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Managers turn away from retention bonuses for Y2K

February 8, 1999
Web posted at: 6:39 p.m. EST (2339 GMT)

by Ilan Greenberg



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(IDG) -- As the deadline for completing year-2000 projects nears, year-2000 specialists continue to rake in rewards from companies that want to make sure specialists stay happy until the projects end. But many companies are moving away from using retention bonuses -- once touted by some as a prime solution to the year-2000 staffing crunch -- in favor of other staff-retention strategies.

"The companies I've worked with are turning away from the bonus approach," says Jerry Costello, the president of ERG, a Redmond, Wash.-based recruiting firm with extensive experience in placing year-2000 professionals. "[Instead,] companies are offering more money [for year-2000 specialists] than for other categories -- we're talking about 25 percent more."

Costello says IT managers face difficult decisions when confronted with star staff members who, aware of the increasing demand for year-2000 expertise, ask for bonuses in return for promises to stay on the job, at least through the turn of the century, and sometimes beyond. Although some individuals do get what they ask for, companywide year-2000 retention bonuses are increasingly rare.

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One reason is simply timing. Even at companies that designed bonus programs specifically targeted at retaining year-2000 workers, it's now too late for new workers to be eligible for many of these programs. Many of these companies initiated their bonus programs several years ago with an eye toward retaining employees for the long millennial stretch.

At this point, IT managers say, the return on investment is rapidly diminishing: Even a sizable bonus can't compete with the permanent pay raise a year-2000 worker can get by jumping ship at this late hour.

A second reason that year-2000 retention bonuses appear to be falling out of favor is that they haven't always worked well.

"We set up a program a couple of years ago," says the director of information services at a major financial services company in New York. "We gave a $30,000 bonus for those who agreed to stay on until 2000. But you know what? Good people left anyway for the reason that the bonuses [couldn't match] the signing bonuses that firms were giving to experienced Cobol programmers."

The director cites other, unanticipated problems with the program. Some employees turned down promotions to continue to be eligible for the bonus program; certain departments and projects found themselves outside the bonus loop; and struggling employees who otherwise might have looked for a new job were encouraged to stay.

For some of these very reasons, many companies never engaged in a year-2000 bonus program at all. Often, these companies shied away from bonuses because of the difficulty in assessing which staff members should be considered strictly year-2000 workers and which members had primarily other responsibilities. In addition, some corporations balked at the expense.

"Even if you did identify the 50 or 100 people who did year-2000 work, you need to devote a significant chunk of money until it becomes exorbitantly expensive," says Jeanne Koch, a systems manager in the systems and engineering department at The Washington Post, in Washington. "There are also people who are critical to the business who are [not necessarily] working on year-2000 issues, and we don't want to discriminate against them."

Instead, The Washington Post gives bonuses for earning various technical certifications, with increased bonuses awarded after one year.

NationsBank gives bonuses based on a companywide recognition program, but it balked at a year-2000-specific bonus plan because of the inevitably high turnover in IT, according to Bob Large, executive director of year-2000 projects at NationsBank, in Charlotte, N.C. Instead, Large says, the giant bank retains year-2000 employees through its general efforts to create a rich work environment.

Despite these problems and the dwindling time, bonuses may still be a viable way for some companies to hold onto their crucial year-2000 workers -- especially those workers who have been with the company for long enough that they didn't benefit from the recent boom in year-2000 salaries.

"It might be the only effective tool available to some companies," says Philip Murphy, a senior advisor at Giga Information Systems, in Norwell, Mass. "Retention continues to be a big concern, especially as a lot of this work has turned internal. If you're working alongside a consultant making twice as much, you might decide you are unhappy."

And some companies may decide it's not too late to buy a happy face by giving out bonuses.

Alternatives to year-2000 retention bonuses

  • Bonuses for other achievements, such as certification
  • Salary increases for all year-2000 workers
  • Salary increases for key individuals
  • Rewarding work environment

Ilan Greenberg is a free-lance writer in San Francisco.

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