December 16, 1998 Web posted at: 4:30 PM EST by Steve Alexander

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(IDG) -- As IT budgets are squeezed, managers are seeking inexpensive ways to reward employees. Although most managers agree that the following employee retention techniques alone will not keep employees on board, they also say that low-cost ideas such as these are an essential piece of the retention puzzle.

1. Flexible hours

2. Telecommuting

Many IT executives say flexible hours and telecommuting are among their most effective low-cost incentives. However, these two perks don't enjoy their former status as progressive measures in the war for talent, for two reasons. First, they benefit the company as much as the employee, and second, many employees do not use them.

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"I think of flexible hours and telecommuting as making better use of our overall resources. In effect, we have people that cover for us around the clock. It's a benefit to the company more than anything else," says Mike Natan, chief information officer at Reliance Insurance, in Philadelphia, and CIO of New York-based Reliance National Insurance.

Jerry Bartlett, senior vice president of human resources at American Century Investments, a mutual fund company in Kansas City, Mo., says only about one-quarter of his company's employees use flexible hours or telecommuting.

3. Praise

Praise by a manager still works wonders. Lynne Halpin, chief information officer and vice president of information systems at Detroit Edison, the Detroit-based electric company, says it's most important for junior IT people.

"They need to be acknowledged for having the right demeanor, answers, work process, and practices," Halpin says.

Adds Danny Murphy, director of information technology for the city of Phoenix, "Praise is always good as long as it's not overdone. If you praise everyone equally, what's the praise worth?"

4. Employees training employees

Training can be a low-cost incentive when employees teach each other. "Many companies could leverage their best talent to do technology transfer," Halpin says. "It has the advantages of reducing training dollars and giving smart people a forum for having their abilities recognized."

Natan suggests gathering over lunch for a technical discussion.

"It's very informal and has no cost, because an expert who works for you is sharing information about a topic with some colleagues," Natan says.

5. Clear career paths

Another retention device is to make clear for IT workers what is required to get promoted to higher-level jobs.

The Principal Financial Group has spent about two years clarifying its IT career paths. Suzanne Williams, senior training analyst at the Des Moines, Iowa, insurance and financial services company, says it has helped retention.

Natan agrees.

"The absence of a clear-cut understanding of what people have to do to advance is a demotivator, and will create problems in retaining people," Natan says.

6. Work with cutting-edge technology

Although some IT managers advocate letting people work on special or new technology projects as a reward, others point out that this can be difficult.

"It's a problem because you have to ration it," Natan says. "You have to make sure that everyone is getting some opportunity, and that the high-potential types are getting every opportunity."

It's also important to watch out for backlash from people who didn't get the opportunities they wanted.

Murphy tries to give IT people a chance to work on desirable projects by putting the employees in a pool from which new projects are staffed.

"We try to make sure people don't get pigeonholed into jobs like supporting a legacy system," Murphy says.

Some shops are also experimenting with letting workers choose their assignments.

"In my department, it has made a difference with key individuals, who now have more opportunities available to them," Williams says. "But I think it varies by individual whether that's effective."

7. Shielding IT from some users

One of the more controversial low-cost retention methods involves shielding IT people from unhappy users.

Natan does it through what he calls the "business advocacy group," a group of IT volunteers that handles interaction with users, such as gathering requirements and setting expectations. Those IT people become the lightning rods for the IT shop, allowing others to focus on their work.

"You have to be careful, because some people are going to enjoy a lot of interaction with users, and shielding them is not the right solution," Natan says. "But a lot of people are more interested in the technology. So, if people don't want to be bothered by users, I make sure they aren't."

But others see risk in this approach.

"Buffering IT workers encourages them to have their heads in the sand," says Jack Erdlen, Boston-based vice president of the human resources division at the IT personnel company Romac International. He does agree, though, that managers shouldn't let users "go directly to IT workers and pound on them."

8. Emphasize value of benefits package

If your company offers good benefits, make sure your employees know it.

"If you're being offered an increase from a potential employer, you may be able to see that you're better off with your current salary plus benefits," Erdlen says.

9. Supportive culture

No one denies the retention value of a culture that celebrates birthdays, anniversaries, and other special occasions.

"I can spot the managers and departments that pay more attention to those things," Williams says. "And when I look at IT exit interviews, I can pinpoint many times where we quite possibly could have held on to an individual if we had paid more attention to their personal needs."

But if the culture is initiated by upper management, it may not be as effective.

"I don't want to create something like that on a companywide basis, because then it becomes bureaucratic and depersonalized," Natan says.

10. Small gifts and cash prizes

Most IT executives say small gifts such as sports tickets, free meals, or on-the-spot cash awards of $50 are useful mainly as a way to recognize employees' accomplishments.

The trouble with those incentives is that they've become commonplace, Bartlett says.

What is important is to combine small gifts with public recognition.

"Like most folks, IT people like to be recognized by their peers," Natan says. "It's not the free dinner that's important, but that the IT person is recognized in front of their folks. Recognition is a motivator, and lack of recognition is a real demotivator."

Small cash awards are not a strong enough incentive to promote retention by themselves, Halpin says.

"As part of an overall comprehensive management program, yes, spot awards work," Halpin says. "But if you've got to work for Attila the Hun, somebody handing you check for $50 when you're working 80 hours a week in an ungratifying situation is like rubbing salt in a wound. You can't buy loyalty."

Incentives are just part of the compensation picture

Can low-cost incentives compete with sky-high salaries?

Although noncash incentives remain a key way to retain IT workers, managers say some have lost their appeal at a time when big salaries are luring employees away.

"The little things don't hurt anything, and they may help retention," says Danny Murphy, director of information technology for the city of Phoenix. "But they aren't the panacea that they might have been at one time. The big thing right now is simply salaries."

But some IT managers do see value in low-cost incentives. They can help keep employees satisfied enough that they won't bother to look for another job and get a higher-salary offer, says Mike Natan, chief information officer at Reliance Insurance, in Philadelphia, and CIO of New York-based Reliance National Insurance.

"The secret here is to keep people from getting into the [job-seeking] game. If you can avoid that, then it doesn't matter what the other salaries are because people aren't going to make those comparisons," Natan says.

Jerry Bartlett says low-cost incentives still work, provided they're used in the right way.

"They're part of a total package made up of compensation, low-cost incentives, and personal development. People buy into all of the package," says Bartlett, senior vice president of human resources at American Century Investments, a mutual fund company in Kansas City, Mo.

Steve Alexander is a free-lance writer in Edina, Minn.