Financial institution technology departments are facing a talent crunch at what may be the worst possible time.

Recruitment in the competitive technology world, a constant challenge, has been exacerbated by mega-projects related to year-2000 software and preparations for the unified European currency, the euro.

But experts say those near-term considerations mask a deeper, intractable problem likely to affect technology-driven businesses into the next century.

"We don't think it's a temporary situation," said Avron Barr, co- director of the Stanford Computer Industry Project, which has 20 corporate sponsors including Citicorp. "There is a worldwide talent shortage, which is a long-term situation."

"There is a certain amount of software talent," he said, and banks must bid for it against companies inside and outside their industry that are similarly under the gun.

"Whether that talent works for Microsoft or Citibank, it's the same talent," Mr. Barr said.

Global demand for programmers is increasing by 15% a year, according to the Stanford project, a software industry research effort at Stanford University funded by the Alfred P. Sloan Foundation.

U.S. jobs related to information technology will increase at twice the average rate for all industries between 1996 and 2006, according to the Commerce Department's Economics and Statistics Administration.

Meanwhile, there is reason to worry about the supply of newly trained people to fill these jobs. Between 1986 and 1994 the number of U.S. students graduating with computer science degrees fell by 40%, according to the Economics and Statistics Administration. There are 50,000 computer science and engineering graduates this year, the agency said, but more than 250,000 unfilled information technology jobs.

Salaries are escalating to attract and retain these skilled employees.

The London Sunday Times reported May 24 that American companies were staffing up for the year-2000 problem by offering British programmers more than $7,000 a day and paying for weekend flights home on the Concorde to see their families.

Such measures may be misguided, said David Foote, managing partner at Cromwell Foote Partners, a human resources consulting firm in Stamford, Conn. "You can't buy your way out of a staffing crisis," he said.

Extreme pay and reward tactics won't still work in 12 months' time, Mr. Foote said.

"You have to treat everyone the same. If you treat those who are coming in differently than those who are already there, you will foster a 'have and have-not' feeling among long-term employees."

Besides, there are other ways to reduce turnover below the prevailing 20% to 25% a year, Mr. Foote said.

Technology workers "gripe about getting no respect, being jerked around, and having no cool stuff to play with," he said. They want challenging work, respect, and "psychological ownership" of their jobs.

And though money has its uses, Mr. Foote conceded, working conditions such as flexible schedules are important-and often overlooked.

"People are seeking more balance," he said. "By nature, IT people are adaptable and fluid."

Customized pay/reward schemes have been successful, Mr. Foote said. Employers get around inflexible salary scales with a practice called broadbanding, which lets workers with more skills double or triple their salaries without a change in title.

Comerica Bank's chief information officer, John Beran, also emphasized that pay is not the only issue. "If you only compete on dollars, you lose," he said "If you can create a (favorable) environment, it's worth more than just dollars."

Comerica offers low mortgage rates and encourages teamwork skills.

Laurence Sheehan of the Cambridge Assessment Center in Wellesley, Mass., said that to recruit better, banks must define their cultures better.

Bank cultures have been changing in recent years, said Mr. Sheehan, a former international human resources director at Chase Manhattan Bank. In some ways banks are looking more like software companies, he said-with casual dress codes, for example.

"Know who you are and your style," Mr. Sheehan advises bankers. "When you interview, recognize the individual's style - and communicate that that style will be rewarded."

To improve the match between staff needs and skills, more banks are hiring temporary workers, in effect trying them out before taking them on full-time.

"Over time, the cost of hire will be less if you spend money on the front end first," Mr. Sheehan said. "Those who like the environment will not be pressing the organization for more pay and benefits."

Mr. Foote of Cromwell Foote Partners pointed out that different types of information technology workers seek different rewards. Some are business technologists, business-oriented problem solvers with technology knowledge, he said. Others are technical specialists with specific programming or systems skills.

Business technologists seek long-term rewards, Mr. Foote said, while the specialists respond well to short-term rewards and benefits.

"Companies need to develop different rewards and incentives for the two groups," he said.

Business technologists will be most in demand over the next few years. They serve as project managers, line-of-business strategists, and analytical advisers, and are good at managing relationships.

"A big part of the job is technology," Mr. Foote said, "but it also requires relationships, communication, trust and being a good marketer."

Banks should invest in business technologists but resist the temptation to recruit them from their own technical staffs, he said. The failure rate of such converted workers is 65% to 70%, Mr. Foote said, compared with an 87% success rate for recruits from business units or consulting firms.

"The world is moving to information workers rather than IT workers," he said. "Projects are failing not because of the technology, but because of the people."

Jeff Hunter, an account manager at Spectrum Concepts Consulting Corp., a technology recruitment firm in New York, said there is a clear trend toward hiring multitalented technologists.

"Companies like Merrill Lynch and Bankers Trust are looking for someone with financial knowledge and good communications skills," he said. "They're looking for the whole package, someone who can contribute from day one, with technical and interpersonal skills."

Spectrum's New York office places 130 to 150 consultants a year, mostly in financial service companies.

"The majority are not born in this country," said Mr. Hunter. "The demand for talent has totally exceeded what we have here, so we're moving to recruit overseas."

To free clients of paperwork, Spectrum sponsors the foreigners-from Europe, India, and elsewhere in Asia- for the visas or green cards they need to work here.

Spectrum plans to expand to Toronto and London. "We're going global, because a lot of our clients are global," Mr. Hunter said.

Ultimately, said Mr. Barr of Stanford University, a bank's attitude may be its best recruiting asset. In particular, banks must get serious about making software a core competency, he said.

Companies that do not do a good job at fielding new software-based products and services will go out of business, Mr. Barr said. "A bank has to decide to stay in business or to sell out to someone who's serious," he said.

"Some companies know that their future depends on software," Mr. Barr said. "But some don't."

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