The Skill is Not Enough
Pay Just for the Skill or Also for the Proficiency?
Most organizations Aon Hewitt spoke to, on how they differentiate employees compensation based on skill, suggested that there were no conscious level based differentiations that they applied. In other words, if they deemed a skill to be "hot", they were willing to provide a premium to employees at all levels uniformly. Aon Hewitt carried out a quantitative survey on the pay differentials that exist for digital skills across major system integrators that predominantly build talent and were early adopters/ innovators in the digital space. What was surprising was that across these organizations, there was a clear differentiation on the skill premiums being provided to employees by level, which was contrary to the stated objective they were running. Across all the major skill groups, it is very clear that the skill differentiation at the entry level was minimal, perhaps signifying the fact that most of these organizations hire a common pool of resources at the bottom of the pyramid and deploy them across different skills. Even though the individuals were being trained in "hot skills", there hadn't been enough differentiation built into the system yet from a pay perspective which tends to build over a period of time.
Most interestingly, we see the skill based differentiation peak at the senior individual contributor levels where you would expect large scale technology specialization. These organizations were building towards increasing the employees exit barrier as the proficiency levels of the employees increase. Surprisingly, after a certain level in the hierarchy the increasing trend of higher skill differentiation disappears. This is predominantly based on the fact that in large system integrators, the higher levels have a greater supply of business managers and project managers than technology specialists. However, given the intent that has been shared by multiple system integrators in public forums, the clear intent is to increase the no. of technology specialists that exist in the organization at the cost of the "general" managers. As we see this trend gain momentum, Aon Hewitt's point of view is that as these organizations build technology specialists, the trend of skill premiums increasing with hierarchy would become a lot stronger and would have much higher correlation.
Putting it All Together... Where are We Headed?
With the technology landscape changing at a dramatic pace and with technology lifecycles becoming shorter, it becomes imperative for technology organizations to be able to monitor the spread of their employee cost across different skills and be able to proactively realign themselves to the dynamic marketplace. Organizations would need to invest in being able to track employees not just at a department or job family level but at a skill level to ensure that the available funding is being directed to the right place. The way organizations look to secure market information will also need to change dramatically by focusing on more micro segregation of employees, i.e. at a skill level rather than at the job family level. Lastly, organizations need to balance their talent management imperatives with how they reward niche skills. The approach of "one size fits all" may not be relevant or feasible in the world of skills. Organizations need to identify levels in the pyramid which bring distinctive client value and look at ringfencing them rather than increasing the cost of these skills across the board. At Aon Hewitt, we believe that for organizations to be successful in this new world, they would need to be able to monitor data at the skill level while building in alternative ways of compensating employees with niche skills to ensure easy/effortless reallocation of costs as the client landscape changes.
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