and dislocations become ever more acute.

Now that the economy is picking up steam, the talent shortages are becoming more acute, more pronounced, and more expensive. Companies with a growing revenue backlog need key people (and a lot of them) to make and service their bulging sales pipelines. Unfortunately, some of them aren't going to find that talent or will pay dearly for it. Worse, their competition needs those same people. So, what happens next? A bidding war breaks out for this talent.

Bidding wars are stupid and the hallmark of bad, unimaginative, and non-strategic management. The money spent recruiting other people's talent is significant, and could be used to enhance the talent one already has. Worse, the fact that the company was caught flat-footed on the lack of skills shows a real lack of market awareness on the part of management. Desperate leaders should be a warning sign to potential new hires (ie, your next employer might not be the world beater they think they are!). Seriously, do you want to work for a firm that couldn't see a major trend emerging years in advance? How can you believe they won't also miss the next two or three big trends to come?

There have been several of these pops in the cloud software space in recent years. For a time, everyone needed Salesforce.com implementers. Recently, integrators wanted more Workday HR implementers. If they couldn't hire them, they bought entire integration practices. Now, the battle is in cloud financial implementation skills and cloud ERP implementation skills.

Smart software buyers should look closely at the implementers they use. If the implementer had to buy their way into this services space, then the following could be true:

  • The integrator doesn't really know how to manage this kind of project

  • The integrator lacks a single, consistent culture, as it is comprised of recent hires all from a number of different firms each with their own ideas of success, quality, teamwork, etc

  • The implementer may still be trying to assimilate this practice with their other practices, practice guidelines, metrics, etc

  • Practice leaders come from old technologies, while the newly hired practitioners are from a different experience base. You might see a Tower of Babel problem within the integrator's organization. The leaders are speaking one project management discipline (that's no longer relevant), while the practice personnel are using another.

Peter Cappelli, a management professor from the Wharton School, has a piece in the recent HR Executive magazine titled "Wondering on Wages". (I, too, am a Wharton graduate, except I graduated from Wharton Senior High School.)

Peter cautions readers to be careful about salary reviews these days, as much of the recent data was captured during a long period of time with little to no inflation. Moreover, this data often represents average values.

I'd like to pile on some more sobering guidance. Salary databases represent data points in the past, not the here and now, and not where the market is moving. If technology or services firms are staring down a huge market uptake in a new technology, then no amount of survey data is going to give executives the salary guidance they really need. Simply put, these databases are interesting historical artifacts and add the most value when the economy is flat, trained applicants outnumber available positions, and innovation is at a standstill.

In volatile times, where skills go white hot in weeks/months and then go ice cold again, a survey is not sufficient for businesses that want to win in the market. Employees, when convinced that your firm is essentially the same as a competitor's, will leave en masse for a few extra bucks. Employers may panic and throw more money at the problem.

Executives need a better way to manage their workforce.

The better way

The best firms continuously scan the market and make small bets on emerging technologies and trends. They possess a mechanism to rapidly scale up should one of their market offerings begin to take flight. They develop headcount plans, recruiting strategies, and training programs to develop the right number of skilled professionals at exactly the right time. And don't tell me it can't be done. In one instance in my career, I helped train 19,000 professionals in three months on business process re-engineering when the market for that took off.

Those firms that continuously scan the marketplace are very cosmopolitan. They talk to lots of high-tech executives, attend numerous third-party shows, read everything they can get their hands on, and discuss new concepts with academics, researchers, and others outside their firm and normal sphere of influence. They get great at detecting change, and know when to sound the alarm in their firm. These best firms don't wait until another market leader stakes out a new space (ie, this is the fast follower strategy), nor do they wait until most everyone in their space declares that they, too, are "all-in" in this new category. No, the leaders are just that: Leaders. They make leadership their core competency. The bets the leaders make aren't really bets, as they've done the homework and they know the market is shifting. Leaders see the change, plan for the change, execute their training and staff development plans, and don't rely on raiding parties to build their team.

The best firms also create a unique value proposition for their employees. They do more than simply match a competitor's pay rates or signing bonuses. They create experiences for their workforce that make it the place to work. Why does everyone want to work at Google (and not your firm)? They get to work at a cool place with brilliant people, and are encouraged to experiment. If your HR group is still using the same practices and offering the same experience as others in your space, you've already lost.

A great experience must be looked at from the employee's perspective. Is your firm helping them:

  • Build and enhance their brand (or does your firm slap down anyone who wants to speak, blog, publish, etc)?

  • Have a career (or are you jamming them into a job with limited advancement opportunities)?

  • Be all they can be (or are you condemning them to a droid's existence)?

Yes, you need to pay people a fair, market wage, but the hallmark of great managers/leaders is that they create the environment and circumstances that get people to stay years and years longer than industry averages would suggest. Is this your firm today, or are you still striving to be "average"?

One more thing: The best firms also don't mind when a mercenary employee leaves to go to a less-advanced competitor that is willing to pay a bit more in the short term. The best firms know this person is probably too short-term oriented and may never fully appreciate the career opportunity they are leaving behind. The mercenary worker is simply too interested in WIIFM-N (what's in it for me — now!) and not about the bigger picture. The really great firms also don't rehire these mercenaries once they have milked the money out of the short-term employer.

So, if your firm is launching raids on another for key talent, what does this really say about your company, its leaders, its inability to plan/forecast, and its approach to developing its talent from within? If you're truthful, I bet it's not a pretty picture. Now, with that thought, ask yourself this: "Is our firm better off paying a lot of money to expensive mercenaries who will doubtlessly figure out we're a clueless, short-term mess? Or, should we fix our problem and make our firm a real destination for current and future employees?"

I hope you choose the latter option.

Editorial standards