IT Workers: Found and LostPublished: October 02, 2000 in Knowledge@Wharton
It is common for companies across America to complain about a shortage of information technology workers. The reality, however, is that there is no widespread lack of workers, but a shortfall in the ability of companies to recruit IT employees, to assess their talent and to make their jobs rewarding enough to keep them from quitting, claims a study by Wharton management professor Peter Cappelli.
While the study has significant implications for corporations, it also will contribute to the policy debate over whether the federal government should take steps to help eliminate the "shortage" by allowing more IT workers to immigrate to the U.S.
The unhappy truth, the study points out, is not that there are few people available to do IT work, but that once they are hired they are often poorly managed. In addition, many IT jobs are ill-designed and boring, leading many employees to become dissatisfied and leave.
"What’s really unusual about this situation is that so many people are quitting the IT profession," says Cappelli, who is also director of Wharton’s Center for Human Resources. "The number of workers who quit the programming field every year, for example, exceeds the number of new programming jobs. It’s peculiar to have a field that’s thought to be so hot, yet where so many people are leaving in droves."
In the study, prepared for consulting firm McKinsey & Co., Cappelli finds that employers are not entirely mistaken in feeling confronted by a lack of IT workers - even if the shortage amounts to little more than what an economist would view as a temporarily tight labor market. There are indeed many occasions when it is hard to find the right people to fill jobs, especially high-end IT positions such as software architects and sophisticated programmers. And it is frustrating that organizations cannot hire more people than they find - even after spending a lot of time and money on searches and offering prospects prevailing wages.
Such frustration can leave companies desperate for both an explanation and a solution.
As for an explanation, companies tend to assume that new workers must not be entering the field and that this is preventing the market from adjusting to what appears to be skyrocketing demand, according to Cappelli. But what often turns out to be the case is that an unusually large part of the demand for new hires focuses on just a few key workers where bidding wars raise wages and search costs sharply.
In addition, employers frequently seem unwilling to consider hiring older, experienced IT workers. The attention that employers give to recruiting college graduates disproportionately focuses on just a handful of jobs. Moreover, many employers treat IT employees poorly and undervalue their contributions to companies. For instance, programmers typically find themselves working in isolation on fragmented tasks that do not allow them to see the larger purpose of a project or to interact with other people. It may be of no small consequence that the offices of IT employees are often in a company’s basement, the study notes.
If there is a crisis in the IT labor market, Cappelli says, the crisis is a narrow one. But it would be wrong to believe that the cause of the crisis is an inherent shortfall in the supply of workers. The supply of college graduates trained for IT careers has been responsive to market conditions, even though that supply lags demand by several years and can create problems for the labor market.
To rectify the perceived shortage of workers, some employers would like to see colleges churn out more IT-trained people in less time; other companies want the government to expand immigration to attract foreign IT workers. [Congress is currently weighing legislation that would boost the number of skilled high-technology workers permitted to immigrate into the U.S. each year. The bill, supported by the high-tech industry, would raise the number of visas for IT workers to 195,000 annually.]
But Cappelli says these actions are premature until other, more obvious, issues are addressed. These include understanding why turnover is so high in IT jobs, especially in programming, why employers rely so heavily on college graduates to supply these key jobs, and why it appears difficult to recruit experienced workers.
Cappelli makes several recommendations. For one thing, employers must improve recruiting practices. Companies should take some of the resources spent on trying to hire small numbers of people with top academic credentials and instead develop ways to predict which employees will succeed. At present, most companies have no systems in place to make such assessments, the study notes. As a result, firms set pay rates based on average expected performance, which probably leads them to underpay their best people and overpay the least competent.
"An employer that could do a better job of judging talent would have no difficulty attracting the best workers because it could afford to pay them a lot more," Cappelli says.
In addition, companies should redesign IT jobs, especially programming positions, to reflect their true contribution to the business. The shabby treatment of workers contributes to high turnover rates and can lead to higher costs, since IT workers may demand more wages in exchange for doing tasks that offer few rewards of other kinds.
"IT has a culture of its own, and it’s a culture that’s usually detrimental to keeping workers happy," Cappelli says. "It’s amazing that IT management practices simply run counter to how human resources people feel employees in all other kinds of jobs should be managed. Organizations should apply basic management principles to keep IT people satisfied and engaged in their jobs."
Finally, organizations should learn to measure job performance better and link rewards to performance. If the most talented people are essential to the IT industry, they should be identified and paid top dollar. Better performance management may also reduce the prejudice against older workers, which is widespread in the IT sector, despite laws against age discrimination.
Cappelli says one area where the government may be able to make a difference is in funding efforts to improve retraining of IT workers who find that their skills - which are typically highly specialized and not easily transferable to other areas of IT - have become obsolete. Employers find it difficult to fund retraining themselves because they find it difficult to predict which skills they will need or how long they will need them. It is also hard to keep the employees who have been retrained. Skills obsolescence and lack of retraining are two factors that contribute to the industry’s high turnover.
But permitting greater immigration to "solve the shortage" of IT workers may turn out to be little more than a case of devising the wrong solution to a misunderstood problem, Cappelli says.
"Economists are always puzzled by arguments in favor of immigration to fix a problem in the labor market," he notes. "It doesn’t sound right to think there are jobs in certain fields where we just can’t get enough people in the U.S. to fill them because the simpler answer seems to be, fix the jobs to make them more attractive. It would be easier to make the argument that there is an overall shortage of jobs throughout the economy."
In any event, he adds, "Arguments about temporary shortfalls come up against a practical problem: By the time you figure out there is a shortage and get immigration quotas changed and bring people here, it’s likely already too late because the shortage is short-term. A lot of government interventions are so slow and clunky that they’re not likely to help."