| BUSINESSWEEK ONLINE : APRIL 24, 2000 ISSUE | ||||||||
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| WORKING LIFE
Give Me That Old-Time Economy Boomerang: Disenchanted dot-com workers return to Corporate America It seems as if everyone has one of those unbearably seductive job offers--the one that they think maybe, just maybe, might be their lucky pan in the Internet gold rush. For one 37-year-old accountant, the opportunity came two years ago on a dreary day in Seattle. Until then, the father of three was living his very Old Economy life, tooling around in a Ford Contour and working at a paper company while the New Economy's overnight millions and sparkling sports cars passed him by. So when he got a chance to get stock options and a 12% pay hike as the controller at an e-tailer when the market was still in dot-commerce ecstasy, he jumped. He fantasized about paying off his mortgage debt, buying a BMW, and building a house on easy street. Not so easy. An old-school, sign-on-the-dotted-line type, the finance man was immediately uncomfortable with the way the executives of the consumer-electronics company doctored financial statements for the bank, fabricated reasons for late payments to vendors, and shortchanged advertisers. Standard operating procedure was to charge people's credit cards before the goods were even in stock--instead of when they shipped. Not to mention the way the company spent $3 in marketing and administrative costs for every $1 in sales. ''They were doing virtual business with virtual money,'' he says. Eighteen months later he decided to take a $7,000 pay cut, from $65,000, so he could ''go back to where a man's word was his bond''--that is, a traditional accountant job at an old-line insurance outfit. Surprisingly, this guy has got a lot of company. Although the reasons for dot-com defections vary widely, headhunters, management consultants, and corporate recruiters say they are starting to see the first tiny bubbles of an Internet backlash: people who have shucked traditional positions in search of those fabled cyber-riches only to be disappointed and boomerang back to the old world. BROWN GRASS. Thanks to the worst labor shortage in recent history, bosses are welcoming back these onetime defectors as ''alumni.'' And those who stayed with the Old Economy warhorses--the very people who seemed hopelessly out of it just a few months ago--are beginning to feel like they were the ones who made the right non-move after all. To be sure, the number of defectors is still small. And the larger story continues to be the exodus to the Internet. But this first wave of boomeranging introduces another layer to the New Economy story and could signal what's to come, recruiters say. ''A tremendous number of people thought the grass was greener, and it wasn't,'' says Jeff Kaye, president of executive search firm Kaye Bassman International Corp. in Dallas. In fact, in many cases it turned out to be brown and balding. Indeed, as the recent rout on the Nasdaq shows, the cyber fairy tale of boundless potential is morphing into a nightmare for many Internet companies. Of the 80 Net companies that have gone public so far this year, almost half are trading below their initial public offering price, and 90% are trading below their Day One close, according to senior analyst Kristofer Williams at investment banking research outfit Commscan LLC. This is giving rise to a new Silicon Valley syndrome psychologists call ''the IPO blues,'' the entrepreneurial equivalent of post-wedding-day letdown. Many are reconsidering risks that only months ago seemed like can't-afford-not-to moves. And while all those Internet firms were siphoning off Old Economy workers, something momentous was happening in Corporate America. Traditional companies--Big Five accounting firms, Rust Belt stalwarts, investments banks, law firms--were forced to find ways to remake themselves in the image of their worker-snatching rivals. They moved to merit-based pay, doled out signing bonuses, offered stock options to secretaries, flattened organizational structures--even developed ad campaigns that mimicked their Internet peers' wry irreverence. Just this year, top-tier law firms chucked the starched shirts and instituted everyday casual dress. They also boosted associates' pay by an astronomical 50% and let them participate in the partners' bulging venture-capital-style investment funds. NASDAQ NERVES. The result is that Corporate America's previously scoffed-at security, stability, and seasoned management is beginning to look a lot more attractive now that some of high tech's perks are within reach--and come without the risks associated with the Nasdaq's wildly unpredictable swings. The attitude is even starting to infect Silicon Valley, where companies like Gap (GPS), Safeway (SWY), Circuit City (CC), and Wells Fargo (WFC) are beginning to be back in career vogue. Last year, at Silicon Valley law firm Cooley Godward LLP's office in Menlo Park, Calif., four young associates fell under the Internet's spell and departed for high-tech-related ventures. Three of them--Vincent Pangrazio, Craig Venable, and John Geschke--have all since returned to Cooley. Geschke, 30, came back last year after a one-year stint at online investment bank WR Hambrecht & Co., where he owned 1% of the company. ''There are a lot of painful aspects that don't get appreciated by everyone who jumps ship,'' says Geschke. First, there was all the cushy stuff he had to give up--the assistants, the paralegals, and the free vacations with his wife. His roomy office was hard to let go of, too, especially since he shared his new one with 15 other people. He even missed the photocopying and faxing staff: ''You can't imagine how time-consuming that is!'' But more than that, the nature of Geschke's work changed dramatically. He went from being involved every day with the top executives of the most powerful New Economy companies to dealing with people who didn't like the size of their cubicles. ''I really like working for people who are the best at what they do, and while Hambrecht might be there someday, they weren't when I left,'' Geschke says. Besides, it's not as if Geschke had a guarantee of cashing in at WR Hambrecht. The company is still struggling to be a market leader. Cooley already is one. Soon, Geschke will be able to invest his own money in the Cooley partners' venture-capital-style investment fund, which owns stakes of startups the firm advises. ''People will end up doing a lot better with this than in the dot-coms,'' Geschke predicts. ''This way, you get to invest in a range of great companies as opposed to investing in just one.'' Law firms aren't the only ones benefiting from the boomerang syndrome. So many employees have returned to Freddie Mac (FRE), the Washington mortgage investor, that the company has taken to telling its headhunters to punch in the company's name when searching resumes on job boards like Monster.com so they can scout out and court alums. This year alone, 14 people have returned to the company, many of them from high-techs. One of them is Web site developer Larry Clink. As one of the most sought-after employees in one of the country's hottest high-tech hubs--Tysons Corner, Va. (home to America Online Inc.)--Clink felt he had no choice but to ''see what was out there.'' So he joined National Electronics Warranty, where he said he was spun great stories about the company going public and the potential windfall he could reap. ''They told me I would be the lead Web developer,'' Clink says. ''It turned out I was the only Web developer.'' He was also frustrated by the endless budgetary restrictions, which he said hampered him from being able to spend the money he needed to do his job. He also missed the family-friendly Freddie Mac culture with its off-site day care, concierges, subsidized cafeteria with dessert bar and sushi, free gym (with personal trainers, sauna, and Jacuzzi), and guarantee of getting 10% of his annual salary as a bonus. Last year, he returned to Freddie, with a promotion and a salary that is 20% higher than when he left. This demonstrates that often boomerangers do better than those who stay behind. It also creates a loyalist-vs.-defector tension--another worry for old-line companies as they struggle to compete against what seem like almost absurd compensation packages. Paul Stefunek, a headhunter at StratfordGroup in Cleveland, says he has seen some newly minted Internet executives get guarantees on the value of their stock options as well as the ability to vest 25% of their options the day they start their jobs. Some Internet companies are also giving recruits half their salaries as loans, so the employees can avoid paying income taxes and the companies can minimize payroll costs. And they only have to repay those low-interest loans if the stock jumps by a certain percent. ''It's scary,'' Stefunek says. ''They have to keep stealing from Peter to pay Paul.'' BREACH OF CONTRACT. When the economy is strong, fired executives or workers whose options have gone under water can seek another opportunity. But with the Nasdaq's recent downturn, the next sure bet is getting harder to find. That's why more and more executives are pursuing remedies in court, filing fraudulent-inducement and breach-of-contract suits against their former employers. Silicon Valley employment lawyer Garry Mathiason of Littler Mendelson says his firm, which advises about 150 Internet companies, had no such suits two years ago. Today it has about 50. Mathiason thinks that time for these companies to make money is running out. ''It's like watching the floodwater behind a large dam,'' he says. ''And it's going to explode.'' If and when that happens, the boomerang minority may end up looking like a majority. Wouldn't it be ironic if the New Economy wound up making a star of the old? By Michelle Conlin in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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