Demise of the Skill Premium

FRAMINGHAM (07/31/2000) - You've just interviewed a candidate for an open Oracle Corp. database administrator position. Now what do you do?

A.Immediately offer a salary that's 25 percent higher than the industry average for that job title. Who knows when another Oracle database administrator will come along?

B.Offer a competitive salary, supplemented with workplace perks. After all, money isn't everything.

C.Structure a compensation package that rewards the candidate with bonuses throughout the year. That way, you'll have more control over your payroll.

Not long ago, you could have picked A, B or C and considered yourself a savvy hiring manager. Midway into the year 2000, however, option A is increasingly considered more hasty than prudent. Having lived through Y2k fever and a market correction, information technology managers have become slightly more patient and a bit more conservative about the outer limits of salary premiums.

"A year ago, it was the open-bank-vault syndrome because people were so desperate, and we had the Y2k thing bearing down," says Ed Grasing, a director at Pencom Systems Inc., a recruiting firm in Atlanta.

Today, Grasing says, companies are more conscious of what they're spending.

"People are more patient about finding a person they trust rather than anybody with a pulse who walks in with Java or C++ skills," he says. "Just because you've got Java on your résumé, you're not going to get US$75 an hour."

"Organizations in previous years have been in panic mode," agrees Vincent Milich, director of the IT effectiveness practice at the New York office of Hay Group, a compensation consulting firm in Philadelphia. But pay inequities caused by jacked-up salaries can inflict management turmoil.

"You end up with people sitting next to each other doing the same job but with a 30 percent to 40 percent difference in compensation," Milich says. "It shortly becomes unjustifiable because the market catches up with the demand."

"Companies have moved to substitute bonuses for raises, since they don't have to repeat them in subsequent years the way they have to continue paying a higher salary after a raise," says Janet Ruhl, director of, which publishes the Real Rate Survey, and author of Computer Job Survival Guide, due in October from Technion Books.

Bonuses are the preferred route at the Mahwah, N.J., office of Atlanta-based United Parcel Service of America Inc. "We're very team-oriented, so with regard to compensation, we have to be very conscious of how it affects the existing workforce," says Jim Diancola, a workforce planning manager at UPS.

Just this year, UPS added sign-on bonuses to its compensation plan "to help us be competitive and fill these harder-to-fill positions," says Diancola, citing skills such as Oracle, Tivoli and anything related to the Web, including Java, C, C++, Common Gateway Interface and Unix. However, he adds, "we're very careful how we use [the bonuses], and we continue to monitor their effectiveness."

Belk Store Services is similarly concerned about pay equities. "Our goal is to try to protect the people who are already here," says Don Harris, manager of staff development of the IT arm at Belk Inc. in Charlotte, N.C. "You do what you have to do to recruit people, but as we hire at higher ranges, we make adjustments for the people who are here."

Harris says that lately he has had to go to the top ends of the company's set pay ranges rather than aim for just above the midpoint. However, he adds, he hasn't had to make drastic salary increases in the past year.

"We didn't want to raise the salaries and then live with that when everything was over," Harris says. "We've tried to hold the line" by improving the company's benefits package, for instance.

But compensation doesn't just have to come in the color green, says John Putzier, president of FirStep Inc., a high-tech human resources consultancy in Prospect, Pa. "What attracts talent is the company's culture, its mission, whether it's fun to work there. Are the bosses jerks? The intangibles add up, and no matter what you pay, that's what gets people," he says.

That rings true for UPS. It recently adopted a five-day business-casual dress code throughout the information services group and started offering on-site banking and dry cleaning.

According to Putzier, the conservative approach to salary premiums isn't just a cooling of the market or a refusal on the part of employers to get blackmailed.

"These salary scales have to max out at some point, and I think they have," he says. "And the companies that have maxed out will have to look at nonmonetary compensation. It's a wake-up call - why don't we treat people like human beings and have some fun?"

Brandel is a freelance writer in Newton, Mass.

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