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CONSULTING
Dot-coms revamp salary landscape
By Eve Epstein
LIKE MANY IT WORKERS job-hunting in the past year, John Tawadros found that the tight labor market offered many
lucrative opportunities. In the end, his choices boiled down to taking a job as a project manager with an established
high-tech giant, which offered a $20,000 signing bonus as a sweetener, or going with a newer, smaller dot-com.
Although the signing bonus from EMC, the Hopkinton, Mass.-based builder of storage infrastructures, was awfully
tempting, Tawadros wound up choosing a job with iProspect.com, a 20-person company in Cambridge, Mass., that works
with online clients to help them improve their ranking in Web searches. Five months after turning down that signing
bonus, he has no regrets.
"I look forward to coming to work every day," Tawadros says.
Like many that migrate to the dot-com environment, Tawadros was lured away from an established company. The good
news is that for many like him, there's more to selecting a company than higher salaries and unbelievable stock
options. But the more sobering news for IT recruiters and managers at traditional companies is that dot-com fever
is going to have a lasting impact on the compensation landscape.
The dot-com difference
Now director of client services at iProspect, Tawadros had worked for multimedia and conference technology developer
PictureTel, in Andover, Mass., before making the switch.
When looking to move on, Tawadros found that the salary and bonus packages were roughly equivalent between iProspect
and EMC, although the signing bonus was unique to the bigger company. But stock options were certainly part of
the picture at iProspect, which has not yet gone public but does hold the allure of potentially huge payoffs.
What factors create the dot-com difference that has been luring IT staffers and managers away from more traditional
companies? Is it straight salary, the chance to become a millionaire if stock options pay off once a fledgling
company goes public, or the chance to work in a hot field with cutting-edge or bleeding-edge technology?
All of these factors are playing a role, according to InfoWorld's 2000 Compensation Survey. Our survey of more
than 3,200 IT professionals identified that both the financial and organizational differences between dot-coms
and traditional companies are a factor for those who are making the move.
For Tawadros, working in a small, entrepreneurial environment made the difference.
"When I came to PictureTel, I was really just a number," Tawadros says. "It was really the difference
between leaving a big company and coming to a start-up."
As a result, the dot-com difference may bring some permanent changes to the IT employment landscape, even if the
current turmoil in high-tech stocks continues and puts a bit of a damper on the dot-com mystique, according to
experts.
"It really is a kind of transformative event, a phenomenon," says John Challenger, CEO of outplacement
company Challenger, Gray and Christmas. "There are a lot of people who have said, 'I don't want to miss this.'
"
Changing salary baselines
In the face of dot-com competition, what should IT recruiters, managers, and human resources departments consider
regarding their compensation offerings? For one thing, they can't ignore the basics, as InfoWorld's survey suggests.
The stock options at dot-coms -- with their Who Wants to be a Millionaire lure -- are certainly creating waves.
But straight salary adjustments may also be a factor, our survey indicates. More respondents at Internet companies
are making salaries at the higher end of the scale (see Comparing compensation).
Dot-coms almost have to offer higher salaries than traditional companies, says Kara Gray, who started Preferred
Solutions, a Las Vegas-based recruiting company, with another founding partner three years ago. Preferred Solutions
finds IT and other talent for dot-com start-ups, particularly in the business-to-business e-commerce arena.
Founding partner Rachel McKee agrees.
"I think the competitive salaries have really shot up in the dot-com world in the last two years," McKee
says.
In addition to more six-figure salaries, the InfoWorld survey found that more dot-com respondents are receiving
higher-percentage raises and bonuses -- and more feel they are compensated fairly than do those at traditional
companies (see Comparing compensation).
Some traditional companies are taking notice of the salary trend.
Staples, the office supply retailer, used to rely on stock as a lure for IT recruits, says Carl Lopes, director
of employment at Staples, in Framingham, Mass. He agrees that base salaries at dot-coms have "been larger,
typically," but that is changing as brick-and-mortar companies such as Staples raise their salaries to catch
up.
"We have found that we need to be very competitive with dot-coms," Lopes says.
The company is now offering salaries in the $65,000 to $85,000 range for senior Web developers with three to five
years' experience -- that's $10,000 to $15,000 more than Staples was offering for the position two to three years
ago.
Keeping up with the ever-escalating salary trends can seem like an Alice in Wonderland task, in which every step
forward only lands you back where you started in the overall market.
SEI Information Technology, a large Chicago-based IT consulting firm with a 30-year history, was offering last
fall $55,000 plus a signing bonus of $2,000 to $5,000 to new IT recruits just out of college. And this year, as
a new crop of recruits hits the employment market, the company will likely offer more, explains Lonna Braverman,
SEI's IT recruitment director. That's because there was so much competition for the recruits last year, the company
wasn't getting as many bites as anticipated.
SEI will now offer $150,000 for a very experienced Web developer with skills that will help SEI build its business,
particularly somebody who has e-commerce or ebusiness experience, Braverman says. That's $20,000 to $30,000 more
than the company was offering just a little more than a year ago.
Skyrocketing stock options
There's no question that for dot-coms, a big part of the lure is stock options.
"That's the first question out of their mouths: What are your plans relative to an IPO?" says Glen Bingham,
president of Allmeetings.com, a Henderson, Nev., corporate meeting-planning Web site that launched about a year
ago. Bingham says job candidates are always interested in his company's stock option plan.
InfoWorld's survey found that 59 percent of respondents at Internet companies are receiving employee stock option
plans, compared with only 28 percent of those at traditional companies (see Evaluating hard assets vs. potential
payoff).
For Allmeetings.com, stock options are an important part of the compensation package. Although the company does
have a 401k plan, it doesn't offer matching.
"I think our take on it is, given where we are in the cycle of things, our stock options are really our match,"
Bingham says. "[But it's] one of those ones where you have to be careful and tell them, 'No sure bets in this
deal,' and, 'We hope that it happens somewhere in this time frame.' "
Balancing benefits, stability
Although the take on dot-com recruits is that they are more willing to take risks, InfoWorld's survey suggests
that people working at start-ups and those at established companies are both looking for some stability when it
comes to certain standard benefits offerings (see Motivations and satisfaction).
Preferred Solutions' McKee says she still believes that although Internet start-ups have to offer more in salary
and stock options, they have a little more leeway in benefits.
"I think mostly what people are looking for is stock, but health benefits can vary on a wide scale. People
are taking a risk when they come; so if they have to pay for their own health insurance out of their pocket just
to get shares, they're willing to do that," McKee says.
Many traditional companies use stability as a key selling point when talking to recruits, and some say they are
seeing more success with this pitch as recent stock market ups and downs call the future of smaller start-up companies
into question.
"It sells tremendously well," says Steve Baraban, technical recruitment manager at Staples. "It's
been especially [true] recently, but going back a little further, it's been a great sell because who else out there
can point to a parent company with a 13-year history?"
Wells Fargo, the San Francisco-based bank that started out as a stage coach service delivering mail and cash in
1852, has also used stability as a lure for IT employees. Jean Bourne, senior vice president of human resources
for Wells Fargo's Internet services division, says some employees who left the company for dot-com start-ups have
since returned.
The defectors who came back missed things like "a well thought-out business plan, an experienced management
team, and having the funding of a larger company," Bourne says.
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