Monday, August 04, 2008

Developer Compensation: The New Reality?

The compensation plans we have been designing for our later stage software clients have become increasingly light on employee retention and incentive features, such as stock option grants. The trend is an inexorable one, best explained by one client as follows: "Software engineering has evolved from being highly prized to being just another skill set, and compensation has been adjusted accordingly."

In contrast to emerging industries like clean tech and biotech, the skills needed to scale a software business are widely available in many parts of the world. Recruiting employees is no longer driven by the need to attract specialists from a scarce candidate pool; now, it is largely driven by cost. (This is not great news for Canada, once the near-shoring alternative for the US, unless our dollar take a tumble).

Where does that leave employees? One HR professional summed it up: "Software developers are in the same position as automotive industry workers 20 years ago. They are frustrated that their skills no longer garner a premium, yet hamstrung by few options currently available."

In this new software reality, how SHOULD compensation schemes incent software employees? We're working on it.