Communications of the ACM

Communications of the ACM

Crafting an HR Strategy to Meet the Need For IT Workers

By Ritu Agarwal, Thomas W. Ferratt
Communications of the ACM, July 2001, Vol. 44 No. 7, Pages 58-64
10.1145/379300.379314
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All business functions in the digital economy exhibit a pervasive and ever-increasing demand for information, computing power, and electronic communications. However, with the supply of human capital possessing the knowledge and skills needed to exploit IT falling short of that demand, all kinds of organizations around the world struggle to maximize the return from their IT investments [6, 10].

How do organizations cope with recruitment and retention in an IT labor market that is still highly competitive, despite the recent collapse of so many dot-coms. One approach is to attempt to increase the overall pool of IT labor. Unfortunately, individual organizations have limited power and influence in shaping broad demographic trends. Given this lack of economic influence beyond their own operations, a second useful approach for individual organizations is to develop an internal environment allowing them to attract, employ, and inspire IT staff to deliver maximum performance and productivity. How do senior IT managers ensure that scarce organizational resources are invested most productively in practices that result in IT professionals' willingness to stay with the organization for some desired tenure? Conventional wisdom suggests that success comes from paying attractive salaries, providing training to keep IT knowledge and skills up to date, and offering interesting things to do. But our research suggests otherwise; the most successful organizations at recruiting and retaining IT human capital look beyond specific HR practices to craft an IT HR strategy. Some organizations seek to implement strategies that result in relatively low turnover; others seek to implement surprisingly different strategies that result in relatively high turnover, even in a tight labor market.

Our purpose here is to help you understand what an IT HR strategy is and how to implement one. The insights we describe were developed through our own intensive fieldwork during 1996–1999 with 35 organizations. All but one were headquartered in the U.S., though over 50% had operations outside the U.S. Approximately 33% of the sample (11) belonged to the professional services or computers and communications sectors; the rest were in other sectors, including chemicals, financial services, manufacturing, and transportation. We also interacted with a number of CIOs to help us further refine and validate our conceptualization.

We start with an example of one such strategy—called the long-term investment strategy. We then explain what a strategy is and describe two underlying factors that differentiate strategies. We use interview data from our research to illustrate how these factors play a role in defining strategy. In order to assist successful implementation, we describe barriers to and facilitators of strategy implementation, and conclude with a set of implications for IT managers as they decide what to do and how to do it.

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Long-Term Investment Strategy

An organization following a long-term investment strategy views IT people as worth developing and retaining due to their specific knowledge and competencies relative to the organization, as well as to IT. The long-term strategy is most likely to be used in organizations in which the values driving the HR strategy for all employees, not just for IT professionals, focus on developing and maintaining long-term relationships. Organizations implementing the long-term investment strategy experience the least turnover and inspire their IT professionals to feel the strongest intention to stay. As a result, these organizations also reduce the volume (and expense) of recruiting needed to replace departing employees.

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"IT professionals are a precious resource. Given the high demands on IT to deliver an agenda larger than I can accomplish, I am greatly concerned about the risk of losing people." —CIO of a leading agricultural firm

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Organizations seeking such long-term relationships invest more in career development and security; they may even encourage people to gain experience in other organizations and return with yet greater knowledge and competence. They position their recruiting efforts to reflect the long-term benefits of employment with them. For example, they may emphasize career planning and career paths. They may build on their reputations for employment security and financial stability in order to differentiate themselves from their competitors. To support longer-term relationships, they tailor their compensation and benefits to include, say, significantly longer vacations; indeed, one company we talked to offered six-week vacations, and, not surprisingly, its IT professionals expressed their reluctance to leave.

Another organization offered financial benefits that increased the longer one stayed; one CIO noted that "profit-sharing is huge" but is not available until one has been there a year and a half. Officers and above get stock options. The greatest challenge, according to this CIO, is to get people to stay three years. If they stay five, he said, the organization feels like "we gotcha."

To maintain a long-term relationship, these organizations tailor their HR practices to achieve not only short-term productivity but longer-term productivity and retention. Practices may include:

• Designing work arrangements to provide sustained opportunities for interesting work; for example, through job rotation;
• Providing training and development to build new competencies based on technologies to be adopted in the future or to broaden the IT professional's business knowledge or managerial skills; and
• Conducting performance measurement to identify individual developmental needs consistent with both short- and long-term organizational goals.

In addition, these organizations employ HR practices that reflect concern for individual employees beyond short-term productivity. Practices may focus on employee participation, community building, and lifestyle accommodations.

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What Is an IT HR Strategy?

As reflected by the long-term investment strategy, an HR strategy is defined by an organization's bundle of practices in several IT HR areas, including recruitment and selection, appraisal, reward, and development. Our conceptualization draws on the work described in [9, 11], as well as by other HR specialists, recognizing, as they do, that HR practices designed to achieve productivity are essential components of any IT HR strategy and that a strategy is a coherent bundle of HR practices (as in the long-term investment strategy described earlier) [3].

The objective is to simultaneously elicit productive work behavior and influence joining and staying behaviors. Our research has led us to identify two underlying factors—length of employment relationship and concern for individuals and for productivity—that serve at least implicitly as guides for managers as they craft logical bundles of practices. Given the assumption when we started our research that CIOs want to retain scarce IT professionals, the surprising difference between assumption and reality is that many organizations do not seek long-term relationships.

Length of employment relationship. In reviewing the concern various organizations have about retention, we found that some of them intend to keep their employees for the long term but that others have shorter-term agendas. Consider the following comments reflecting attitudes influencing IT HR management from our interviews with CIOs and HR executives: "We have more contractors than ever to meet market-driven technical needs. A lot of these people like the flexibility to ride the new wave of the week." "Employment security is moderate. We try to increase the person's knowledge and make them a better, more employable commodity." And "Employment security has been cradle to grave, but that is changing. There has been little turnover within the company, with the average age being 50 and average tenure over 20 years."

At one extreme, organizations seek long-term relationships with IT professionals under the assumption that organization-specific knowledge and commitment is valuable for obtaining productive contributions. At the other extreme, organizations seek only short-term relationships with IT professionals, including contractors, under the assumption that their most pressing need is generic IT skills. Between the extremes are organizations seeking relationships that yield productive contributions for a number of years to reduce the costs of turnover and related recruiting while avoiding the costs of building and maintaining long-term relationships.

An organization's stance on this dimension should influence its selection and implementation of a variety of HR practices [1]. Organizations seeking long-term relationships invest more in career development and security and position their recruiting efforts to reflect the long-term benefits of employment. Those seeking short-term relationships are more likely to expend additional resources on compensation and benefits; they also expect a greater volume of recruiting activity, since short-term relationships inevitably result in greater turnover. Not surprisingly, helping employees maintain their current technical skills through training and development is likely to be a more important element for strategies designed to retain employees (at least for an intermediate length of time) and less important for short-term retention; longer-term retention is more likely to reward the relationship investment.

Relative concern for the individual and productivity. Another striking difference we observed across organizations is the types of culture that IT shops develop. Some focus on productivity; others balance concern for productivity and concern for the individual. Comparing the dimension of concern for productivity and the dimension emphasizing the length of employment relationship indicated that organizations with a more balanced focus have longer retention than those focused primarily on productivity. Reflecting a productivity-focused culture, a senior IT manager at an international freight transportation company told us: "The overall HR strategy emphasizes a productive and results-oriented culture. Jobs are not defined rigidly, and employees have discretionary authority in the performance of their work. Considerable emphasis is placed on training and development of employees, and performance is measured on results, as well as behavior. Compensation is linked to both individual performance and organizational performance."

In contrast, the following comments from the IT HR manager of a manufacturing company reflect an organizational environment that places relatively greater emphasis on concern for the individual: "The company has a strong philosophy of building a caring community and a greater sense of belonging among its staff. To foster and strengthen this culture, a lot of community programs are in place." He alluded to what he called the "corporate soul," saying: "We want to create an environment that values the individual and the contribution of every person and where employees feel connected and take ownership. We are trying to help the organization understand what is a community without using a boilerplate definition of the word."

Relative concern for productivity and the individual suggests that employers appeal to the different needs of different IT professionals. Associated with an organization's assumptions about IT professionals' needs are its choice of recruiting and retention practices. Concern for productivity and a results-oriented culture appeal to IT professionals' need for professional achievement [4, 5]. Work arrangements appealing to the need for achievement in a results-oriented culture include interesting, challenging work, and performance measurement. Included is feedback, which is especially important for high achievers [7]. Employability training and development appeals to IT professionals' need for personal growth. When recruiting new employees, achievement opportunities are emphasized. For organizations seeking balanced concern for productivity and the individual, achievement-oriented practices are accompanied by inducements that satisfy individual needs, including lifestyle accommodations in the form of flexible work scheduling. Recruiting posture, notably messages providing competitive differentiation, reflect this balance.

The following comments from the CIO of a global manufacturing company of specialized technologies reflect the mix of concern for productivity (emphasizing customer and shareholder satisfaction) and concern for the individual (emphasizing employee satisfaction and corporate values): "There is a growing emphasis by the CEO in all his pronouncements to move the firm toward a performance-based culture. This is viewed as very attractive to the IT professionals. All employees have performance goals aligned with three key imperatives: employee, customer, and shareholder satisfaction. Leadership is assessed on adherence to and exemplification of five core corporate values: respect, integrity, trust, credibility, and continuous improvement."

Together, all these comments reflect the mix of concern for productivity and the individual by recognizing the importance of balancing personal and professional life. For example, the IT HR executive in a manufacturing company observed: "The impetus for flex scheduling came because we were losing women employees with small children who wanted to work part-time with benefits. This recognition of the importance of family life is a change from the conservative company approach that has been part of the company culture. A book passed around by senior managers in the past noted that if you don't carry two briefcases and work 80 hours a week, you'll never get ahead."

The HR director of a software vendor told us: "The work environment and culture drew me to the company. Overall, the company cares about its employees. It understands that employees have a life outside of work and accepts that. Other companies in the area do not. Yes, the IT staff works long hours, but they are rewarded and do fun things. Groups have parties, picnics, or a day away at an amusement park. IT managers budget for these parties."

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Five Strategic Levers

The two underlying factors—length of employment relationship and concern for the individual and productivity—lead to a range of IT HR strategies managers should consider. See [1] for a framework for defining strategies based on the following five groups of HR practices, referred to as "strategic levers":

• Recruiting posture, focusing on HR practices essential for influencing the joining behavior of IT professionals;
• Compensation and benefits, essential for competing in the labor market, given the relative scarcity of IT professionals;
• Concern for productivity, arising from the strategic factor of relative concern for the individual and productivity; it consists of HR practices focused on the work of IT professionals, while maintaining their productivity, work arrangements, performance measurement, and employability training and development;
• Concern for the individual, arising from the same strategic factor as concern for productivity and consisting of HR practices related to opportunities for advancement, recognition, quality of leadership, sense of community, and lifestyle accommodation; and
• Career development and security, arising from length of employment and including HR practices associated with longer-term career development, organizational stability, and employment security.

The length of relationship sought and managers' relative concern for the individual and overall productivity (and associated assumptions about IT professionals' needs) are reflected in the relative emphasis on each of the five strategic levers and how specific practices related to each one are implemented. In essence, the levers consist of specific practices selected to embody managerial beliefs and values about the role of the IT professional in the organization.

The two-dimensional space created by the two factors underlying any IT HR strategy could include an infinite number of combinations. In light of the relative emphasis on the five strategic levers, our research suggests the possibility of conceptually identifying four distinct strategic IT HR management archetypes: long-term investment; balanced professional; high-performance professional; and short-term professional (see the figure here). We offer examples for the short-term producer strategy, which is at the other extreme of a CIO's strategic options from the long-term investment strategy mentioned earlier [2].

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Short-Term Producer Strategy

An organization following a short-term producer IT HR strategy has an urgent need for productive IT people. It views them as providing highly valuable contributions to the organization in the short term and recognizes that those willing and able to provide them are driven by short-term professional achievement and financial goals. Compared to all other strategies, the short-term producer strategy puts relatively greater emphasis on compensation and recruitment, relatively less on practices related to concern for the individual, and least on practices related to career development and security. Such a strategy is likely to be appropriate for IT professionals with highly marketable skills and a strong desire to maximize compensation. Organizations adopting the short-term producer strategy experience the greatest turnover.

Although not explicitly identified in our research, the short-term producer strategy might have negative implications for the total IT labor pool. Individuals employed in an organization following this strategy might leave the profession altogether upon termination of their employment relationship, placing more pressure on the availability of IT labor and wages.

Barriers and facilitators. A well-defined IT HR strategy is not sufficient for achieving its successful implementation. Our research identified barriers to success, including too much stress and inequities in how individual employees are treated and compensated. It also identified facilitators of successful implementation, including a shared IT HR vision and strategy and successful management of a variety of relationships internal and external to IT.

One source of stress for IT professionals is a sense of having an overwhelming amount of work. In a transportation company we looked at, the IT people talked about having their work plates piled too high, with more continually added on top, so work was constantly falling off.

Three key items—compensation, assigned work, and recognition—are important factors in determining perceptions of inequity among individual IT employees. Concern about the equity of compensation loomed large in one company we studied. Even though management confidently noted that its compensation was generally in the top 50%–75% of the market, its IT professionals we interviewed skeptically observed they had not seen the industry benchmarks against which their salaries were pegged. In addition, these professionals voiced concern about the equity of their work assignments. They perceived contractors as getting the most interesting assignments, such as projects involving new technologies, while full-time employees got the grunt work, such as maintenance of older systems. As for recognition, they noted that some managers gave out recognition awards more frequently than others, with some managers not giving any awards at all.

Avoiding or addressing barriers to successful IT HR strategy implementation requires a shared understanding among IT managers and IT professionals of the intended implementation of such strategic elements as concern for productivity and career development and security and overall IT HR strategy. Shared understanding is achieved through a number of intentional, persistent activities. For example, these organizations employ a dedicated HR person within IT who articulates their corporate vision and develops a strategy, communicates the vision and strategy with IT managers and professionals, and implements practices consistent with the vision.

In addition, these organizations pay close attention to the management of a variety of important relationships, including those between IT managers and professionals in work units within the IT organization; between IT professionals across work units within the IT organization; between the CIO and top managers; and between people in the IT organization and business partners throughout the organization and beyond. Managing these relationships depends on a variety of activities, including improving project management by IT professionals; increasing IT awareness among top managers and business partners; and addressing IT HR issues through the organization's HR function, as well as through dedicated HR staff within the IT organization. Many of these "relationship management" activities, though not a direct component of overall IT HR strategy, nevertheless have an indirect, but critical, effect on its successful implementation.

To illustrate the surprising, not-so-obvious HR effects of some of these relationship-management activities, consider the roles of project management and of senior IT leaders in communicating the costs of IT to top management and other business partners. Where project management activities are performed well, the workload is better balanced among IT professionals, resulting in a greater sense of equity; there is also a greater sense of accomplishment. Where the costs of IT are communicated better and projects are either funded at appropriate levels or the demand for IT services are better matched with available resources, the stress level within the IT work force is less likely to lead to burnout [8]. The indirect effects of these relationship-management activities include feelings of equity, a sense of accomplishment, and less stress.

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Recommendations for IT Managers

We want to suggest the following strategic approaches IT managers can use to address key challenges and concerns when recruiting and retaining an IT work force:

• Define and articulate the IT HR strategy clearly.
• Communicate the strategy at all levels of IT management, as well as to the people being managed, so everyone is cognizant of its core beliefs and values.
• Identify specific IT HR practices consistent with the strategy.
• Remember to manage relationships vigilantly to achieve indirect benefits.
• Reassess the IT HR vision periodically through an IT HR strategic audit.

To the extent that the overall labor market and computer technologies, as well as an organization's specific needs, are constantly changing, an IT HR strategy needs to be reevaluated periodically to keep it relevant and assure it is being implemented effectively. We found that managers and IT professionals alike might have different views of reality. Therefore, it may be useful to have an impartial third party conduct an IT HR strategic audit to assess whether HR practices are being implemented as intended. Such an audit should evaluate the IT HR vision and practices from the viewpoint of both IT managers and professionals. It should look for gaps within and between these groups with respect to the vision and their interpretations of how various practices are implemented.

Serious gaps can impair the ability of the organization to recruit and retain IT professionals and damage the delivery of critical IT services. Even where gaps are minimal, periodically sharing the results of an audit or identifying action plans to address the concerns of IT professionals can contribute to a shared IT HR vision. Listening to IT professionals through an IT HR strategic audit helps assure that workers have a voice in the strategy, both in environments where workers traditionally have a strong voice (more likely in countries with strong worker councils or unions) and where they do not.

Spending time and money on assuring that IT professionals are well managed may seem to cut into the resources devoted to delivering IT services. But in a scarce labor market, organizations focusing their resources on this area are more likely to have the people they need to deliver their IT services.

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The Digital Library is published by the Association for Computing Machinery. Copyright © 2001 ACM, Inc.

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