Dot.commers trickle back to the jobs market

The Business World: Hamish McRae

Until a few weeks ago, the surge in the price of new economy share prices was having a dramatic impact on the recruitment market, with large, long-established companies losing staff to dot.com startups.

Until a few weeks ago, the surge in the price of new economy share prices was having a dramatic impact on the recruitment market, with large, long-established companies losing staff to dot.com startups.

The dot.coms could offer share options, bearing the promise of riches beyond the dreams of avarice. Now a majority of the IPOs are below their issue price and the dot.commers are coming back to mum. They were returning in the US before the latest high-tech sell-off. Presumably now the sell-off has spread to Europe and become even more vicious, the disenchantment will spread too.

But does that mean it's business as usual in the recruitment market? Will offering a secure job, decent benefits and a reasonable salary be enough to retain high-flyers? Or has there been a once-and-for all change in the job market that will not be reversed by the flip-flop in high-tech shares?

The evidence, as far as established companies are concerned, seems to be the latter. But the startups are having to offer much more conventional packages to attract good people, so perhaps the main outcome will be a convergence in packages and maybe styles.

For established US companies the changes are here to stay. The fight-back by those companies has several elements. One is the wider granting of share options. The scale on which these are distributed is still more limited than the scale at the dot.coms, but extending the opportunity to own part of the company to people who did not qualify for options helps recruit those at the lower end of the pay-scales.

Another ploy has been the change in dress-codes. To Britons irritated by the compulsory "dress-down Friday" practice of many US firms (substituting one uniform for another), it might seem odd the lax dress codes of the dot.coms proved an attraction. But this is something workers want and the cost is free to the company (though not to the worker who has to buy a new set of casual clothes).

A third change seems to be in the cultural response of some big companies. Elements of the management of the dot.coms - the short decision time, for example - are being forced on established companies by the need to plunge into the e-economy themselves and it has a recruiting spin-off. People eager to work in a dot.com environment don't need to go to a start-up. They can stay in the mainstream.

In the UK there seems to be just as much demand for e-specialists as ever. That may fade if the start-ups are unable to fund their losses by issuing new securities, but it does not seem to have happened yet. But the startups can no longer entice people to join them at much lower salaries than they had been getting, offering options to make up the short-fall. Instead they are having to offer comparable salaries and have evidence they are adequately funded, before people will join them. There does not seem to be reluctance as such to join dot.coms, merely a more circumspect approach.

Hugo Codrington, at the specialist recruitment consultants NewMedia Heads, says: "People are still willing to move to new media businesses, but they are a lot more choosey about the quality of the businesses they are joining and the scale of the backing."

So the eagerness of the highly-qualified to look at e-business propositions seems to be as strong as ever. Some worm's-eye evidence: a friend hunting for a new chief executive for a fledgling business asked the advice of others for people to contact. Two of them said: "Um, do you want to see my CV?"

Enthusiasm for joining startups will wane if it becomes clear many cannot refinance their losses, but it is hard to believe the entrepreneurial spirit that created them them will be crushed for long. So there will be more startups. The fever may have gone out of the jobs market but the nature of the contract has been permanently changed by the dot.com revolution.

The return of some of the dot.commers to mainstream business may change the latter in unexpected ways. Familiarity with the potential of the internet to change the way a company operates is a vital skill. So returnees have added human capital, rejoining companies shaken by the experience of seeing their own supposedly solid business written off by the market. So they will be eager to introduce elements of dot.com culture, not just in the labour contract and the work practices, but in the way the company looks at new business developments.

It has always been far better for a company to have its employees bring their good ideas, instead of taking them away to start on their own. Now, after the last few months, it may also seem better to the employee too. Better to have a reasonable share of the upside if all goes right but still have a job if it goes wrong, than have all the upside if it goes right but lose everything if it doesn't.

So maybe the lasting legacy of the gyrations of the shares of high-tech companies will be not just to encourage more flexible job contracts for all, but to persuade big companies to encourage their staff to become more entrepreneurial for employers. If that is right, all will be winners - something not evident in the mayhem amid the techie-stocks of the last few days.