"Surprisingly, given the difficult economic climate, voluntary departure rates at technology companies continue to be high, with the average turnover for all reporting companies at 10%," said Maria Schafer, program director of META Group's Human Capital Management (HCM) and author of the study. "That's down by only a single percentage point from 2001. Although turnover has improved for many companies, concerns about retaining valuable employees are quite high."
META Group categorizes a turnover rate below 10% as relatively healthy, while higher than 10% turnover generally indicates an organization with fundamental issues that affect productivity and morale. META Group finds that the highest voluntary departure rates were reported in the transportation and distribution industry (20%), followed by media/publishing (18%) and healthcare (17%). The causes cited most commonly were economic conditions (33%), organizational restructuring (18%), and available skills (18%).
Gartner Dataquest predicts that the worldwide IT services industry is on track to reach $557 billion in 2002 a 2.8% increase from 2001 and revenue is projected to grow 7% in 2003 to $597 billion, increasing to $644 billion in 2004. By 2005, IT services will total $696 billion.
Gartner Dataquest analysts indicate that IT services companies need to prepare for a longer-term future where double-digit growth is the exception rather than the rule.
However, even slow growth could mean more options for IT professionals and companies are going to have to focus on retention, rather than recruitment, to cultivate an environment that fosters IT longevity.
META Group addressed these issues with the survey respondents and found that the retention issue is split nearly evenly, with more than half indicating it is a "very serious" or "fairly serious" issue.
Interestingly, when asked about types of bonuses rewarded to IT staff in 2002, survey respondents indicated that the number of retention bonuses rewarded in 2002 grew from 12% to 44% in 2002. Among the IT skills that were considered most difficult to retain were e-commerce/Internet skills (24%) and application development skills (20%).
"Managing human capital as a competitive asset in both good times and bad is critical to the survival of Global 2000 companies," said Schafer. "The data clearly indicates that those who don't aggressively court and develop IT staff through the downturn and into the long term will find themselves in crisis mode."
Other findings from the META Group study include:
- Retaining critical skills and key performers is a top IT priority, second only to maintaining profitability and competitiveness. Managing IT compensation rates while still offering attractive incentives for high-performing staff was rated third.
- Even though the average turnover rate of 10% is quite high, there are far fewer companies reporting excessively high (over 20%) turnover rates, though approximately one-quarter of this year's respondents still report turnover in the 11% to 20% range. Conversely, the high involuntary departure rates were on a par with the rest of the country; 45% of survey respondents indicate they have fewer IT staff than last year.
- Surprisingly, despite the downturn, more than one-third (34%) of IT organizations have increased their total number of IT staff.
- Employers are preparing for the legions of "baby boomers" expected to retire soon, leaving many legacy skill positions empty. The federal workforce will be especially hard hit, with more than 50% of its workforce expected to retire during the next five to seven years.
- IT compensation levels are still higher than for non-IT employees.
- Signing bonuses continue to be used at roughly the same rate as last year (22% in 2002 vs. 20% in 2001). Retention bonuses were much more frequent in 2002, with 44% of respondents reporting they issued a retention bonus (vs. 12% in 2001).