#292 from Innovative
Leader Volume 6, Number 8
the Career Limbo of Skilled Specialists
by Jim Kochanski and Kevin O’Connell
Kochanski is a principal in the Raleigh, N.C. office
of Sibson & Company, an international organizational effectiveness
and compensation consulting firm. Mr.
O’Connell is senior consultant in Sibson’s Princeton, N.J. office (phone 609-520-2806).
In many companies,
highly skilled specialists such as scientists and engineers are central
to the franchise—without them, there’s no business.
Yet most of these companies still treat the pay and careers of
their all-important technical employees (or others with unique knowledge
or skill) the same way they did before they ever heard of biotech or the
The end result:
technical employees are caught in an uncomfortable kind of limbo.
These people are unique in that their knowledge is critical and
dynamic, their work style is unconventional, their career aspirations
are often non-vertical, and their services are in high demand in the job
marketplace. The problem
is, technical employees are generally paid and managed like workers in
other parts of the company.
For example, many
companies still keep their technical employees on traditional merit pay
programs, complete with the 3 to 4% annual base pay increases.
These increases hardly create the conditions for technical
excellence and, in many cases, don’t reflect rapid market movement in
pay for “hot” technical jobs. We’ve
seen several organizations where the technical staffers returned
what they called “insulting” pay increases.
Not surprisingly, places such as labs are becoming areas of
employee dissatisfaction, low productivity and high turnover.
Meanwhile, companies want these specialists globalizing, working
in teams, cutting cycle time and increasing business impact.
One reason for this
unfortunate situation is that companies are wary of treating their
technical people differently from other employees. But yet most do. Sales
people get commissions, executives get performance bonuses, and
production teams get gainsharing checks.
But what about technical employees?
career tracks have been around for years. But, as the percentage of technical jobs continues to grow,
you need other creative ways to retain and motivate this critical
The pay systems most
companies are using were designed for a buyers’ market for talent.
Now, however, there’s a talent shortage.
We often meet technology managers who tell us that a key business
concern is the inflexible pay systems.
Some managers become specialists in how to circumvent the systems
that would keep them understaffed and behind schedule.
They either inflate grade levels, sometimes creating phantom
management levels, or they promise employees more money than they are
authorized, and later ask for forgiveness.
These Band-Aid activities don’t address the real business
needs, and typically create more problems than they solve.
One solution is a broad
range of pay to provide more flexibility to hire and advance technical
employees. Unlike the
traditional narrow-step system, advancement within and between the broad
ranges should follow the natural career progression that comes with the
phases of technical careers. Dual
tracks were originally designed so technologists could equal the pay of
a manager. Now, even more
flexibility is needed to pay technologists at the market rate which, in
some cases, is more than an equally experienced manager.
Flexibility is also required when competing for technical talent
in a market dictated by rapidly changing supply and demand.
Managers, handcuffed by less flexible pay systems typically
created for non-technical employees, are at a significant competitive
disadvantage to attract and retain the expertise needed to succeed.
important word of caution: while
broad ranges give companies that flexibility, they require greater
managerial skill, judgment and accountability.
Otherwise, a more flexible pay system can escalate a company’s
labor cost beyond competitive positions.
In the end, managers need to be responsible for their decisions
in a more flexible pay system and they must have the information needed
to do so. Information about
payroll budgets and competitive rates of pay internally and externally
allow managers to make good decisions.
Base Pay Increases
Rather than a series of
discrete jobs in narrow pay ranges, today’s technical career is
characterized by a series of projects.
As a result, it’s critical that key people stay associated with
the projects. Narrow pay
ranges that force a person to move to a new job to get a significant pay
increase often disrupt critical projects and may have little to do with
the business cycle or the cycle of an individual’s development.
At the same time, the
“experience curve” concept, the foundation for many technical career
ladders, is no longer viable for many technical disciplines. In the more dynamic fields, a person with only five to ten
years of experience may be at the peak of his or her craft. This person may be the most valuable to the enterprise and be
of highest value in the marketplace.
Managers need new ways to provide base pay increases to replace
merit increases that have become ineffectual entitlements and promotions
that require a change of job. One
example is Technical Growth Pay, a vehicle for managers to reward
employees without an artificial annual cycle, according to the
employees’ technical development or attached to the project cycle.
One way to get
technical employees to focus more on a particular goal is to tie a part
of the pay to the performance of the business.
Business managers are often frustrated because R&D isn’t
focused on business results; yet most companies wouldn’t want their
technical people constrained by a quarterly earnings focus.
Still, there are other longer-term performance measures that can
be tied to variable pay. For
example, a product development department at a clinical nutrition
company linked incentive pay to the net present value of a project’s
expected cash flow to ensure the commercial viability of research
As the business
landscape changes, major technology-based companies are losing key
people to small start-up firms that provide an equity stake to
non-manager technologists. Some
larger companies provide stock, options, or even phantom shares, not
only as a retention device, but to get R&D employees to focus on
long-term financial performance. Like
performance bonuses, equity has the benefit of encouraging employees to
see the whole picture of the business.
Companies often miss
the boat on employee perks when it comes to their technical staff.
Like executives and managers, scientific and technical employees
are highly motivated by perks—but not necessarily the same ones as
their management peers. Technical stars favor the autonomy to make real, technical
decisions, not just administrative ones.
Another valued perk is additional budget to fund research or to
buy materials and equipment. To
meet the learning orientation of technical employees, some organizations
provide educational sabbaticals to their top performers.
Away the Store?
The answer is not to
just pay technologists more as the market for their talents goes up.
Companies need to be careful how
technologists are paid to get the results that are best for them and the
company. By developing an approach to technical careers based on
today’s realities, companies and their technical employees can
eliminate their mutual concerns and embark on a new kind of relationship
in which both thrive.