Poachers' paradise for skilled workers

Demand for skilled workers is at an all-time high, but the downside for the channel is that there's always someone out there trying to pinch your staff. So how do you ensure loyalty among your staff?

This time last year there was a fair amount of gnashing of teeth by Mike Murray, head of human resources at Microsoft. How, he asked, could the software giant stop its young whizzkids from leaving when, typically by their mid 30s, they had amassed enough wealth through share options that they never needed to work again?

He had a point. For as Murray pondered a solution, his local newspaper in Seattle was revealing how one in six Microsoft workers was now a millionaire, their riches reflected in the abundance of fast cars and soaring house prices in the city's Redmond district.

Twelve months on, Murray himself has flown the nest, presumably to cash in his own stock. But his concerns about finding and retaining staff remain as valid today. IT companies are battling to lure the brightest, most talented workers in an increasingly ruthless job market.

Poaching staff
A recent study by human resource specialist Development Dimensions highlights the scale of the problem: half of all firms canvassed in the UK lose at least 10 per cent of their staff annually to rivals. Sales executives and techies, the lifeblood of most dealers and resellers, are the most likely to be poached. In some instances, average staff turnover was 80 per cent.

Microsoft's problem might be unique in that it is a victim of its own success, but how do others in the industry retain key employees? In the UK, share options might still be something of a last-ditch concession to attract or hang on to valued staff, although that doesn't deter the more brazen from demanding them.

"Youngsters fresh out of college and facing their first interview are today starting to ask about stock entitlements. It makes you gasp. It's something that started with the smaller Nasdaq-quoted companies in the US and is rapidly spreading here," says Jonathan Fitchew, managing director of IT head-hunting firm Tareto Law.

Moreover, share options could become the norm if the UK government has its way. In his pre-budget report in November 1999, Chancellor Gordon Brown announced breaks for employee share-ownership schemes, with workers eligible for shares worth up to £3,000 in their companies, tax free.

At the time, Brown explained: "I think people understand that in preference to large or excessive, or inflationary wage increases, which could put inflation up, it's better to invest in your firm's success and be a stakeholder in the future."

Share and share alike
One firm that has already introduced shares for its employees is UK software house Autonomy. When it floated on Easdaq 18 months ago, it was valued at $165m (£104m), making several of its programmers, some still in their early 20s, £100,000 better off.

Workers at the UK arm of Cisco also receive generous stock options. Fitchew knows of at least one employee who is already worth £250,000 on paper after just a few years with the company.

Grant Morgan, managing director of PC peripherals specialist Impleo, told how his company went one better by giving all the members of the 12-strong team shares. Impleo was the subject of a management buyout from its larger parent, SCM Micro Systems.

"The aim is to go for a public offering in a few years or accept a buyer," says Morgan, although he doesn't believe there will be a Microsoft-style exodus of staff as they cash in their shares. "We've got a very committed team here. In my experience, people who get rich do so because they're driven and that's how they'll stay, irrespective of any sudden wealth," he adds.

Who wants to be a millionaire
Jean-Michel Beeching, director of Development Dimensions, believes the main reason why someone stays with a particular employer or leaves usually has little to do with money. This view is backed by his company's poll of more than 200 human resource directors.

"Our research shows that the reason why people leave is usually far more deep-rooted," he says. "High pay or even share options was found to be the least effective way of retaining a member of staff who has already decided to leave. What's important to workers is the cultural fit; how they're managed by their bosses; what opportunities there are for promotion; and the part they play in corporate goals."

Networking distributor Data Connectivity is adopting this approach. The company is in the relatively novel position of having as many technicians on its staff as sales agents, but it is an abundance of technical largesse that makes the company a prime target for poachers.

Graeme Smee, Data Connectivity's managing director, will not name the culprits, but claims that it's mainly networking product vendors that poach his staff. So how does he keep them loyal? "It is difficult," he admits. "We've had engineers who have been offered almost double their wages, plus a flash car and commission, if they'll defect. We can't always compete in that league, particularly against a major outfit.

"But what we do offer, especially to our technical staff, is the constant opportunity to improve their skills. It usually costs us thousands of pounds to put them through the various courses, and we have to include a clause in their contracts stipulating that they reimburse us if they leave at a certain time.The temptation is always there, but fortunately we've been pretty lucky so far and our attrition rate is low, although it's a constant problem."

In for the skill
There was a widespread belief that the new year would see a surplus of technical workers in the job market as millennium bug contracts ended, but that does not appear to have materialised. If anything, convergence of computer and networking technologies has made demand for skilled staff greater, particularly for companies geared towards ecommerce. The threat of poaching is now greater than ever.

"Everyone said the job market would be stagnant in 2000, but the exact opposite is happening," says Fitchew. "In fact, I've never known it so buoyant."

He believes that most organisations will just have to live with the ethos of rewarding staff with fat salaries and the latest car if they want to attract the best workers.

"If you're an employer and not in that remuneration ball park, then you're not a player," he says.

Many large employers such as Cisco are going one step further in their determination to attract the right people. The networking giant pays its employees a £750 bonus for every new person they successfully recommend.

Fitchew says that as the jobs market heats up, recruitment methods are getting more resourceful, if not downright unethical. Some agencies and companies resort to "hacking into corporate websites to find the email addresses of key staff and then showering them with offers", he says.

"Some employers put the email addresses of staff on their own web pages for anyone to read and then they wonder why it's so tough to hang on to personnel."

New blood
Does Fitchew ever get flamed by disgruntled employers from whom he's lured vital staff away? "Luckily I tend to work with new blood, the end of the job market where it's mainly about getting recruits straight from university, so I don't usually step on too many toes," he says.

"Besides, I don't like the idea of placing a candidate in a company for just a year or so, and then going back for a second bite of the cherry by finding them a new employer. Other recruitment specialists do it regularly."

Peter Morrell, managing director of software house EMS, says online selling of IT products and services is exacerbating the demand for technical staff. "Now that goods can be bought on the internet, the whole paradigm of selling and of employing old-style salesmen is going out of the window."

Can EMS compete rewards-wise when predatory rivals come sniffing around? "In a word, no," he admits. "But we try to reward our workers in other ways. For example, by ensuring they always have a new project to stimulate them. Most programmers and developers like to feel that they're breaking new ground. Providing you can offer that type of environment, then there is a good chance they will always stay loyal."

Steve Stanway, managing director of reseller SAS, motivates staff with a bonus scheme. "We don't go in for share options at the moment but we do have a profit share scheme for everyone."

Steve Shaw, human resource director at Ideal Hardware, says: "We try to foster team spirit, and must be doing something right. Not many leave. Although we don't go in for events such as getting staff on assault courses, we have internal, cross-team events to encourage integration."

Ultimately, the answer to staff loyalty is "understanding their ambitions and providing the right social environment", says Shaw. "You should never underestimate the importance of personal and career development in bonding people to an organisation."