The dire shortage of high-tech and business professionals is now forcing many dot-coms to dole out mega-salaries and non-monetary perks, according to a report released Tuesday by job search site WetFeet.com and global management and consulting firm Hewitt Associates.
The report, “The dot ComP 2000 Survey,” found that the days of pre-IPO Internet start-ups being able to offer employees low starting salaries with the promise of a huge payoff in stock options are gone. Most of the lead programmers at the 20 pre-IPO dot-coms surveyed are making near six-figure incomes, and the heads of sales are earning almost $200,000 (US$) in total cash compensation per year.
Said Steve Pollock, president of the San Francisco, California-based WetFeet.com, “Quick, effective hiring is always a necessity for high-growth companies, but our survey shows that dot-coms are beginning to realize that equal thought must be given to retention.”
Pollock added, “In today’s ‘cut-throat’ environment, many dot-coms are balancing base pay, bonuses and stock with non-compensation incentives to ensure that employees stay before, during, and after the company goes public.”
Show Me the Perks
Notably, the use of cash bonuses is not widespread in the dot-com world. The survey showed that only 17 percent of employees in non-sales positions received bonuses. Sales positions, on the other hand, are highly leveraged, with 78 percent of employees receiving bonuses or commissions.
The survey did show that 94 percent of dot-com employees receive stock options or grants.
Yet many perks are not directly cash-based. A majority of dot-coms are flexible when it comes to work schedules; 86 percent offer their employees flex-hour work schedules and 57 percent allow employees the option of telecommuting. Additionally, 85 percent provide training benefits and personal services such as massages, fitness programs and catered meals.
Said John Davis, a compensation consultant for the Chicago, Illinois-based Hewitt Associates, “As these Internet companies continue to get established, they should begin to develop solid compensation philosophies that support their business strategies. This will enable management to make clear decisions whether to staff ahead of company growth or in line with growth and compensate accordingly.”
High Growth, High Turnover
Dot-coms have to treat their employees well because most Internet companies are undergoing a period of extreme growth and experiencing turnover that is higher than expected.
During the last 12 months, the average one-year employee growth rate was 85 percent and the total annual turnover rate was 14.6 percent, with 7.2 percent of employees leaving voluntarily and 7.4 percent leaving involuntarily. For the same period, the U.S. Bureau of Labor predicted an annual turnover rate of 13.2 percent.
The report also found that on average the base pay of dot-com founders is 18.8 percent lower than non-founder base pay. At the same time, founders have an average of 11 percent higher company ownership.