Salaries are on the rise

Contact Features Editor Paul Desmond

Salaries by the numbers - Average figures and salary figures broken down by job.

The 1996 Network World Salary Survey was our first done in conjunction with Deloitte & Touche Consulting Group. As the telecommunications consulting arm of an accounting giant, Deloitte & Touche Consulting is in a strong position to offer perspective on the numbers generated in our joint salary survey.

In the following Q&A, Gerard Cunningham and Glenn James, both partners in Deloitte & Touche, share their perspective with Network World Features Editor Paul Desmond.

Q: Our survey showed net staffers got an average hike of 7% in '96 and they expect, on average, a raise of 5.5% next year. How does this compare to past years? Does it seem high, low, or about right?

GC: That's consistent with results of a year ago. There are selective components. When it comes to broadband networking to support client/server and those kind of resources, those are more scarce, therefore the higher premiums are being paid. That's probably still the same because you've got consulting firms looking for those people along with users and a growing cadre of outsourcing companies.

Q: Replacement salaries appear to be a bit below the salaries of folks who are already in a given position. Is that realistic?

GC: I think it's going to be tough to do that in the high demand areas. The amount of demand is growing from a number of different sources. In essence what they're saying is they're replacing mid level people with lower level people and paying them less. That's going to get harder to do. In highly targeted areas, the demand curve will force up the base and the replacement cost will be equal to or higher than the averages that people have seen in the past.

GJ: I don't think there's any doubt. The only thing I can attribute this to is that the folks who responded haven't been in the unfortunate position of having to replace anybody recently. In general, the bar just keeps going up, and it goes up at a much higher rate in those areas that are in high demand.

Q: About 36% of respondents are making at least 11% of their total compensation in some form other than base salary. For one-third of respondents, bonuses constitute between 10 and 29% of total compensation. Does this strike you as a change?

GJ: My experience is that there tends to be a more performance-based compensation system, which implicitly means that whatever your total comp is an increasing percentage of that is 'at risk,' meaning either upside or downside. It could be straight bonus, it could be through the granting of options. That's directly proportional to your level within the company -- the higher you go in the company, the more true that is.

GC: That's consistent with what we've seen from people who have been presented to us as well. We're finding interesting compensation packages out there that we're trying to compare to and compete with.

Q: So there's a trend toward more of the total package being tied up in bonuses?

GJ: The base salary component of a total compensation package is decreasing as a percentage of the total and that other - whether it's bonus, stock options, other non-cash compensation - those collectively are an increasing percentage of the comp package.

Q: What should people shoot for in terms of bonuses and such?

GJ: It depends on what your objectives are. I know of one guy who works for a company in the southeast and lives in Charleston, S.C. Part of his compensation package is he could continue to live in Charleston even though that was not his company's location and they would pay for an apartment for him near [headquarters], so long as he got himself to work - it was about a 4 or 5 hour drive - and so long as he accomplished his job. The company had a couple corporate apartments so its cost wasn't large. It was an opportunity for him to continue to live where his wife and kids lived in an area that he liked better than where the company was, and it was part of the package that they gave him; they put it in writing."

Microsoft and other high-tech companies do all kinds of interesting things. One high-tech company every five years grants its employees a six-month sabbatical where they can go off and do anything they care to and continue to be paid.

GC: You see that more in high tech firms that are sensitive to it than in major financial services firms....

GJ: ...or manufacturing. To the extent that telecommunications and networking skills are functional, as opposed to industry-oriented, and there's mobility among and between industries, I think you're going to start to see these kinds of interesting and non-traditional perks start to migrate their way into some other more conservative industries that haven't seen this kind of thing historically.

GC: We have an insurance client that has flexible hours within a 3-hour range everyday on the bottom and the top. Everybody in the organization that wants a home office can have one and the company foots the bill for the remote communications. I don't know how their salaries compare, but that's something that they believe their people are looking for.

Q: So what advice can you give our readers relative to their total compensation package?

GJ: Your readers are both employees and employers. The message for both of them is to think outside the box. Think about some creative ways to improve life either as an employer or as an employee. You've got to put bread on the table, so you've got to get paid in terms of cash compensation enough to make whatever kind of living you deem important, but there are a lot of non-standards ways to compensate people. Everyone talks about telecommuting, for example. Some jobs just won't lend themselves to doing it remotely, but [Network World readers] should be the most adept, the most aware of what the possibilities are. Things like the examples we descried can potentially cost an employer relatively little but can mean a lot to an employee. Everybody's got their balance between quality of life and money."

Q: Another survey finding showed respondents are not making much in terms of overtime pay - just over 90% made nothing in overtime. What's your take on that?

GJ: It's not because they're not working overtime. You would hope it means they're all on straight salary. Reliance on communications and the complexity and of the communications infrastructure is going up, not down; people tend to be working harder, not less. The fact that they're not making any money, or less money on overtime, could be just a straightforward cost cutting measure on the part of the company that says "thou shalt not work overtime." Or it could be they're giving everybody some kind of increase to compensate for overtime, but are moving them to annual salary from an hourly rate. "I think it's more the latter than the former. I haven't seen any companies that on one line say that you can't work overtime but then expect people to work 50-60 hours. Plus it's easier to manage and predict [salary expenditures] if everyone's on salary. Otherwise, 3 or 4 major outages can kill you if lot of people are on overtime - you may not have budgeted for it.

Q: A significant number of people (34.7%) said they thought their total compensation package was worse that others in a similar position in their industry. Only 18.9% thought their compensation was better. What can a company do to combat the perception that it is paying below the going rate, if indeed it's not?

GC: The risk you always run is the way people find out how they compare is by talking to peers and headhunters. if you have a set of talents that are in demand, you'll always find someone who will pay you more. the issue for the employer is to convey that in some way and try and move off the dime in terms of just compensation. but that is a very tough thing to do because you use the market to determine what is a comparable compensation. that often comes when people are looking to cherry pick. I don't see an answer to that other than to pay people fairly and make sure that the non-cash compensation things are handled well.

GJ: You can always find a better paying job somewhere; whether that is a better job, however, is an entirely different issue. Whether a job is better than the last one you had or the next one you're going to get has as much do to with what you do and what the career path is and the scope of your responsibilities as it does with what you actually get paid. I think it's shortsighted to look only at that aspect of things. A company that recognizes the importance of communications is going to continue to spend the money it needs to spend to make sure it's done well. That's the kind of place I would prefer to work as opposed to a place where I might get paid 10% more, but my sole purpose in life is to spend as little on the communications infrastructure as possible because the company views it as being a cost of doing business as opposed to a strategic or competitive advantage. That tends to lead to an unfulfilling job with little opportunity for advancement. [it also raises] the possibility that the whole function could get outsourced because an outsourcing company comes in and says I'll save you 10%.

Q: How do you convince upper management to change its tune if it views IS only as a cost center?

GC: One potential way of doing it is to involve the business people in convincing management that networking is essential to the business.

GJ: You've got to talk to them in terms that they understand. It means, this is what we need to do in order to open a new distribution center in France, or to consolidate manufacturing operations in these three states. Or if you want to travel less, videoconferencing is the way to go. you don't deal with the technology. It's like bringing your car for service. You don't want to learn how to rebuild the engine, you just want to trust that it'll be fixed right. Communications and networking unfortunately is sometimes viewed that way. If you're a network manager at a major corporation, you are the bridge between two sides of a lake. On one side are the people building TCP/IP packets and on the other side folks are wondering what the stock price is. It's a pretty big distance between those two and you've got to have a little insight into both sides.

Q: What about the list of skills that are in high demand but short supply, forcing you to pay a premium. Did you see any surprises there?

[For reference here is the list. The number indicates the percentage of respondents who selected each area. Client/server development and deployment - 47.4.
Internet/intranet - 47.1
Network management (i.e.: OpenView, etc.) - 44.0
Windows NT - 40.5
World-Wide Web - 34.
Distributed database - 19.2
NetWare 4.x - 17.5
Collaborative computing - 12.4
APPN - 6.5
All other - 14.]

GJ: No, there were no surprises. It was consistent with my experience. In terms of demand, if you look at Windows NT, and compare that to NetWare 4.x -- and I would guess it wouldn't change a whole lot if we put in NetWare 3.x -- NT is in demand at more than twice the rate that NetWare was. I think about our experience with large corporate clients. We're starting to see a lot of that in terms of things like implementation of Microsoft Exchange and their [Systems Management Server] products. And that's kind of leading them into the close coupling with Windows 95 on the client and Internet Explorer for Internet and intranet browsing. my experience has been that's starting to make some inroads relative to Netscape, for example. And Microsoft's clear strategy to integrate the suite and horizontally expand and extend their product line - it's starting to pay off and be pretty effective for them.

Q: Headhunters said they weren't seeing much demand for NT skills. Why do you think that is?

GJ: We have clients who are looking to hire people with NT skills and all the LAN/WAN internetworking stuff. It's almost like a standard criterion for selecting a consultant is having fairly significant NT skills - not to the exclusion of LAN Manager or NetWare or even Vines. It may be that corporations don't use executive recruiters for that. They'll place ads in papers or trade magazines or something.

GC: We're also seeing growth in demand for consulting projects around that which may be indicative of the fact that they're having a hard time getting the resources and getting the people to manage the resources. There are a couple fairly large opportunities that have evolved for us around the conversion to NT and the sense that we have is that large clients have been looking for resources in that area and people who can manage the migration. That is I think indicative of the fact that there is demand for those kind of resources and concerns about getting them and getting the management talent to supervise large projects.

Q: Any advice on how to find these people who are in high demand?

GC: If someone is on the fringes of the high demand areas, I would suggest a fair amount of investment either by their companies or by themselves to retool and get in line with where the demand is, and that's clearly around broadband networks to support client/server, routable networks, etc.

GJ: With organizations getting smaller and thinner, or flatter and keeping the same breadth, the question becomes, among all the functions the organization provides, which does it believe it needs to keep in house and control over and which does it want outsource or acquire on a part-time basis? It's one thing to migrate from say NetWare to Windows NT ; it's an entirely different thing to then operate and maintain an NT environment. Companies are increasingly saying there's an aspect to this that we believe is strategic and we want to retain that in-house, and there's an aspect that's really not so strategic, it's more of a commodity, and we'll outsource that. Or even if it's strategic but if it's relatively short-term, we may do a combination of things

The companies I've seen that have been successful in attracting and keeping people have done a lot of things that deal with the non-monetary aspects of the job. That may include letting people do things like work nonstandard hours, telecommute, or if somebody has an interest in traveling, assign them to an international position for some time. There are other things that one can do to help these people understand the business and get a broader network within a company. That doesn't necessarily mean you've got to go out and figure out how to pay them an additional $10,000 a year or what have you.

GC: The demand is such that that $10,000 could be eclipsed rather easily, so just economics probably won't cut it.

Q:In terms of education, 77.6% of all respondents have at least a 4-year college degree. Is that a higher number than in the past?

GC: That is increasing because of the visibility communications is getting now. A few years ago, you didn't see user-oriented communications stories on the front page of the business section of the Journal. Now you're seeing that because there is more recognition of the dependence we have on communications and the importance of managing communications costs. All of those things rolled together will have a continued impact on the marketplace.

Q: The average years of industry experience respondents reported was 17.49. That seems high, or is it just a reflection of the people we went after, those who were high on the totem pole?

GJ: That's part of it. But also, whether people like it or not, this particular function is not frequently a fast track to the executive suite. You don't find network managers becoming CEOs of companies. So you find that people who choose this career path, at least historically, tend to stay in the general area of communications and networking. They may move around between jobs, or between companies, but they generally stay in that area. So you see that kind of experience number. The network managers that I've dealt with seem to have a fair amount of experience and if you looked elsewhere in the organization, particularly in the marketing and sales organizations, the peer group is frequently less experienced.

GC: We've been doing a fair amount of interviewing for clients looking for senior people. There doesn't seem to be a shortage of people looking for positions, some of which have been put there by consolidations and other things. You've got a fair amount of seniority but those people still need to be on their toes. The number of corporate positions is shrinking because of consolidations and some downsizing. We've had clients that had 400 or 500 people in the communications organization that today may have half that, because they've cut back on what they're doing, they've gotten better at it, they've found vendors to do pieces of it that can do it more effectively. And technology in some cases, when it comes to network management, is more sophisticated and you don't need as many hands. So the issue at the top end [of the totem pole] is a key one as to what the impact's going to be. If there are a number of people looking for work, that's going to have some lid effect on the salaries people have to pay to get them. The ones that are successful and do well, people want to keep. But there are still a number of people on the street.

Q:What can we learn from all this? What's the secret to keeping people happy?

GC: The marketplace is getting tougher, more competitive. it places different demands on senior executives and requires different talents at the lower levels. that's not going to slow down, that's going to increase. So finding ways to integrate the communications group with the rest of the business and show the value of it is likely to improve compensation [for the whole IT group] and deal with some of the job movement issues. That's what we see almost every day.

The other lesson I would try and take away is, that both employers and employees ought to think about creative, non-monetary ways to make a job more rewarding using some of the things we described.

Q: Given all this data, can you give me a few things that a network manager should do?

GC: I'll hearken back to an earlier question about what makes people valuable to an organization. If a network manager is providing a utility service that isn't perceived to have value by the business people who are running the business and generating the revenue, that is something that needs to be worked on. They need to leverage not only their technical competence, but political and sales skills to more clearly create the linkage between the success of the business and the success of the networking technology. The clients who have done that and are able to communicate those kinds of things to the people who run the business, tend to be fairly successful.

The other important thing is to keep retooling. The hot hands in the marketplace from a compensation point of view continue to change and evolve. If you're the backbone network engineer and you're not familiar with routable networks, you're in trouble.

GJ: That's it. If you don't keep up with [changing technology], you're going to be left in the dust figuratively and literally. And if you don't make dust, you eat dust.