Dear CertMag: Why don’t U.S. firms pay IT pros what they’re worth?
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Dear CertMag: I keep reading about the shortage of tech workers, but what I actually see is a shortage of cheap tech workers. American companies don’t want to pay IT pros what they are worth. If there’s so much money in IT, then why do font-line tech professionals get so little of it?
— Walt, Huntington Beach, Calif.
Note: Wayne Anderson’s response to this question is based on his own observations and does not reflect the views of any past or present employer.
Few topics in the business world ignite passionate rants over an IT worker’s adult beverage like the subject of compensation. The idea of what an individual tech worker “is worth” is an interesting starting point. Can anyone say there is a “right” and “objective” way to measure that value? I’ve heard many ideas:
• Someone should earn an employer at least (2x, 3x, 5x) what they are paid. (Often the implication being that when you reverse the formula, they are underpaid.)
• Someone should be paid as a straight multiple of (this other job) because (reason).
• Someone should make a certain amount per year of experience, as with many government employers.
• Someone should make (dollar figure) because they have paid (amount) in tuition.
• Someone should make a certain amount per year of schooling.
In the years since I first got paid working on a PC, I have yet to see an employee approach a business and admit to having too much money.
That being said, there are often a few things to think about for how different jobs are paid — even ones with the same title, or even identical responsibility! Working with customers all over America, there are some common “buckets” that I tend to see these differences fall into.
In the marketplace, there are always going to be skills which are more in demand than others. There are also going to be corresponding variations in the supply of available people who have the right experience and/or depth and/or focus for those skills. As an example, a combination of working with certain automation technologies together with a history of working at hyper-scale startups could make a candidate very in-demand for some companies.
Where the job is located will tend to have a fairly significant impact on salary — especially for national or multi-national firms. Using myself as an example, I personally live in the Denver market in the United States. Many firms classify Denver as “second tier,” a “B” market, or similar designations, based on cost of living, availability of skilled professionals, and other factors that impact salary. The end result of this kind of designation is that my identical job in a city like Los Angeles, Seattle, or New York, would be paid a higher numerical salary than I earn in Denver. The difference is to “even out” the added costs of living and working a more expensive, more competitive region of the country.
Even within the same company, a firm’s business performance, expectations, or profit margins for the unit in which the employee operates may tend to affect not only base salary on entry, but sometimes also the compensation adjustments or bonuses that are provided during employment. I’ve seen a manufacturing company where employees in a financial department often had very different experiences and support than employees who operated as part of the lower margin manufacturing divisions.
Company Overall Financial Strategy
The evolution and strategy of a given company can affect the way that it pays employees. A company that expects lean years or localized sub-expectation performance may choose to trim adjustments to compensation. These boom-and-bust cycles, can cause substantial variation when you consider that each of those adjustments tends to compound over a period of several years. (Suppose that you are employed at Corporation A with an annual salary this is one percent higher than what you’d receive for doing the same job at Corporation B. The total difference in compensation may not seem like much at the end of Year 1, but what about by the end of Year 4, or Year 5?)
The way that you enter a company — or the importance to the company of your current role — can have a big effect on how your compensation compares to both your industry and your peers. Many large firms have hiring practices in place where multiple offer levels are possible. Candidates that they really want may have the option of different offer packages (sometimes even pre-approved or with minimal additional approval) if the first offer is rejected. A candidate with compelling skills and experience may also be able to use past performance to request a different package coming into a firm. It is not unknown for individuals within the same role to be paid in vastly different ways with slightly different benefits. I have known even an instance or two where individuals have been compensated more strongly than their supervisor!
The other thing to remember is that promotion sometimes can mean your compensation continues to be a function of your past payment rather than what your job role’s “target” compensation is. As an example, if you are a technician making $60,000 and successfully apply and are promoted to an administrator job, then you may be offer you a substantial raise of 10 percent, making your salary $66,000. Someone hired from outside the company to do the same job, on the other hand, might be brought in either above or below that number. When multiple promotions have been completed, this difference between a “hired” individual and the individual who has been promoted can be substantially positive or negative based on the company’s practices.
A Final Thought
If you are motivated exclusively by money, you stand a much greater chance of being disappointed and miserable in your work, than if you dive into a job role or catch on with a company that really sparks your interest. The general function of what employees are paid for any given job is driven by the value of the work (as perceived by the company) and the company’s assessment of the cost of that work and the risk of that work. There being “money in IT,” as you say, may or may not be true. The positions that really drive strong returns, however, are mostly those based in strong risk. Employees with reduced compensation that is paired with equity, entrepreneurs who create cutting edge innovations, or executives whose name is clearly and publicly associated with the positive or negative performance of large divisions of a firm will often be compensated for those risks.
If all else fails, and you have the appetite for risk, build your skills in emerging technologies and look for startup opportunities. Realize that you cannot succeed in the venture capital-funded market without taking the risk of failing!