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Signs That You Are Overpaying for Mediocre IT Talent

Paying Employees
Written by Stefan Dietrich | January 23, 2013 | 0 comments

Classical HR approaches to attract talent such as internal and external recruiters and employee referral programs are not very relevant anymore. Today, professional social networking has taken over as the main recruiting tool. Not only does it allow you to identify active and passive candidates quickly, but it can also tell recruiters much about the candidates themselves, their ability to communicate, their social interactions, professional behavior, and courtesy. It also serves as a quick first reference check while traditional background checks are slow and costly.

While HR approaches need to be revisited, they are not the main problem. HR is the marketing department that seeks to attract talent. The products that talent is attracted to are the job, the work that is offered, and the people with whom they will work. And for most top talent, the work and the people are more crucial than the pay.

Where We Are Today

Today’s IT departments have too often become unattractive to top talent because they offer a weak product in terms of work and people. To attract today’s top talent, IT departments need to provide an environment where top talent meets other top talent for learning and growth, where the challenges are daunting and they can have a significant impact, and where there is a good balance between developing new skills and putting established skills to work. If this environment offers a clear path to a career-advancing role in a company, the best people will arrive and attract others of the same caliber.

The problem is that many CIOs and HR managers will praise this vision but really have little chance of making it a reality. Because it is difficult to measure the criteria that lead to and define this environment, enterprises work with more quantifiable criteria such as hiring location, company size, business performance, and compensation benchmarking. In fact, many IT departments believe that they mostly compete on these points, and particularly on monetary compensation. But IT leadership must recognize that the true motivation for top talent can be found in the non-quantifiable areas above.

This leads to a situation in which companies increase pay for existing and new hires, thinking that will help to retain existing skill sets and attract stars from other companies. Instead, they find they have an expensive but underperforming team, where existing staff is overpaid and new hires interrupt team dynamics more than they foster progress. We see this in the world of sports all the time when big names are hired at Manchester City or The New York Jets, or when Ralf Schumacher was hired for Formula One.

Signs You Are Overpaying for Mediocre Talent

Here are some clear signs that an IT department is overpaying for mediocre talent:

  • The tenure of your IT staff is more than the industry average (about three years). If this is the case, you probably have too many people who stick with you because they don’t have better opportunities.
  • Top employees are paid according to a standard compensation and bonus scheme. Almost all top talent will want individual arrangements reflecting their contribution to business results.
  • Employees don’t approach you with better compensated external offers. The competition for IT talent is fierce, and market value is driven by available skills in the market. If your employees are not getting better offers, your automatic salary inflation and bonus payments may already overcompensate their current market value.

In other words, if you are not fighting in some way to keep your staff, don’t fool yourself into thinking that’s because everyone loves you and your company and you are doing such a great job as a manager. It’s because they have nowhere else to go.

The Bottom Line

Enterprise IT departments too frequently overpay for mediocre talent and must determine how they can change their dynamics to become more attractive to new talent and find it.

To learn more, please see Stefan’s white paper, which explains why we need a new breed of IT leadership.

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