IT turnover rate has been low, but it could have serious effects.

Chapter Summary

Turnover among technology staff has varied over the past five years, but recently has been lower than state government officials believed.  We estimated the cost of technology staff turnover in FY99 and found it had the lowest total costs of the four occupations studied.  Despite the low turnover rate, qualitative costs of turnover can be serious and widespread, as technology workers run an important part of the state’s infrastructure.  When turnover does occur, compensation is a key factor.  From a risk-based perspective, turnover among technology staff should be watched primarily because of the potential qualitative costs associated with it.  Executive-branch agencies can monitor the effects of this turnover, and can invest in further problem identification to determine if cost-effective retention strategies should be developed. 

Turnover Rate Not As
High As Expected

We compiled an overall turnover rate for technology staff across 28 state agencies, and also analyzed transfers of staff between agencies.  We found technology staff turnover has not been as high in recent years as believed.  There has been a perception that “agency hopping” and turnover of technology staff have been very problematic for the state.  However, this impression was not based on an overall turnover rate for technology staff employed by the state, nor on knowledge of the costs associated with this turnover.  The perception may be due to the fact that a few agencies, individually, have experienced high turnover rates for technology staff

The IT turnover

rate was the

lowest of the

four occupations studied.

We focused our analysis on technology staff turnover in the 14 cabinet-level agencies.  The overall turnover rate for technology staff for all the cabinet agencies combined has fluctuated over the past five years.  Early retirements caused turnover to peak in 1995 at 22.8 percent when 46 individuals terminated.  It was 8.1 percent in 1999, when 17 individuals terminated.  This rate is below the average turnover rate for the state in general, which A&I computed to be 13.7 percent for 1999.  As discussed in Chapter 1, the fact that a rate of turnover is above or below average is not an indication of the costs associated with turnover.

Because technology workers have a unique ease in transferring among agencies within their jobcodes, we tracked the number of agency transfers.  We found there has been a small amount of agency hopping in the last two years.  We compiled available data for the two-year period 1998-99, and found 12 individuals, or 4 percent, in technology job classifications made lateral transfers from one agency to another.  Five of these individuals transferred from a cabinet agency in 1999.  If we include these 5 individuals in the cabinet-agency turnover for technology staff in 1999, the rate increases to 10.5 percent.[1] 

There has been a small amount of “agency hopping,” which increases turnover.

Individual Agencies May Have High Turnover

Turnover rates for individual agencies vary widely, with some having high rates of technology staff turnover.  However, this is primarily due to the small number of technology staff in those agencies.  The smaller the staff, the larger the impact one departing employee has on the rate.  Figure 2 shows the turnover rates for the seven cabinet agencies with larger technology staffs, for cabinet agencies with small technology staffs, and for non-cabinet agencies.  While the overall turnover rate for agencies with small staffs was 20 percent, five of these agencies had no turnover, and two had quite high turnover of 50 percent or more. 

Figure 2:  Turnover Rate by Agency, 1999
For Cabinet Agencies with Larger Technology Staff 

Agency

Employees Separated

Authorized Positions

Turnover Rate

Administration & Information

5

104

4.8%

Department of Employment

3

27

11.1%

Department of Family Services

2

12

16.7%

Department of Health

1

13

7.7%

Department of Revenue

2

8

25.0%

Game & Fish

0

9

0.0%

WYDOT

1

21

4.8%

Cabinet agencies w/ small technology staffs[2]

3

15

20.0%

Total Cabinet Agencies

17

209

8.1%

Non-cabinet agencies

3

27

11.1%

Total

20

236

8.5%

Source:  LSO analysis of SAO payroll data and agency-reported authorized position information.

Some agencies reported difficulty filling positions.

Agencies have experienced some difficulty in filling all of their authorized positions for technology staff.  Some agencies report they have been unable to fill positions for over 24 months, and this could result in the positions being legislatively eliminated.  Agency-reported estimates of vacancies show there has been an annual average of at least 20 vacant technology positions for the past three years.  For 1999, we found on average 26 of the 209 authorized positions were vacant, for a 12.6 percent vacancy rate.

Technology workers have slightly less tenure than state employees in general.  In 1999, 56 percent of technology staff employed by the state had tenure of five years or more.  For all state employees, 71 percent had tenure of five years or more, according to A&I.

Quantifiable Costs of Technology

Staff Turnover Are Lowest of Four

While aggregate costs are relatively low, costs per individual turnover are relatively high.

For this occupation, the turnover has been lower than believed, and the aggregate costs associated with this turnover were the lowest among the four occupations studied.  Nevertheless, costs per individual turnover were relatively high because of the high investment made in training individual technology workers.  Additionally, qualitative or intangible costs of the turnover of technology staff have the potential to be serious and widespread, affecting internal customers throughout state agencies as well as external customers. 

Training Costs Linked To Higher
Individual Turnover Cost

Using agency-reported information to estimate the cost of turnover for 13 technology workers in FY99, we estimate the cost to be about $286,000.[3]  If the 5 individuals who made lateral transfers in 1999 are added, the cost of technical staff turnover increases to $396,000.[4]  In terms of quantifiable costs, this is the lowest total turnover cost for the four occupations studied. 

State agencies typically cannot attract highly qualified applicants, and must invest in training new employees.

However, technology staff also had per turnover costs of about $22,000, which was the second highest of the four occupations studied.  State agencies invest heavily in the initial training of technology workers.  Most of the turnover costs, 58 percent, are due to training costs, which we costed for the first year of employment only.  Additionally, the long-term training investment that agencies make so staff can keep pace with changing technology is also lost when technology workers leave.  Our methodology did not include quantifying these costs. 

Agency estimates show the largest component of training costs is investment in informal, or on-the-job, training for new staff during the first year of employment.  We found this accounts for 81 percent of training costs, while formal training accounts for 14 percent.  There was widespread agreement among technology staff and managers that the state is generally not able to replace a technology worker with someone having equal skills.  Reportedly, this is because agencies cannot pay top wages to attract highly qualified applicants, and consequently must make a large investment in training.

The remaining costs of turnover, or 42 percent, were primarily related to costs incurred during times of staff vacancies.  The costs of contractors, temporary personnel, or overtime due to vacancies accounted for 30 percent of the total costs.  Costs for replacing terminated employees, plus administrative costs incurred when they depart, made up the final 12 percent of turnover costs.

Intangible Effects of
Turnover are Widespread

Not all costs associated with turnover could be quantified.  Turnover has impacts at many different levels of state government:  on the agency as a whole, on users within the agency, and on remaining technology workers. 

When IT staff depart, both technical skill and understanding of the agency’s mission is lost.

We asked technology managers and workers from many different agencies to describe the intangible effects of turnover.  They described how the loss of institutional knowledge hurts an agency.  For example, a technology worker at the Department of Revenue needs to understand the agency’s statutes, rules, and administrative policies in order to translate their content into the computer systems of the agency.  When a technology worker who is knowledgeable about both computer systems and the business of the agency departs, the productivity of the agency is lowered.

Turnover means users do not receive full service, and some work is left undone.

Furthermore, when an experienced worker leaves, either a vacancy occurs or a new employee takes over and undergoes training, but is not fully productive.  This results in users at least temporarily not receiving the level of support they should because technology staff are short-handed and can only address the highest work priorities.  Technology workers expressed that they simply are not able to address all the needs of their agencies, and certain projects do not get completed.

Increased stress for those technology workers who remain after a coworker leaves can eventually lead to more turnover within the same agency.  In turn, this can create a ripple effect that can be overwhelming.  Both managers and workers agreed that the loss of even one key technology worker could greatly increase the pressure on those that remain.  According to one manager, “It affects everyone immediately.  There is high stress as remaining technology staff spreads out to fill the void.” 

Technology Staff Have Opportunities to Make More Money

Wages are the strongest cause of IT turnover.

The information technology industry has been highly competitive nationwide.  This has resulted in plentiful opportunities for technology workers employed by the state to make higher wages by leaving Wyoming or by entering the private sector.  Although technology staff turnover has been lower than perceived, we found wages to be a strong cause of the turnover that does occur.  In contrast to other occupations, satisfaction with working conditions is often a reason technology staff remains with the state.  Additionally, the state’s distributed technology function has some drawbacks that increase turnover.

Technology staff view working conditions positively.

These opinions were confirmed by a focus group of technology staff we conducted for this evaluation.  In general, participants said technology workers remain at the state because of positive working conditions.  We found technology workers were satisfied with the hours and overtime required by their jobs, enjoy the independent work they do, and find satisfaction in providing assistance to users.  Technology workers expressed some non-wage concerns, such as dissatisfaction with aging equipment that is difficult to support, lack of standardization across agencies, and dissatisfaction with the willingness of users to accept change.  Further, some individuals expressed a degree of dissatisfaction with the support the information technology function in their agencies receives from upper management. 

Technology occupations have experienced rising wages nationally.

National Shortage of Technology Staff

In recent years, the information technology industry nationwide has been very competitive.  Some of this competition revolves around recruiting and retaining skilled technology workers.  We found an abundance of literature discussing a national shortage of skilled technology workers.  This shortage has caused wages in technology occupations to rise.  Because government employers do not link wages as closely with the labor market as private-sector employers, public-sector employers have a competitive disadvantage regarding recruitment and retention of technology staff. 

Most technology workers who ended employment with the state were no longer employed in Wyoming.

Wyoming Wages Below Those
of Surrounding States

Wages for technology occupations in surrounding states are higher than Wyoming’s.  It appears technology workers who leave the state are likely moving to other states for higher wages.  BLS data for the private and public sectors combined show that wage differences for technology occupations between Wyoming and surrounding states are substantial.  See Appendix D for detail.  Also, Central States Survey (CSS) data on public sector wages for technology staff show the state’s wages for 12 of 14 technology occupation benchmarks are below those of the six contiguous states.  See Appendix C for detail.

Research by the Department of Employment, Research and Planning Division (R&P) revealed that most technology staff that left jobs with the state are no longer employed in Wyoming.  Specifically, 64 of 92 technology workers once employed by the state were found to be no longer earning wages in Wyoming.  The data provided by R&P does not include self-employed individuals, and some of these individuals may have become self-employed.  See Appendix E, page E-5 for detail.

State salaries are not linked to private-sector wages.

Technology Workers Increase Wages
in Wyoming’s Private Sector

Research done by R&P further showed technology staff who remained employed in Wyoming increased their wages after leaving employment with the state.  Specifically, 14 of the 92 individuals remained employed in Wyoming in the private sector and earned an average of 10.8 percent more.  Presently, the state’s wages are determined by comparing them to public sector wages for surrounding states, and are not aligned with private sector wages.

Agency Hopping Not Pervasive

We found agency hopping is not a pervasive practice, and wage competition among agencies is minimal.  A total of 12 individuals made lateral transfers during the two years for which data were available, and eight of them transferred with a wage increase.  Regression analysis showed tenure and job classification, which are the basis for uniform wages, to be the most significant determinants of wages for technology staff.  Regression results also revealed that WYDOT pays slightly more than other agencies for technology staff.  See Appendix F for detail.

The distributed IT system results in agencies offering different opportunities to technology staff.

Wages are not always the reason technology workers switch agencies.  Agencies throughout state government offer different opportunities to develop technology workers’ skills.  The state’s distributed technology system spreads technology staff among many agencies, and agencies do not always have a promotional opening to offer a technology worker.  We found four individuals made lateral transfers for no wage increase.  They may have done so for working conditions issues, such as personal development or because they desired new challenges.  We also found six individuals made promotional transfers over the two-year period we examined, with five receiving a pay increase. 

On average, technology staff have received wage increases.

Agencies can give lump-sum bonuses to technology staff to improve retention.

Some Proactive Changes
Have Already Been Made

HRD, in response to and in conjunction with the employing agencies, has taken several steps to reduce turnover among technology staff, such as increasing wages, allowing more bonuses, and restructuring the career ladder.  It is possible these moves have helped the turnover rate remain relatively low.

The state has increased wages for technology staff on average over the past three years.  Our analysis of SAO payroll data shows that between 1996 and 1999, the average pay for all non-supervisory/non-managerial technology staff increased from $2,411 to $2,839 per month.  This is an increase of 17.3 percent. 

The state has created avenues to give technology staff bonuses or raises.  In the 1998 Budget Session, in response to agency testimony, the Legislature authorized agencies to give technology staff lump-sum bonuses, for the purpose of improving retention.  Additionally, the new broad-band compensation system allows agencies to give retention bonuses and performance increases, provided agencies can fund them internally.

Positive changes to the career ladder may have also stemmed turnover, although more steps may be necessary.  In 1996, HRD worked with an advisory committee of technology managers to reconfigure the career ladder for technology occupations to standardize job classifications across agencies and to increase promotional opportunities for technology staff.  However, the career ladder is still based on years of experience, not purely on demonstrated skills, and IT managers reported not all individuals doing information technology work are in IT job classifications.  Technology managers believe they would have a broader pool of job applicants if the career ladder were skills based.   

Turnover Costs Could

Be Shifted to Wage Costs

Technology staff run critical infrastructure, creating the potential for high-risk turnover.

Better alignment of wages with the private sector may improve retention of technology staff.

Turnover cannot be eliminated completely, but selected retention strategies may decrease it somewhat.  In our judgment, neither the turnover rate of technology staff nor the associated quantifiable costs appear excessive.  However, the qualitative costs associated with technology-staff turnover are potentially high, as infrastructure critical to state government operations could be impacted. 

In the case of technology staff, better aligning wages with the private sector may be an effective retention strategy.  Although public-sector wages may not always achieve parity with private-sector wages, alignment with the private sector can be a goal.  If not aligned, government pay could be too low or too high.  If government pay is too low, there will be increased turnover costs; if it is too high, government incurs unnecessary salary expense. 

Currently, changes in how the state determines wages are in progress, and A&I anticipates that in the future, Wyoming’s private-sector wages will be incorporated into the determination of the state’s wages.  This could bring wages for technology staff into closer alignment with Wyoming’s private sector, likely decreasing turnover. 

Policies To Decrease

Internal Wage Competition

In this case, curtailing internal wage competition could decrease turnover among those individuals who switch agencies.  Professional literature on compensation systems speaks of the principle of “internal equity,” meaning those doing similar work should be paid similarly.  If an internal equity is not built into a compensation system, an employer could create wage competition against itself.  The distributed technology function, along with the new broad-band compensation system, creates potential for wage competition among state government agencies.  However, A&I reports it is in the process of assisting agencies to develop standard pay zones for technology occupations. 

Non-wage strategies, such as a “grow your own” program, could be  effective.

HRD could give employing agencies latitude in personnel rules to take actions in areas that could decrease technology staff turnover, but do not involve increasing wages.  Additional incentive structures such as signing bonuses, add-ons for acquired skills, or recruitment bonuses could be developed.  Some states experiencing high turnover of technology staff have used “grow your own” programs to increase the applicant pool and to increase retention.  These programs identify non-technical staff who have demonstrated both ability and a preference for state employment.  They provide technical training to enable these employees to qualify for technology staff positions.

Next Steps to Decrease Turnover Costs

A&I, with agency input, is best positioned to evaluate the costs and benefits of different retention strategies.

The cost of retention strategies, such as the ones we identified or others, must be weighed against the cost of turnover in order to decide how to invest resources.  This would require systematic problem definition and cost identification regarding technology staff turnover.

This type of exercise is uniquely challenging for the information technology occupation because it involves many agencies, making it difficult for a single agency to conduct this type of analysis or lead other agencies in making uniform changes.  We believe A&I, with input from the employing agencies, would be the best entity to accomplish this. 

Our research represents only a snapshot in time.  We believe the analysis we did shows turnover in this occupation has potentially large effects.  If the executive branch embarks on a process to strategically monitor turnover facts for use in management decisions about personnel, technology staff should be included.  This process would allow managers and policy makers to see changes in the turnover rate and costs of turnover, as different retention strategies are used.  Legislative involvement may be needed to implement any retention strategies that involve increasing wages.