TRENDS IN RETENTION STRATEGIES FOR HOTSKILLS

1. TRENDS IN RETENTION STRATEGIES FOR HOTSKILLS March 19, 1998 Daryl Johnson Ernst & Young Gail Evans The Wynford Group CANADIAN COMPENSATION ASSOCIATION Retention Strategies for Hot Skills - G. Evans & D. Johnson

2. What the ‘HOT SKILLS’ Are OIL & GAS • Exploitation • Rotating Equipment Engineers • Process Engineers • Exploration - Prospect Generator • Land Records Administration • Engineering Technologists Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

3. What the ‘HOT SKILLS’ Are INFORMATION TECHNOLOGY • Progammers • Network and INTERNET • Software Developers • Integrated Business Application - • SAP, PeopleSOFT, Oracle • Systems Architects • Legacy Systems - Y2K - COBOL Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

4. What the ‘HOT SKILLS’ Are OTHER AREAS • Project Managers • Accountants, Controllers • Tax Accountants • Marketing/ Business Analysts • Human Resources • Compensation • Construction/Trades Journeymen Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

5. What the ‘HOT SKILLS’ Are ADVANCED TECHNOLOGY • Hardware Engineers - Telecommunications • Electronic Engineers • Specialized Research Scientists - Biomedical • Drafting/Graphic Designers Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

6. Why These Skills are Hot • Restructuring of organizations and work • Core Competencies - basis for competitive advantage • Lack of graduates in 5 - 8 year range • Changing Technology Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

7. You think there’s a problem now … North American Information Technology Work Force 1994 2M workers 2005 3M workers North American Job Vacancies Today 205,000 Year 2000 290,000* CANADIAN I.T. Job Vacancies 1996 12,000 1998 20,000* *number under upward revision Sources: U.S. Office of Technology Policy Canadian Software Human Resource Council Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

8. Critical Issues for Retaining Technical Employees Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

9. Retention TrendsCompensation & Rewards • Employee Referral Bonus • becoming increasingly common • Signing Bonuses • recent graduates • seasoned specialists , in-lieu of bonus, stock etc. comp • Special Hot Skills Bonuses -e.g.: SAP, Project Mgmt, Eng. Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

10. Frequently Used Reward & Recognition Programs Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

11. Key Components Of Incentive Compensation • Relevant to individual or team • Alignment of goals and outcomes • Influence on outcomes • Balance of risk and reward

12. IMPACT OF REWARDS Results • Short-term motivation • Specific behavior reinforced • Rewards specific performance RESULTS Effort Valued Reward Short Term Incentives Specific Goal Results • Retention of valued employees • Motivated by intrinsic value • Alignment of goals • Empowered employees • Continuing performance RESULTS Effort Longer Term Incentives Valued Reward/ Feedback Aligned Goals Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson © Gail E. Evans

13. Short-term Incentives • 60% of employers have short-term incentives in place. • 8% will implement in 1998. • Cash bonuses preferred • 30% Providing Profit Sharing • Common for professional employees and above. Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

14. Short-term Incentives • Rewards based upon performance : • of Company 60% • of individuals 50% • of team/BU’s 35% Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

15. Long-term Incentives • 30% already have in place. • 5% plan to implement in 1998. • Stock preferred approach. • Gradually being provided to lower levels. Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

16. Stock Plans • Stock options preferred • Also employee stock purchase & phantom plans • Rewards earned primarily upon individual performance, except Sr. Mgmt. • Company performance typically reflected in stock price. Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

17. Retention Bonuses • Hottest long-term trend • Particularly for long-term projects, R & D • Based upon: • time alone • achievement of specific performance targets e.g. budget, safety • Structure - payout in 2-3 years Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

18. THE EMERGING ORGANIZATION EXEC EXEC Coaches Mid- Mgmt Staff Functions Project Managers Project Managers Knowledge Workers Workers Core Staff Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

19. The New and Emerging Workforce • Greater Workforce Diversity • Aging Population • “Free-Agent” Employment Status • Home/Work Life Balance Increasing Priority • Increased Expectations of the Employment Relationship Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

20. The Social Contract OLD Job Security Benefits Career Ladder Income Big Office Other Perks A reasonable day’s work Loyalty and dedication Commitment Willingness to obey NEW Challenging Work Training and learning Fair Compensation Work in proportion to remuneration Constant skills upgrading Honesty and loyalty Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

21. Poor project management Job restructuring Better opportunities Too many hours away from home Quality of life suffers “our industry is not a ‘sexy’ one” Lack of leadership/frequent change Lack of career direction More money Technology is not a high priority Opportunity to work as a contractor Internal opportunities Desire to work in a smaller, more entrepreneurial organization Why Companies Lose Hot Skills Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

22. IT Best Practices: Career • Effective technical recruiting methods include website postings and partnerships with universities/technical institutes • T&D opportunities are considered a high priority • Longer-term career paths are a concern for those dedicated to projects Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

23. IT Best Practices: Job Content • Change of focus from job to role • Performance Management processes now often multi-rater • Professional development opportunities and project assignments are increasingly replacing pay as important consequence of performance Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

24. IT Best Practices: Affiliation • The IT workplace is becoming more responsive to the balance between work and personal life • telecommuting • job sharing • part time work • IT titles are being simplified to reflect more dynamic, project-oriented roles • Increasing number of contract workers Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

25. Usage of Work Environment Strategies Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

26. Strategies For The Future • Cash is key • Control base salaries • Increased use of variable pay • Signing bonuses continue • Retention bonuses tied to performance • Alignment with organization • Career development opportunities Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

27. Reward Strategy Trends Role/Person-Based Pay Job-Based/Internally Equitable Pay • Relevant Market-Based • Pay for Development • Skill/Competency-Based Reward Customization • Personalized Risk Levels • Pay based on • Individual Value of Rewards ”One-Size-Fits-All” Trends in Retention Strategies for HotSkill by G. Evans & D. Johnson

28. ALIGNING REWARD STRATEGIES FOR KEY KNOWLEDGE WORKERS STRATEGIC ORGANIZATIONAL GOALS KEY SUCCESS FACTORS CORE COMPETENCIES COMPENSATION STRATEGIES DEVELOPMENT STRATEGIES KEY KNOWLEDGE WORKERS BASE PAY INCENTIVE PAY VALUED BY INDIVIDUAL EMPLOYEE • SATISFIED EFFECTIVE EMPLOYEES  THE WYNFORD GROUP