Dot-coms face recruiting woes

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Over the past year, ad sales and marketing execs flocked to dot-coms like bees to honey. The rise of dot-coms and the wealth they promised prospective hires, as well as the challenge of something new, lured execs away from their posts at oldline companies.

But the Nasdaq's spring plunge is making dot-coms and the stock options they offer seem less of a sure deal. That will make it harder for start-up dot-coms to attract talent, even as the strongest Internet ventures--and healthy oldline companies--find themselves in a better position to attract and retain talent.

Last week, stock fluctuations caused many pre-IPO Internet companies--including CMGI's AltaVista Co.,, and Yupi Internet ( postpone their public offerings. The dive in dot-com stocks has made many options worthless. Both pre- and post-IPO dot-coms are circling the wagons, reassessing how to attract and retain talent now that options are less of a lure.

If dot-com startups can't attract great talent, they could find themselves in a no-win situation, unable to secure talent or the capital needed to stay in business: Venture capitalists increasingly look at how many employees a start-up can hire each month--and caliber of management--as benchmarks of their worth.

"[Nasdaq's drop] definitely shook confidence. I think all along the talent market has been tight. I think [prospective job candidates] who were on the fence [about going to an Internet start-up] have probably shied away," said Patti Keeney-Maischoss, managing partner at Lucas Group, an executive recruiter.

Interwoven, a Silicon Valley Internet software company, in January was so desperate to sign software engineers that it promised to give BMW Z3 roadsters to the first 20 recruits who qualified, Ms. Keeney-Maischoss said.

"This is way beyond the shakeout. It's way beyond giving the free lunch and extra vacation."


Since last fall, clients could no longer offer their stock as the only incentive, she said. And there has to be more cash incentive, she added. "Clients have to offer stock as gravy."

Hundreds of senior level sales and marketing positions at Internet companies are going vacant, she said.

Granted, the plunge reminds people of what they should have known all along: that this was bound to happen, said Ed Koller, an executive recruiter at the Howard Sloan Koller Group, New

York. "This is the awakening to what really can happen," he said. "People now are going to say to themselves, `Maybe I should take a good, hard look at the basic value of the company I am going to work for,' " he said.

More established Internet companies like DoubleClick and America Online may now have a better shot at attracting much-needed but much-dispersed talent.

"There's gonna be a shake-out," Mr. Koller said. "Now, it's impossible to find people [because] the pool of talent has dwindled so much."


Execs most likely to move on: those currently working at dot-coms whose stock has dipped below the offering price, Mr. Koller said. And many execs might now opt for a higher base salary and fewer, more bankable options from established companies.

For Scott Kurnit, whose company, a Web directory, went public in March 1999, the market's drop has forced him to educate employees about stock options. About went public at $25, peaked at $105.81 and at end last week $27.38.

"What just happened was an avalanche, and in an avalanche, everything falls down," said Mr. Kurnit, chairman-CEO of About, adding that the strong companies are the ones in a position to get back on top.

'A FRINGE BENEFIT' had budgeted 100 new hires in the first quarter 2000. "We are probably pretty close to that," Mr. Kurnit said, not indicating a number. "We haven't lost people we haven't wanted to lose."

And for post-IPO companies like, a dip in stock value gives companies a chance to offer new recruits a lower strike price. "It's actually a positive time to join a company," he said.

To keep company morale high, cosmetics e-tailer began weekly meetings with staffers to keep them apprised of the competition and company partnership deals, said Deborah Goslin, exec VP-sales marketing and business development.

"That tells them we're driving the bus," Ms. Goslin said.

While stock options are part of the allure of coming to a start-up like beautyjungle, which has yet to file for an IPO, Ms. Goslin said, "We try not to overwow them with a get-rich scheme."

Evan Sternschein recently left his post as exec VP-national ad sales at ESPN/ABC Sports to be exec VP-sales at CBS-backed Internet portal offered him options, but Mr. Sternschein, who wasn't looking for a new job, said they were only a fringe benefit.

"I think this company has tremendous potential [so] I looked at the market volatility and it still didn't scare me off," he said. "I was never going to change jobs just because someone was throwing stock options at me."

Copyright April 2000, Crain Communications Inc.

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