Accelerating IT migration threatens to decimate Connecticut businesses

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

The incorrect assumptions were that productivity would plummet and lead times would suffer. Surprisingly, this did not happen and in many cases productivity even increased. Why? Let’s look at the reasons…

The Open Floor Plan Fallacy

Unfortunately, too many companies have followed the fad, perhaps without reading all the research first. The open floor plan facilitates higher levels of collaboration, but it also significantly hinders productivity during times when individual workers need a quiet space to do their jobs.

The overwhelming majority of big businesses in Connecticut aren’t Google, Twitter, or Facebook. Some of the largest companies represent the insurance, high-tech manufacturing, pharmaceutical and financial sectors. These are some of the most regulated business categories in the United States. IT systems in these industries do not have the luxury of being able to drastically change direction on a whim due to complex business and regulatory requirements.

Studies have been carried out, some dating back more than five years, which show that the introduction of open space will cause an immediate 20-30% LOSS of productivity; exposure to additional noise levels, exposing individual workers to ALL conversations in their work area, destroys concentration and makes concentration 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 employees will spend 36 hours a week wearing noise canceling headphones and being productive is a losing proposition.

A 2018 article by Ethan S. Bernstein and Stephen Turban, “The Impact of the ‘Open’ Workspace on Human Collaboration,” documents two studies conducted that indicated a dramatic reduction in face-to-face interactions, potentially up to 70%, and a significant reduction in productivity. In fact, an article published in Working Capital Review indicates that up to 13% of departing workers cite open space as a contributing factor.

When the pandemic sent workers home, the noise dropped significantly. Even though workers had to deal with children or their spouses working in the same area, the number of simultaneous conversations dropped from 30-50 to 2-3. If they had the ability to isolate themselves in spaces separate from other members of their household, their productivity increased significantly. With the effective use of technology, work continued and productivity increased.

The unintended consequence

The effect of the success of 100% working from home has been felt nationwide. Many companies have been smart enough to recognize that they can hire IT people from all over the country and have them contribute meaningfully to their business. It changed the market. While many Connecticut businesses assume they are paying market rates for computing, they actually use an algorithm that calculates market rates “for Connecticut”.

Unfortunately, this geographic adjustment factor no longer applies to the free market, and their failure to recognize this has sparked a migration of higher-level IT personnel to positions that pay market rate based on the value of the work, regardless of their physical location. .

The irony of this migration is that it will be a boon to Connecticut state tax coffers as they move on to much higher paying positions while remaining Connecticut residents. So tax revenue from income increases, but if companies don’t get smart, there will be a horrific effect on profits and potential bankruptcies for small and medium-sized businesses.

Unfortunately, many companies are willing to play the penny-wise, pound stupid card to retain staff. The likely consequence is that these companies will continue to lose senior executives, along with years or even decades of intellectual capital that allows them to be highly 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 lost business domain knowledge. It will also likely lead to delays in delivery schedules that are always aggressive, as forward-looking tech stacks are a big differentiator in the market today.

Shareholders will not appreciate this.

Why Computing Is Different

Unlike industry-specific skills, eg insurance actuary, underwriter, aerospace engineer, pharmaceutical chemist, computer skills are easily transferable across industries. So Pfizer is not only competing with Moderna or AstraZeneca, they are also competing with Raytheon, Cigna and Google for the best resources. This presents much greater opportunities for transition to these employers.

The deadline

It started slowly around July 2021. The pace is picking up quickly, and at the current rate it will likely reach critical mass between April and June 2022.

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

Some will attempt to use one-time prompts to fix the problem, but while it may give them a short respite, it won’t solve the problem. In fact, it may cost them even more as there might be those who might bide their time to see if it happens, while engaging in research, to take up a new position after receiving the incentives.

Connecticut’s business community faces a tsunami of exodus of high-level IT resources if they don’t step up. The cost of replacing these resources will far exceed the cost of adapting them to market and months of productivity will be lost. Tax coffers will grow, so these businesses shouldn’t expect much help from the state of Connecticut. Adjustments to market rates may hurt short-term earnings, but will likely mitigate long-term downturns.

So, Connecticut businesses: your dice. Don’t shit.