Accelerating IT migration threatens to decimate Connecticut businesses

One of many unexpected side effects of the Covid-19 environment is a drastic change in how IT workers do their jobs. Prior to the involuntary work-from-home imposed by the pandemic, it was generally frowned upon for IT workers to work in a full time remote configuration.

The mistaken assumptions were that the productivity would crash and timelines would suffer. Surprisingly, this didn’t happen and in many cases, productivity actually went up. Why? Let’s look at the causes…

The open floor plan fallacy

Unfortunately, too many companies have followed the fad, perhaps without reading all of the research first. The open floor plan does facilitate higher levels of collaboration but it also dramatically hinders productivity during those times when individual workers need quiet space to get their work done.

The overwhelming majority of large businesses in Connecticut are not Google, Twitter, or Facebook. Some of the largest companies represent insurance, high tech manufacturing, pharmaceutical, and financial industries. These are some of the most highly regulated business categories in the U.S. IT systems in these industries don’t have the luxury to be able to dramatically change direction on a whim due to complicated business and regulatory requirements.

Studies have been done, some are over five years old, which show the introduction of the open floor space will cause an immediate 20-30% LOSS of productivity; the exposure to additional noise levels, causing the individual workers to be exposed to ALL conversations in their work area, destroy concentration and make focus very difficult.

The collaborative space is most useful for 3-6 hours of the 40 hour week, while the remaining time requires space that allows for concentration. Assuming that employees will spend 36 hours a week wearing noise cancelling headphones and be productive is a losing proposition.

An article published in 2018 by Ethan S. Bernstein and Stephen Turban,” The impact of the ‘open’ workspace on human collaboration,” documents two studies completed that indicated a tremendous reduction of face to face interactions, potentially as much as 70%, and a significant reduction in productivity. In fact, an article published in Working Capital Review, indicates that as many as 13% of leaving workers cite the open space as a contributing factor.

When the pandemic sent the workers home, the noise went down dramatically. Even if the workers had to contend with children or their spouses working in the same area, the number of concurrent conversations plummeted from 30-50 to 2-3. If they had the ability to isolate in separate spaces from the others in their household, their productivity rose dramatically. Through effective use of technology, the work went on and productivity went up.

The unexpected consequence

The effect of the 100% work from home success was nationwide. Many companies were smart enough to recognize that they could hire IT employees from all over the country and have them be meaningful contributors to their business. This changed the market. While a lot of Connecticut businesses consider that they are paying market rates for IT, they are really using an algorithm that calculates market rates “for Connecticut.”

Sadly, that geographic adjustment factor doesn’t apply to the open market anymore, and their failure to recognize that has started a migration of senior level IT personnel to positions that pay market rate based on what the work is worth, irrespective of their physical location.

The irony of this migration is that it will be a boon for the tax coffers of the State of Connecticut as they are jumping to much higher paying positions while remaining residents of Connecticut. So tax revenue from income goes up, but if the businesses don’t get smart, there will be a horrific effect on profits and potential failures of small to medium businesses.

Unfortunately, many companies are willing to play the “penny-wise, pound foolish” card to retain their people. The likely consequence is that these companies will continue to lose senior level people, along with years, even decades of intellectual capital that allows them to be very effective in their current positions.

They will now have to pay those market rates to replace them AND lose months of productivity trying to regain the business domain knowledge that walked out the door. This will likely also cause delays to delivery schedules which are always aggressive as forward looking tech stacks are a great differentiator in the marketplace today.

Shareholders will not like that.

Why IT is different

Unlike industry specific skills, e.g. insurance actuary, underwriter, aerospace engineer, Pharmaceutical Chemist, IT skills are readily transferable across industries. So Pfizer isn’t just competing with the likes of Moderna or AstraZeneca, they’re also competing with the likes of Raytheon, Cigna, and Google for the top resources. This presents far greater opportunities for transition to those employers.

The timeframe

It started happening slowly around July 2021. The pace is rapidly accelerating, and at the current rate, it will probably reach critical mass between April and June 2022.

The challenge to the management of the affected companies is that they are currently paying somewhere between 40-70% below national market rates for their senior IT staff. There will be reluctance to take any action that would come anywhere near the correction necessary as it would set a precedent they would consider very dangerous.

There will be some that will attempt to use one-time incentives to address the issue, but while that may give them a short reprieve, it will not solve the issue. In fact, that may cost them even more as there could be those that might bide their time to see if that happens, all the while engaging in searches, only to take a new position after receiving the incentives.

The Connecticut business community is facing a tsunami of exodus of senior IT resources if they don’t step up. The cost to replace these resources will far exceed the cost to adjust them to the market and months of productivity will be lost. The tax coffers will expand, so those companies should not expect much help from the state of Connecticut. Adjustments to market rate may hurt profits short-term, but will likely mitigate long-term downturns.

So, Connecticut businesses: your dice. Don’t crap out.