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People First

You could have all the gigabytes in the world at your disposal, order processing that plucks cash right from customers' pockets and a product or service that people literally can't live without--but it would all be for nothing without quality employees.
September 13, 2000
URL: http://www.entrepreneur.com/article/32484

The prospect of launching a dotcom business can be very exciting, with its promise of riches and potential fame. But before getting ahead of yourself, it's important to remember that no entrepreneur can do it alone. Hiring the right personnel-who can, let's face it, make or break your new venture-is one of your biggest challenges.

Unfortunately, many dotcom entrepreneurs don't devote enough attention to hiring, believing their companies will survive merely on the strength of their business smarts and, in some cases, the amount of money raised to launch. If you're one of those netpreneurs, beware: Most experts believe this approach is fraught with peril. As with all companies, human capital and managerial skill are assets you need to survive . . . and prosper.

"Entrepreneurs don't recognize how crucial it is to bring people in, or how difficult it is in today's tight labor market," says John A. Challenger, president and CEO of Challenger, Gray & Christmas Inc. , an outplacement firm in Chicago. "They don't view the job of bringing people on as a top priority." It's vital to understand that it takes constant effort to find the right people and get them at a reasonable price, he continues. And hiring has got to be a strategic part of your company and its business plan.

"The entrepreneurs that have taken a structured approach to hiring are the ones who are succeeding," says Paul Villella, president and CEO of HireStrategy.com, a Reston, Virginia, company that helps start-ups and fast-growing companies hire employees.

Growth Strategies

Villella says that the most successful dotcoms have specific growth strategies. "These companies don't just say, 'We need 600 people, let's go get them,' " he says. "Instead, they plan out their human capital, but also understand that that plan is going to shift and that they have to be flexible."

In general, Villella says the most successful dotcoms hire in three stages: In the first stage, shortly after launch, the founders hire key executives and key technology and finance officers. In the second stage, two to four months later, they hire midlevel executives, technology staff, and sales and marketing employees. Then, in the third stage (usually around the time of a company's one-year anniversary), they flesh out the teams in each department.

But entrepreneurs should also take a measured approach to growth as they fill out their teams. EBags.com is a good example-this online retailer of bags and accessories, based in Denver, uses a particular formula. Peter Cobb, 43, co-founder of the 90-person company, says that eBags.com bases hiring decisions mainly on sales. "When we hit [our] revenue objectives, then and only then do we hire more employees," he says. It seems to work for him; however, experts insist there's no hard and fast rule about how many employees are needed for smooth operations. Most successful dotcoms do, however, have this in common: They have excellent business plans, and within those plans they map out their rate of growth, or what they expect to net, and how many people they need to support that growth and potential profitability.

As for the types of employees to hire, there's no magic formula. It is possible, though, to study-and even contact-the companies you admire and determine their attributes for success. Or align yourself with a mentor or expert in the industry who can provide advice. Or follow eBags.corn's example: A typical dotcom start-up, the staff is made up of about 20 technical employees, including application developers, technical infrastructure staff. Web designers and management; 15 customer-care employees; and various sales, marketing, merchandising and management employees.

Dotcom Employees vs. Traditional

One mistake not to make is thinking that hiring for your dotcom is just like hiring for a traditional company. No way. As a result of the shakeout that occurred in the dotcom world earlier this year-when many well-funded dotcoms went under-there is a trend now toward hiring sales employees and jack-of-all-trade types vs. solely research-and-development employees.

"We are entering into a new phase of how dotcoms are evaluated," says Challenger. "They're being evaluated much more strictly on their ability to post earnings. As a result, they're focusing less on research and development and more on acquiring customers. They're hiring more salespeople who can go out and sell products or services, or more employees who can do many different tasks."

Even if you haven't experienced a shakeout, you should still hire multitalented employees. "As a dotcom company, the challenge is to-at least initially-do with less, so having good people with a lot of different skills is what's necessary to really thrive and move to the next level," says Michelle Burke, CEO of Executive Counterparts, a San Francisco consulting and training company.

You'll also probably have to hire more technical employees than you would at a traditional company, and when it comes to hiring them, you have to explain your business model in a way that "savvy technology folks agree is a sustainable business model," says Villella. "A year ago, dotcoms-no matter what they were-appeared interesting. Now, people are looking at companies and wondering if they're going to be around for a while."

Challenger is in agreement. "If you find people coming out of school with state-of-the-art experience, you have to get them," he says, "Create an environment where they want to come to work for you." Also, unlike traditional companies, it's important to hire emplovees who mav not be as concerned about big paychecks as a chance to be part-owners of a successful dotcom company in the future through stock options.

This means you'll probably hire a group of energetic individualists who, in many cases, will be young. For example, eBags.com's employees have a median age of 27. At a dotcom company, you'll also generally give employees significantly more responsibility than you would at a traditional company-which means snagging responsible individuals who are excited at the prospect of owning a project.

"I don't have the time to micromanage here," says Cobb. "Therefore, I have to trust my employees to get a project that fits in with the company's goals and objectives up and running pretty much on their own."

Another dotcom difference: Unlike traditional corporations (Cobb's last job was as director of marketing for Samsonite), where the people hired are all alike, dotcoms like eBags.com seek out variance. "Since we're doing something that really has never been done before, we look for people who see the world a little bit differently," Cobb says. That means he's not concerned about appearance when hiring: "We tell people they can wear whatever they want, and if they want to wear shorts or an earring, that's OK."

When to Outsource

A key part of your dotcom business is customer service. Depending on your company's size and budget, you'll have to decide whether to outsource that department or hire an in-house staff. At eBags.com, Cobb firmly believes in keeping his customer-care staff in-house. That way, if customers call with questions that the customer-care representatives can't answer, his staff can ask someone else in the company and respond to those customers quickly.

"Our customer-service area is within 30 feet of our offices," says Cobb. "It's important to keep them nearby, especially since we have well over 170 brands and 6,000 products they have to keep track of." Right now, Cobb says, his company doesn't offer 24/7 customer service. Instead, it shuts down for about six hours every day. So even though the company is working toward round-the-clock service, he insists it's not always necessary.

"We know exactly how many people visit our site every hour, and we didn't feel there was a need for it," says Cobb. In addition, experts say that 24/7 is not always important in the business-to-business world, where no one expects 24-hour support.

So while there is indeed a trend toward bringing custorner service in-house, Villella says that today, most dotcoms choose to outsource functions such as benefits administration, Web hosting and project-based functions, such as those done by writers, editors, artists or technology consultants. Cobb, for instance, outsources Web hosting and benefits administration. In addition, his company outsources consultants who assist the company in application development.

Find the Talent to Fit Your Company

As with any company, the best way to find employees is by networking with your colleagues, contacts and friends. But it also a good idea to keep in close contact with marketing advertising and even journalism professors from nearby colleges. Says Cobb, "I'm familiar with a lot of professors at Colorado University at Boulder, so when I'm hiring employees, I call them up and ask for the best and brightest."

But in order to be "the right employee," that person has to share your vision and understand your culture. "Start-up companies need to find employees that obviously have the functional skills to do the job," says Burke, "But more importantly [they need to] fit into your company's culture and support your vision." The best way to achieve that goal, she says, is to consult with existing employees and make sure they meet with new hires. They'll know best whether that person will fit into the new environment.

It's also important to communicate clearly the company's culture to future employees, and one of the best ways to do that is by hiring human resources executives. Ethan Berman, 38, is CEO of RiskMetrics, an Internet start-up on Wall Street that sells risk-measurement solutions. According to Berman, "One of my early tasks in setting up the company was to find someone whose main function was to recruit and retain employees and maintain our culture."

But eBags.com, which already has its own in-house HR manager, goes even further: Cobb says that before his company hires prospective employees, one of the company's five founders must meet with them at least once. "No one is hired without a founder meeting with [him or her]," explains Cobb. "It takes time out of your schedule, but we think it's worth it. Having an employee that doesn't work out is time-consuming and expensive."

And then there's the obvious: Netpreneurs still rely on the Internet to find talent. Sites such as Monster.com, HotJobs.com, ComputerJobs.com and Techies.com are regularly used by many dotcom entrepreneurs.

Retain Employees

Although hiring employees is a crucial part of dotcom success, it's even more important to keep those employees. Unfortunately, even after hiring the best and the brightest, retaining good help can be a challenge in a dotcom environment, where the office hours are long and the payoff is far, far away.

"Working for a dotcom isn't easy," says Cobb. "It's a lot of long hours and a lot of commitment. But we try to do everything we can to make it fun and enjoyable."

For example, Cobb says that the company frequently has "Bagel Days," when free bagels and coffee are brought in to the office in the morning for the staff. Plus, every night the company buys free pizza for staffers who work past 7 p.m. The company also took its entire staff to a screening of Austin Powers: The Spy Who Shagged Me when it opened in Denver-several employees even dressed up for the occasion.

Villella says there's a whole gamut of incentives like that now in the dotcom world, and they're designed to help create "a team-like environment, where people come together and develop a passion for what they do." And incentives don't stop there. Many companies, including eBags.com, also offer employees three-week vacations and stock options. But before you offer incentives, make sure they fit within your budget. "Many start-ups are doing small things, like giving employees a day off when they finish a project that they've been working on 24/7," says Burke. "This can be really motivating at a very low cost."

A New Page

The Five Temptations of a CEO Need some inspiration to help you through the hiring process? Try The Five Temptations of a CEO: A Leadership Fable (Jossey-Bass) by screenwriter and business coach Patrick Lencioni. The book, which is currently being circulated in recruiting circles, uses a self-help approach to guide entrepreneurs through the common workplace "temptations" to jealously guard career status, consistently remain popular with subordinates, unfailingly make correct decisions, constantly strive for an atmosphere of total harmony and always appear invulnerable. (Sound like you?)

Surfing For Staff

The best way to find talent? Hit the Net.

Online entrepreneurs are using the Internet for recruiting more and more. According to an independent study of 141 small businesses (many of which were dotcom startups) conducted by Auburn, Maine, Advantage Payroll Services, 63 percent of respondents believe that Internet recruitment is growing dramatically, relative to traditional methods such as newspaper advertising or face-to-face recruiting. In addition, the study found that 57 percent of entrepreneurs use the Internet for recruiting and 32 percent expect Internet usage for recruiting to increase 21 to 40 percent.

10 Things

Top tips dotcom entrepreneurs should know when hiring

Paul Villella of HireStrategy.com offers the following tips for dotcom entrepreneurs on the hunt for new employees:

1. Create a "staffing blueprint." This plan will help you avoid the mistake of random hiring. It should include what sources you need to consider before hiring a specific candidate, whether you can afford to hire that candidate and whether you can get the candidate when you want.

2. Keep your options open. Don't make the mistake of undervaluing networking and other grassroots opportunities to identify candidates.

3. Establish a culture. Help your employees identify with their work environment and give them a reason to be part of the culture. Then, don't stray from the fundamentals of that culture.

4. First interview: Plan tactically. At this stage, tell the story and share the vision of your company-and don't dwell on any conflict between the two. Talent is quick to see that as a red flag.

5. Second interview: Sell your company's story. Before signing on, candidates must be drawn to your vision and culture. Ask a key employee to take the candidate to lunch and talk about the company. Don't let a good candidate slip out of the hiring process by using intimidating "team interviews."

6. Use PR. As an unknown organization, use the power of public relations to build your company's image. Getting your dotcom in the press provides a positive push in a way that expensive advertising sometimes can't.

7. Recognize the dotcom world is in its second phase. Today's candidates, aware of the new pink-slip phenomenon, want to know if your business plan is sustainable.

8. Recognize that cash is king. Stock options are no longer valued as a core compensation. Your best candidates know better than to think stock options mean "money in the bank."

9. Capitalize on crossover hiring. Look for candidates who have successful track records in other disciplines. Look beyond strictly dotcom experience.

10. Don't hire too quickly. Even if it takes time, hire people who understand your company's vision. Besides, venture capitalist take into consideration that you're minimizing future risk by looking for the best.


Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines.