Working INSIGHT

Volume I, Number 3, March/April 2001

Employers Are Courting Former Dot-Com Execs

The Career Journal (April 30-May 6) reports that though many dot-com executives presided over failing ventures, their skills and experience are still sought after by Old Economy companies. "Many of these people are extremely creative, and they understand the role that technology can play in today's competitive markets," says Michael D. Zinn, president of Michael D. Zinn Associates, a Princeton, N.J., executive-search firm. With a strong entrepreneurial drive and a tendency to thrive in a competitive environment, former dot-com leaders now have developed more realistic compensation expectations that make them attractive candidates to traditional companies.

Many Still Aren't Saving for Retirement

The personal savings rate of workers has declined substantially, despite all the publicity surrounding 401(k) retirement-savings plans, reports the Career Journal (April 30-May 6). A report by the Congressional Research Service show that among employees age 25 to 64, only 55% participated in an employer-sponsored retirement plan in 1999. Though workers age 55-64 are most likely to have retirement accounts, only 77% of them lived in households with retirement savings between zero and $37,000 in 1997 - an account balance insufficient for most to live on during retirement.

Demand for High Tech Workers Drops 44 Percent

According to the Information Technology Association of America, the demand for high tech workers has dropped 44 per cent since last year. However, many companies still report difficulty filling all their technical openings with qualified personnel. The Deutsche Press-Agentur (4/2/01) reports that employers will need to fill 900,000 technology positions in 2001, compared to 1.6 million in 2000. But there will still be a shortage of 425,000 IT workers - half last year's figure - in a total high tech workforce of 10.4 million, up from 10 million in 2000. The shortage will keep the demand high for foreign high tech workers who are employed in the U.S. on specially- issued H-1B visas.

On a more positive note, the rate of job cuts in the internet sector is falling, with cuts at Internet companies totalling 9,533 in March, compared with 11,649 in February and 12,828 job cuts in January.

KPMG Consulting Lays Off 5 Percent, Cites Weakness In Financial Sector

KPMG Consulting is the second of the Big Five consulting firms to announce plans for a huge layoff. The company plans to dismiss 450 to 500 employees, or about 5 percent of its workforce, due to a slowdown in IT spending, particularly in the financial services sector. As reports CRN (4/20/01), Pricewaterhouse Coopers earlier announced that it was cutting 750 to 1,000 jobs, also citing weakness in the financial services sector. Because the consulting firms have a broader base of services, a reliance on large, established customers, and financial strength, they have been somewhat insulated from the impact of the dot-com meltdown compared to Web integration companies. Most of the layoffs are based in the US and Canada, and cut across all levels of its 10,200 employees.

Skilled Jobs Get Filled Faster

A March survey of small businesses by the National Federation of Independent Business showed that the respondents reporting hard-to-fill openings fell from 32% to 26%, perhaps due to layoffs and lower hiring in larger companies. As reports Business Week (4/30/01), since small business's account for much of the nation's employment growth, the drop in openings in small companies could seem ominous.

However, small companies still report that finding qualified employees is still the biggest obstacle they face. 27% of small companies polled say they plan to expand, compared to only 5% who see a future reduction in staff. NFIB economist William C. Dunkelberg says that "the slippage in small business optimism and the drop in job openings probably portends a rise in unemployment and further weakening of business activity," but that economic growth in the current quarter will be around 1.5%.

Tech's Downturn Has Given Some Startups An Edge in Recruiting

"Many stock options at even the most established blue-chip technology companies are deep under water, giving startups -- at least those that appear to have good prospects -- an edge in recruiting top talent," reports the San Francisco Chronicle (4/10/01). Though this is one of the worst times to be part of a startup, public companies with their depressed stocks are not particularly appealing either. Brian Hall, a professor at Harvard Business School, estimates that 40 percent of stock options at public companies are under water, or trading below the price at which they can be exercised. Particularly in the tech world, options play a bigger role in employment decisions than ever before, as opposed to the 1980's when compensation was totally dominated by cash. With stock options at large, traditional companies under water, more and more people are available to be recruited by startups, and that "executives joining startups today can expect options with extremely low strike prices -- often under a dollar." However, even big firms suffering layoffs and earnings disappointments are generally considered more-secure employers than the aerage startup, which often relies on venture capitalists for their financing.

Hall believes that options will likely play less of a role in future pay packages, while cash and actual shares of stock will probably increase