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MARCH 20, 2001


Legacies of the Dot-Com Revolution
Net culture really has changed business. Organizational structure, management style, and -- yes -- office dress may never be the same

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Before the rise of the dot-coms, the pecking order at Morrison & Foerster pretty much resembled that at other high-powered law firms. Senior partners reeled in clients, schmoozing them up over drinks or on the links. Young associates holed up at the office, doing the grunt work required to keep clients happy. And that was that.

Then a revolution occurred. In the mid-1990s, as Internet startups began sprouting like chanterelles on a dewy log, MoFo's junior associates started bringing in business, too. Net-company founders wanted to deal with go-getters they'd gone to school with or young attorneys who knew technology. Suddenly, the unthinkable happened. Freshly minted law-school grads began hobnobbing with CEO clients, developing strategy, and having a say in the direction of the firm. Somewhere along the way, Morrison & Foerster's buttoned-down New York branch office went to casual dress every day of the week.

SYSTEMATIC UPHEAVAL.  "It was sort of the equivalent of lobbing a Molotov cocktail," says John Delaney, co-chair of Morrison & Foerster's New Media practice group. "The system was turned on its head. We realized that if we wanted to work with dot-com entrepreneurs, we would have to start acting more like them."

The Net sector continues to shake out, and the firm's clients haven't been immune. But Delaney thinks the new order of things at MoFo is here to stay. After all, the entrepreneurial spirit that took hold as Net companies flocked to the San Francisco firm has turned out to be good for the bottom line. "The partners are much more receptive to associates being involved in business development, strategy, and the direction of the firm," Delaney, 36, says. "It was an awakening, [the idea] that everyone should have the opportunity to bring in business. Although many dot-coms have fallen by the wayside, I think that lesson has been retained."

It isn't just law firms that learned from the dot-com era. Net culture has helped transform the workplace in businesses of all shapes and sizes. Consider Goldman Sachs. The storied Wall Street investment bank finally started letting employees dress down in early 2000, shortly before dot-com fever peaked. I-bankers at the time were grumbling about having to show up for meetings at dot-coms in pinstripes when their clients were traipsing about in khaki.

While a few companies switched back to coat-and-tie attire after dressing casually became confused with dressing crassly, fashion gurus generally believe most companies will stay the casual course. "Certainly dot-coms have helped loosen dress codes for employers," says Amy Jones, a spokeswoman for Nordstrom, the upscale retailer based in laid-back Seattle. "It's a trend that's continuing."

"RADICALLY ACELERATED."  To be fair, many of the hallmarks of the Net workplace -- from tieless dress and funky office space to telecommuting and team-based management -- were around well before eBay and What the Net wave did was spread these trends to bricks-and-mortar companies -- where "they were radically accelerated," says Haim Mendelson, a management professor at Stanford University's Graduate School of Business and co-director of the school's Center for Electronic Business & Commerce. With the Web, he adds, "we had a chance to try out a lot of things that needed to be tested."

Clearly, some trends won't survive the test. They'll disappear along with the notion that growth matters more than profits. With the Nasdaq market -- where the fortunes of so many dot-coms were made and lost -- sinking faster than Chairman Greenspan's reputation for infallibility, many things Net have already lost their appeal. In fact, even the ".com" on a company name almost is considered declassé today, with the online delivery service formerly known as going so far as to lop off the suffix to become plain old Kozmo.

Fads such as the oft-cited staff masseuse -- a symbol of dot-com excess -- also will peter out. Likely to fade away as well are the so-called team-building exercises that managers at startups rationalized as necessary to create esprit de corps among employees who often worked ridiculously long hours. Absolute Adventures, a San Francisco company specializing in employee retreats for Silicon Valley's proletariats during the Net's spend-now, budget-later heyday, reports that its business of organizing yachting expeditions and snow-mobile treks is half what it was a year ago. "We don't believe in forced fun," says Wayne Willis, CEO of visual search-engine company (see BW Online, 2/5/2001, "Passing the Baton Peacefully"), who echoes the prevailing sentiment. "Forced fun is not fun. We have a holiday party around Christmas and Hanukkah, but that's about it."

BOOSTING PRODUCTIVITY.  While culture mavens may bicker over whether this or that development will outlive the dot-coms' rise and fall, there's wide agreement on one point: Trends with the most staying power are ones that help companies respond better to the ever-quickening pace of business. There's also a consensus that changes that give employees more say over their work -- what they do, when, and with whom -- will stick. The reason? Experts say that given greater autonomy, employees get more creative, which usually boosts productivity. And most companies like getting more output from their worker bees.

"I think what companies have found is that telecommuting, nonhierarchical management, and so on has enhanced productivity because creative people are motivated intrinsically," says Richard Florida, a professor of economic development at Carnegie Mellon University. "You can't motivate people by telling them what to do."

Thus, the nonhierarchical management style, which was particularly suited to stretched-thin startups, is gaining traction in executive suites. With the all-hands-on-deck atmosphere at dot-coms, the typical org chart often was compressed or discarded. Job titles didn't matter as much as how well someone could do the job: Net companies often assigned workers to small teams to solve problems rather than sticking them in functional departments where they had scant interaction with employees in other divisions. "If we're trying to decide a sales issue and an engineer has a point of view, we pull him right into the meeting, and he helps us figure out the answer," says's Willis.

FLUIDITY AND FLEXIBILITY.  More companies are likely to go this route, says Stanford's Mendelson. In a 1995 survey of 64 information-technology companies, he found they lost precious time if they let a decision to shift allocations in their research-and-development budgets cycle through the corporate decision chain. For example, companies on average took 5.7 weeks if a 10% change in the R&D budget had to be vetted at the corporate level. The same change took 3.1 weeks if it could be approved in the business unit, and only 1.95 weeks if the head of R&D approved it. "In high tech, products have a very short shelf life," Mendelson says. "A delay of even one month is a big deal. The dot-com era has highlighted the importance of being fluid and flexible with a new control structure that isn't tight and hierarchical."

Part of being fluid and flexible is accepting good ideas whatever their source. Like Morrison & Foerster, many companies are moving away from structuring management along strict seniority lines and toward giving smart young employees more say. True, Wall Street at the height of dot-com fever may have thrown far too much cash at callow entrepreneurs -- some barely old enough to buy a six-pack. But the fact that the dot-com era allowed so many twentysomethings to nurture ideas into companies has cast doubt on the argument that would-be entrepreneurs have to pay dreary dues in order to contribute.

"The dot-coms showed us that young people can have great ideas that can succeed, vs. the old days when all young people had to earn their stripes," says Alan Hu, 45, the founder of Collabria, a software company in San Mateo, Calif. "Just because someone is 28 doesn't mean he or she doesn't have a good idea."

REWARDS VS. ROLE-PLAYING.  Net culture has also affected how employees regard their jobs. For many, being at a dot-com was more an "experience" than simply a way to get from month to month. In fact, dot-coms encouraged workers by the tens of thousands to ditch mainstream positions in the quest for more interesting work -- and riches. Whatever the reason, each departure from an Old Economy job was an assault on the notion that a career is a series of better roles in a set profession. Post-Net boom, at least some employees still would rather have jobs that provide rewarding experiences than gigs that place them on a slow track to the top.

"I don't look for jobs," declares Christie Cunningham, a 26-year-old Pittsburgh resident who turned down offers from nonprofits and consulting firms to take a position helping to manage new ventures at Venture Beginnings, a Net-technology company. "I ask myself, 'What kind of experiences can I build around my core values?'" Cunningham, who has a masters in public administration from the University of Pittsburgh, says she sought a role that involved working with a team and valued creative thought and innovation. "My approach to finding work is more based on experiences and challenge," she adds. Indeed, Eileen Appelbaum, research director at the Economic Policy Institute, a Washington think tank, says dot-com culture popularized the notion that jobs could have more of a design-it-yourself quality.

CONTROLLING WORK.  That shift in attitude could be permanent, Appelbaum says. After all, the notion that employees have to report for work at a set place for a set period of time is an artifact of the Industrial Revolution, when workers had to show up to run assembly lines. As the U.S. continues to migrate from a manufacturing economy to a service one, where and when people put in their hours matters less. "If there's one thing that will be lasting, it's the idea that people want to have more control over their work," Appelbaum says.

For a growing number of Americans, that has meant staying at home, or at least not shuttling to the mother ship every morning (though it also can mean spending all day at work, then working much of the night at home). Telecommuting predates dot-com mania, but the Net prompted more companies to let employees do their work wherever they wanted. At insurer The St. Paul Cos., more than 475 employees, or about 5% of the company's total, don't have permanent desks. Equipped with cell phones, laptops, and other telecommuting gadgets, they work out of their homes or in sites spread across the country. "If you focus on results, you can be relatively innovative in terms of the process," says Diane Cushman, the company's manager of work/life. "Dot-coms really stretched this way of thinking."

The change in attitude -- abetted by the technology that makes it practical -- is now changing work practices at plenty of old-line companies, not only because it makes employees happier but also because it can save time and money. Houston employees at oil multinational BP can now monitor 24/7 offshore drilling from home on laptops. This spares employees a trip that can take two days, because they no longer have to travel to a helicopter field, take a chopper flight to rigs more than 100 miles off the coast of Louisiana, and spend time on the structure getting information. It's all available in real time on the Net. Basically, geologists and petrophysicists can have a better life while still doing their jobs. "They don't have to take off their pajamas and go to the office at three in the morning," says Hugh Depland, a BP spokesman. "The cost of transportation [to the rig] would pale in comparison to the lost productivity while the worker is traveling from point A to point B."

CUBE CITIES.  While helping create virtual workplaces, dot-coms changed the bricks-and-mortar variety. Open office spaces -- cube cities -- which were built with zeal by dot-coms, increasingly are becoming the norm. They foster the easy exchange of information, loosen up the work atmosphere -- and often cost less than traditional offices. The office-as-frat-house, replete with pool tables, will no doubt wane, along with the dot-com mentality -- borrowed from law firms and investment banks -- of pulling all-nighters to get projects done. But a growing number of non-Net companies are dot-commizing their office space -- adding features such as couches, gyms, and health-food bars -- as a cheap way to keep their workforces motivated.

"Workplaces were feeling a little bit stodgy before the Internet," says Lewis J. Goetz, chief executive and president of Group Goetz Architects in Washington, which has designed many interiors for dot-coms. "What the dot-coms did was bring fun to the workplace."

The new glass, steel, and aluminum offices that Goetz' firm designed for Lucent Technologies in Washington include a coffee bar, a fixture of San Francisco's dot-com ghetto. The 80,000-square-foot spread won't have any game rooms. But reflecting another dot-com influence, the offices will feature bright colors and plenty of open areas where employee teams can gather.

In the dot-com world, employees for whom work became a way of life developed an attitude that "'our workplace has to adapt more to our values,'" says Carnegie Mellon's Florida. "'We don't want to check our lives at the door.'" For companies that want to get the most from their employees, that may be the rallying cry of the new millennium.

By Eric Wahlgren in New York

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