Have Dots & Have Nots

Risk & Reward

Tech workers are used to compensation packages that offer more stock options than cash, and they know the dangers of working for companies that might not make it. Although market volatility has encouraged entrepreneurs to dole out less stock, the perception remains that techies receive generous options and become instant millionaires.

Jenkins says that although American Pensions employees haven't approached him about working for the dot-com, they have made comments about the potential rewards. "Two American Pensions employees told me that in three years I'll never have to work again," Jenkins says. "I said, 'That might be true, or I might lose my house.' I think it sunk in that this is a tremendous risk. [The dot-com] could come crashing down at any time."

Many employers, however, never address the risks and instead hide their compensation strategies from employees. Employers need to explain differences in compensation as an investment in the future of the whole company, says Andrew DuBrin, an industrial psychologist and professor of management at the Rochester Institute of Technology in Rochester, New York. "The CEO has to say, 'We have to pay to scale to get the talent we need for the company to move forward.' The CEO has to show that [hiring techies] is part of a strategy to benefit everyone in the company," he says.

Outlining reasons for investing in techies isn't enough, though. Employers also need to watch for "compression," which occurs when compensation packages aren't kept competitive. Offering more to techies while failing to keep com-pensation for non-techies at market rates crushes morale.

Keeping up to market is always a challenge for Gary Erickson, co-founder (with Lisa Thomas, 45) and CEO of energy food and nutrition company Clif Bar Inc. Erickson, 44, has recruited a few techies for an in-house IT division. The techies share in a companywide bonus program: an annual payout based on company and individual performance that also makes higher salary grades eligible for larger bonuses.

Erickson says he hasn't seen tension between his techies and nontechies, but he's lost brick-and-mortar employees to dotcoms because the company is located in a technology hotbed: Berkeley, in California's Bay area. To deal with compression, the company hired a vice president of human resources to research the market and review employee salaries. "We try to be competitive," says Erickson. "We do our homework on the [salary] range we can offer."

Can't fathom the value of compensation? Read 5mn With Wage And Compensation Experts Patricia Zingheim And Jay R Schuster to spell it out for you.

Chris Penttila is a Washington, DC-based freelance journalist who covers workplace issues on her blog, Workplacediva.blogspot.com.

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This article was originally published in the January 2001 print edition of Entrepreneur with the headline: Have Dots & Have Nots.

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