This is the autumn of my discontent

If you want to build a company that can really grow through a recession, and produce high-quality products that the market is screaming out for, then simply look after your staff. They are your company - treat them like family, and they'll reciprocate.

I’m an independent consultant. As such I have to keep work coming in otherwise I don’t get paid and my family starve. It’s a bit like being a contractor, but the assignments are shorter and a little better paid.

The market for my professional services seems to have dried up, so I’m trying to sell my other well-oiled skill set – J2EE architecture and development; basically, I have to go contracting.

This, however, has led me to discover something horrific about the current IT job market … there isn’t one.

I’d roughly estimate that compared to a year ago there are less than 10% of the contracting jobs available now, and the rates being offered are considerably less than they were a year ago. Can the demand for software development skills have changed that much in a single year?

Seeing this led me to look at the permanent job market. It seems to be growing, but again, the money being offered is considerably less than the offers of just a year ago. Are good staff suddenly less valuable?

Looking at the churn in the field of recruitment agencies is interesting. Some of the biggest and brightest have been consumed by the TMP behemoth. Others, meantime, have gone under, and new ones have sprung up like phoenixes from the flames. There seems to be a rather high number of recruiters at the moment. If you read between the lines it seems that some companies are trying to find each staff member from multiple recruiters.

So, the market for recruiters seems to be growing, while in real terms the amount of money being spent on developers is decreasing (lower salaries plus fewer contractors equates to a lower volume of cash in the market, despite the growing demand for permanent staff). This seems a little odd; we’re in for more changes here I’m sure.

So, what is going on with the market? Is it simple supply and demand?

There is no doubt that there is a global recession, especially in IT. This is bound to have an effect on the number and value of available positions. The only real response to a recession, though, is to increase the number of contractors in your company, not decrease them. If there is a recession, and it’s extended, then your company will start to shrink – that’s why it’s a recession; if you kept growing, it wouldn’t be a recession. If your company is shrinking, contractors are less expensive because you can get rid of them more easily and for a smaller cost. Okay, you pay a premium for contractors, but this is offset by lower overheads. It balances out until the contract isn’t much more expensive than a permanent member of staff.

So why are companies hiring more permanent staff than contractors? Why is the permanent market burgeoning?

Companies only hire more staff if they need to, and they only need to when they have too much work for their current staff to do. If you have too much work and you’re hiring more staff, your company is growing. If your company is growing and buying permanent staff, then the owners believe that it’s going to continue to grow – otherwise contractors would be the best bet for financial stability.

The current market attitude is being repeated across the US and Europe, therefore business leaders globally don’t really see a recession. They may see turbulence and restructuring, along with a market correction for their company’s perceived values, but they’re predicting growth, not recession.

So how do we explain the drop in salaries? That’s easy – greed and opportunity. With the slow torture of the contract market, contractors the world over are facing hardship. A lot of them are accepting any permanent position they can find, and they’re grateful for it – any port in a storm. Business leaders are taking advantage of this desperation to force down salaries. I’ve been told that salaries are down by more than 15% in New Zealand year on year. I’d suggest this is a conservative estimate. Contract rates are down by nearly 50% in places, and sometimes even more.

The perception is that the market is slow, and so people are more willing to accept a lower salary. When a contractor finally finds a contract they’re willing to work for peanuts. But this is simple supply and demand. There are a lot of contractors and very few contracts.

Who wins in the end? Nobody.

By not earning as much people will be more worried about their finances, and less able to concentrate on their work. They’ll be a less satisfied and, therefore, less effective employee. So, in this case, both the individual, and the company they work for, will lose out.

Ultimately the employer loses the most, though. When the market picks back up again – and it will – those staff members who feel they’ve been taken advantage of will just leave to work where they’re better paid. This will leave the company with fewer staff than they need and high recruitment costs to achieve equilibrium. While the staff members are sitting waiting for this day, they’ll provide considerably less benefit for their company than could otherwise be the case. The cost of this lost productivity to the company will probably be greater than the added salary figure that would cure the problem.

So, if you’re happy about your staff being unhappy and uncreative, please continue the way you’re going. Your company will eventually fold because your customers are no longer buying your low quality products from your miserable sales staff, and you can’t afford the redundancy costs from the staff that are leaving like rats from a sinking ship.

If, on the other hand, you want to build a company that can really grow through a recession, and produce high-quality products that the market is screaming out for, then simply look after your staff. They are your company – treat them like family, and they’ll reciprocate.

Dollery is a Wellington IT consultant. Send letters for publication in Computerworld to Computerworld Letters.

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