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C O V E R S T O R Y
June 15, 2000
C O V E R S T O R Y

Recruit or Die
How Growing Firms Are Waging the War to Fill Empty Seats
By Brian Caulfield

Cisco Systems is an ever-growing behemoth with big-time people needs. Fortunately, it also has Randall Birkwood as director of an employment operation that is bigger than many good-sized job placement firms. And it has developed a corporate culture and an intranet that help to involve every employee in landing the best and brightest job candidates.

"We've hired 26,000 people in a little over five years, so for us, we don't have any choice but to do this exceptionally well," Birkwood says.

But he might as well be speaking for every businessman and businesswoman in the Internet industry. Although other Net firms may trail Cisco in terms of numbers of openings and size of recruitment staff, all are desperate to find people in these times of record-low unemployment. For some, the recruitment struggles pose a threat to ambitious growth plans. For others, the labor shortage could even be a threat to their survival.

"For startups, high turnover or the wrong people in place causes a potentially lethal business disruption," says Neil Fox, chief information officer at global recruiting powerhouse Management Recruiters International. "I wouldn't be surprised if some Internet companies are going out of business because they can't staff effectively."

Amy Vernetti, who holds the title "human capitalist" at the incubator called Garage.com, likes to refer to herself as a combatant in "the war for talent."

And nearly everyone agrees that there will not be a cease-fire anytime soon. April's stock market correction may speed the demise of more than a few dot coms and put their workers out on the street, but not in significant numbers, and only temporarily. The loss of 110 jobs at Toysmart.com or 60 jobs at drkoop.com are tiny blips in an economy with a national unemployment rate in March of just 4.1 percent. In Silicon Valley, unemployment was a paltry 2.1 percent in Santa Clara County and 1.9 percent in San Francisco, San Mateo, and Marin Counties.

"The thing about the current economy is people are losing jobs all the time, but people have alternatives to turn to," says Russell Roberts, an economist at the Center for the Study of American Business at Washington University in St. Louis.

Sometimes, the creation of new jobs and the elimination of old ones even goes on inside the same company. BabyCenter made headlines when it announced it will be letting 80 people go from its work force of 160 after a merger with eToys. What got little attention is the fact that it is hiring new workers even as it lets go of those whose roles were duplicated, according to Mari Baker, BabyCenter's general manager. The company is offering a $2,000 bonus and a bottle of pricey champagne to those who refer new hires.

Even if the dot coms falter, many major offline players, including discount broker Charles Schwab and oil exploration giant Schlumberger, are integrating the Internet deeply into their businesses and are on the prowl for Net talent. These dot coms are going to have to fight even harder for recruits who can find Internet opportunities in any part of the economy. And all the talent seekers have savvy recruiters who know to start sniffing around at Net firms whose shares have tanked. "That's where you can find a lot of talent and recruit some good people to your own organization," says April King, director of people at Sequoia Capital, a leading venture capital firm.

Universities are also not coming to the rescue of the Internet industry with huge numbers of graduates ready to fill positions. Yes, the colleges are increasingly making the Internet an integral part of their curricula - whether graduate or undergraduate - but that can't change the fact that candidates with three to five years of experience with the Web are pretty scarce. And those with more than 10 years are quite hard to find.

Internet executives also shouldn't bet on the Clinton Administration's proposals for providing more visas to foreign tech workers to provide relief either, says Nicholas Imparato, professor at the McLaren School of Business at the University of San Francisco. He compares demand for technical talent today to a sponge, able to soak up any excess capacity as quickly as it is introduced.

So, what to do?

To judge from a visit to the recent BrassRing job fair in Santa Clara, Calif., a recruiting battlefield for everyone from Cisco and Hewlett-Packard to pre-IPO Internet startups, the answer is: Try everything. That includes talking robots, flashing lights, fresh popcorn, and stock options to entice workers who are strolling through on their lunch breaks, scanning for hot opportunities before returning to their jobs at local high-tech firms.

The job fair, formerly known as WesTech, grew up with the local technology industry, and what goes on at the fair is a microcosm of the recruiting practices that are spilling out from Silicon Valley to tech hubs around the country.

Years after the first tales of exercise rooms, executive chefs, and concierge services at Silicon Valley companies, perks remain an important tool for recruiters, and they continue to come up with new ideas. At Sunnyvale software firm Interwoven, perks for new engineers include a two-year allowance to lease a BMW Z3 convertible (with the option to get another car at a lower allowance, or cash). "If we don't grow, we die," says Jack Jia, vice president of engineering. "Everything is built on the assumption that we are growing."

Since the Z3 offer, Interwoven, known for the high-end Web content management tools it develops, has generated more than 600 applicants for positions that generally are some of the toughest to fill in the market. "It's an attention-grabber," says Cliff McBride, a newly hired software engineer who applied for a job at Interwoven after hearing about the Z3 program.

Another attention-grabber, of course, is the venerable stock options - even after April's market correction and the resulting drop-off in IPOs. "We are paying hefty stock options that will guarantee the recruit will be a multimillionaire if the company succeeds," says Ghiath Osman, CEO of OneVC, a Valley incubator that was recruiting at the BrassRing job fair.

A company that wants to be successful at recruiting also needs to be prepared to offer up increasingly sweet cash-and-stock deals for high-level executives. Though such deals are often controversial, one can usually make a case that they are worth it. Take a company that has offered a star CEO prospect a half-million-dollar base salary, a guaranteed 100 percent bonus, a generous stock grant, and a $2.5 million forgivable loan, says Garage.com's Vernetti. She explains to companies that such deals may seem extravagant, but are not if you consider that the results could be an IPO six months later and a market cap of, say, $2.7 billion.

James Citrin, managing director of the global Internet practice at Spencer Stuart, an executive search firm, argues that top-quality leadership is the single most important difference between the winners and losers. "Companies and boards of directors have become much less price-sensitive," Citrin says, arguing that a strong and stable management team can reduce the uncertainties of competing in an emerging industry and an increasingly wild stock market.

In fact, experts say, strong, stable management provides a solid foundation for recruiting people - and for the stock options that you're offering. Online women's network iVillage, for example, has gone through five chief financial officers since its founding (its latest having left in April, just a few days after the departure of the company's chief operating officer), a sequence of events that has helped brand the company as the Net's poster child for turnover. More recently, the company's stock has slid to less than $10 from a 52-week high of $79.50, despite fast-growing revenue and an expanding audience. Everyone at iVillage may in fact be toiling away as happily as the Oompa Loompas who ran Willie Wonka's chocolate factory. But seen from outside the company, turnover can create all kinds of suspicions, justified or not, in the minds of job candidates.

Experts say another key to successful recruiting is to carefully examine what your practices are. "The real story around recruiting is how inefficient it is," says Ilsa Evans, executive director for MBA admissions and career services at UC Berkeley's Haas School of Business. "There isn't really the orderly recruiting system that's existed for the mature companies."

This leads to a number of problems - most seriously, perhaps, an underrepresentation of certain minority groups, particularly Latinos and African-Americans, at many Internet companies. Fast-growing firms, it seems, do not believe they have time to craft plans for recruiting a diverse work force.

Recruitment experts say another key to success in the talent search is to ensure that current employees are happy and involved in the workings of the company. Interwoven, for example, has complemented those BMW leases with a management strategy that prizes keeping employees involved and informed about everything the company does, according to engineering VP Jia. Even the PowerPoint slides shown at company board meetings are released to employees, with any information that could facilitate insider trading blacked out. A bulletin board allows anyone to complain anonymously about work conditions. Employee-crafted artwork decorates the lobby.

The BMW recruiting program itself was the result of employee input - engineers brainstormed the plan to help the newly public company get top talent without the advantage of pre-IPO options, after discarding some wilder ideas, such as free day-care for pets and free corrective eye surgery.

Getting a whole company to function as a recruiting machine is not easy, and that's why venture capitalists and incubators such as Sequoia Capital, Benchmark Partners, and Garage.com have hired recruiters like Vernetti as partners in the process of creating new companies. Vernetti, for example, built a career at elite recruiting firm Heidrick & Struggles helping companies find CEOs and other top-level executives before she was hired by Garage.com to counsel the companies it works with.

A prime goal for such recruiting professionals is to get companies to the point where they have a winning image and are a subject of buzz among job seekers. "Prospective employees aren't stupid," says Stanford University business professor Jeffrey Pfeffer. "If they hear people are working long hours and supervisors are screaming at people - and that happens more often than you'd think - they won't show up," he notes. "Companies that are great places to work have no trouble getting good people; companies that aren't do."

Interwoven has embraced this happy-employee strategy as well, in addition to its effort to catch attention with the BMW Z3 offer. McBride, the veteran software engineer who came aboard and took advantage of the offer, says perks are not deal-makers. Besides, he probably could have had his pick of interesting perks wherever he went. "You want to find a group of people who are going to challenge you and help you grow," he says.

Indeed, Interwoven's Jia considers the company's critical mass of talent to be its secret weapon. To build a stable community of engineers, Jia says, he screens for strong interpersonal skills as well as top technical ability. ("No bozos," he quips.) As a result, Interwoven has the kind of turnover rate a cult would envy. Of the 63 engineers hired by the company in its short history, not one had left as of this May - something crucial for a newly public company looking to move forward quickly.

In the end, a company that follows the advice of recruitment experts will find itself with an operation that looks an awful lot like what Birkwood has at Cisco - albeit on a somewhat smaller scale than 26,000 hires over five years.

Sure, Cisco's got recruiters like Heather Metour at BrassRing just like everyone else. And the company has an online job board just like all high-tech competitors.

Cisco's job board begins to illustrate how the company has taken recruiting to another level and made it a companywide initiative. Prospective employees can sign up to have new opportunities e-mailed to them; they can also provide their phone number, and a Cisco employee with a similar job will call and talk to them about the company. Managers are also more deeply involved in the process than perhaps anywhere else: Postings for hard-to-fill jobs include streaming video from managers describing what they're looking for. Behind the scenes, managers are supported by a dedicated team of recruiters who stalk top talent online, at industry events, and at technical conferences. The result is a database that puts the names of half a million prospects at the fingertips of Cisco recruiters.

Once someone on Cisco's shopping list can be brought in for an interview, Cisco's intranet is used to expedite the hiring process, with hiring managers able to provide feedback online.

Another of Cisco's tools is a slick application that dynamically displays how the company's stock options package - among the most generous in the industry - can dramatically increase a new hire's long-term earnings prospects. It's definitely an attention-getter. "It is a very powerful tool, especially when we're competing against smaller startups," Birkwood says.

Ultimately, Birkwood's recruiting machine is powered by Cisco's reputation as a pleasant place to work. In January, Fortune magazine named Cisco one of the top three places to work in the United States. Even Cisco's warm-and-fuzzy commercials seem aimed as much at potential employees as its customers, and the company receives thousands of unsolicited r�sum�s every month.

Birkwood can't afford to become complacent about his success in r�sum� collection, though, because employers generally fight hard to retain the kind of employees Cisco is trying to lure away.

Cisco lands 90 percent of the people to whom it offers jobs, because it works hard to build personal relationships with recruits even before they show up for work. In the end, Birkwood says, "It is not about money; it is not about stock options - that's a small piece of the puzzle. It is about hitting someone's emotions about what they're going to be doing during their working hours."

What particularly innovative - and effective - recruiting tactics have you used, or heard about, lately? Respond to e-mail removed