Think the tight tech labor market is out of hand? Try this one on for size: IXL Enterprises Inc. plans to spend most of a $15 million 2000 media budget on advertising that has as much to do with employee recruitment and retention as it does with its brand.
The 2,834-person company, which specializes in Web strategy, design and technical development, finds itself locked in a battle with such strategy companies as McKinsey & Co., technology companies such as Cambridge Technology Partners and Andersen Consulting and advertising boutiques such as Agency.com in the bid for e-commerce business. It sees recruitment advertising as a way to get ahead in the game.
And Atlanta-based iXL is not alone in going to extreme measures for manpower.
From giants Electronic Data Systems Corp. in Plano, Texas, which this month opened a customer service center in far-off Nova Scotia, Canada, simply because it could staff the operation there, to Xchange Inc. of Boston, which has planted stories in the Boston business press aimed at making it sexy to prospects, recruitment marketing is the big dog wagging the tail at e-service companies these days.
"In our business, where there's such a high premium placed on the quality of your people, recruiting is marketing and marketing is recruiting," said Jim O'Malley, director of strategic staffing at Lante Corp., Chicago. One of O'Malley's top projects? He's working with marketing and communications VP Rick Gray to hire someone dedicated to marketing the company to prospective employees.
The challenge for marketers is staggering. According to a Lehman Bros. study released Aug. 14, employee turnover among technology consulting and computer service companies was 25% for the second quarter, up from a 21% turnover rate in the first quarter and 18% in the fourth quarter of 1999.
That's the trend that has put human resources marketing at front and center for the marketing departments of Internet service companies.
Jonathan Ballon, chief marketing officer for iXL, said there are probably 25 public companies and 25 private companies competing for its share of the e-services market. But there's plenty of business to go around. Worldwide Internet service spending, which was $26.3 billion in 1999, will enjoy a 40% compound annual growth rate to reach $139.2 billion in 2004, according to the research firm IDC Inc.
Rather than working on landing new clients when its phone is already ringing off the hook with prospects, $500 million iXL is concentrating on bringing quality employees through its door, Ballon said.
"Because of what we do, we can't just recruit out of school," Ballon said. "On average, our people are 34 years old. And we need to keep it at that level. We see a lot of opportunity in the market to lure smart professional people, and not lure them just with the idea of getting stock and getting rich but to lure them with the type of work they'll be getting here."
The nature of the campaign has not been finalized, but iXL plans to launch recruitment advertising in the third and fourth quarters. New York-based interactive agency GroundZero has been retained to create and manage the campaign, which will have a significant Internet component, Ballon said. It is expected the advertisements will showcase select employees as stars and talk in simple terms about Internet challenges.
IXL's move to concentrate on recruitment is a contrast to MarchFirst Inc., Chicago , which has been spending millions on a branding campaign designed to build awareness for the $1.13 billion giant created through the merger of USWeb/CKS and Whitt-man-Hart. That campaign, created by McKinney & Silver, includes "Upside down head," an advertisement that takes a playful look at the first cubist exhibit and is specifically designed to lure clients with statements of empowerment.
Pragmatic reasons are driving iXL's recruitment focus. By going with recruitment advertising, it avoids the brand campaigns of MarchFirst, Sapient and others with more targeted advertising. In addition, it steers clear of the clutter that will be created by the presidential election and the Christmas buying season, Ballon said.
That's not to say iXL is abandoning brand advertising altogether. On the contrary, It is preparing a major branding campaign scheduled for early 2001, Ballon said.
"We're an underdog in our industry from a branding perspective, but we have some of the best clients and an incredibly fast growth tick," Ballon said. "The way we look at it is as a rich coal mine. We have the opportunity to pull some incredible diamonds, cut them, polish them and bring them to market."
iXL is not alone in focusing on recruiting. E-services company Xchange Inc. has implemented a public relations campaign in its headquarter Boston market and in Seattle, U.K., Germany and Australia to profile the company's culture and work spaces. Its research and development office in Boston has been highlighted in The Boston Globe, Boston Herald and Boston Business Journal for its pool table, dart boards and conference room parties, for example.
"People don't just walk down the street and into your door," said Kris Zaepfel, Xchange senior VP of human resources. "If you don't have that machine going, people are not going to know you exist."
Marketing isn't the only answer for staffing issues, said Chad Gallant, managing director of the New York office for Icon Medialab International. His 1,800-person e-services company has an attrition rate of about 6%, far below the norm, because it manages its information well and has good business processes, he said. For example, consultants work on set teams. Those teams also get to choose the accounts they are assigned to work on, he said.
"When your business is services, high attrition can kill you," Gallant said. "We have the same competitive factors everyone else is facing, but we've thought a lot about how we can be different from a traditional management/consulting organization. We'll tell a client that they'll have to wait for the right people to become available, if need be."
Electronic Data Systems Corp., one of the biggest consultants, is taking a geographic rather than marketing approach to the people problem. The company opened a 400-seat customer-service center in Sydney, Nova Scotia, simply because it knew it could fill the jobs, said Mike Littell, president for the customer relationship management group of EDS' business process management division.
"As we see e-CRM [customer relationship management] grow and become a more viable alternative to bricks and mortar, the agents themselves are going to have to be better trained and educated," Littell said. "We saw a place with a higher unemployment rate, where we could quickly fill our seats and have a better delivery environment for our clients."