Human capital, like any strength, will fade if not put to work.
Few people outside Tennessee have heard of New Century Technology, a consulting firm specializing in Enterprise Resource Planning (ERP), e-business, and business intelligence. It’s a small company in suburban Nashville with about 55 employees. But what New Century lacks in name recognition it makes up for in compensation and work environment. The firm’s 30-odd IT professionals earn 10 to 15 percent more than they would in comparable positions at a Fortune 1000 company; receive handsome benefits and stock options; and enjoy perks such as free drinks and snacks, catered lunches, and chair massages.
Growing 60 to 70 percent per year in what President Ken Halford calls a “resource-constrained industry,” the company has succeeded in reducing its annual turnover rate for billable consultants to less than 20 percent–about half the average for IT consultants. “Frankly, [an IT worker shortage] motivates companies like us to figure out how to go the extra mile to attract people, empower them, and, obviously, retain them,” Halford says.
New Century doesn’t let its size deter it from attracting top-notch IT talent, or from leveraging that talent to maximum advantage. That’s quite an accomplishment in an environment in which many small high-tech enterprises struggle to secure and properly utilize human capital.
Intelligent, highly skilled IT workers are hard to come by for the Fortune 500, let alone small, unsung companies with limited resources. Once workers are on board, they’re hard to keep; increased experience and skill makes them even more of a target for big-company headhunters. And making the most of their talents can be problematic in firms where IT workers are obliged to wear multiple hats and constantly adjust their workloads (or look for another job) as business opportunities come and go. Small businesses tend to be the 98-pound weaklings on the human resources beach, constantly spitting out sand kicked in their faces by beefier competitors and with little idea how to flex their intellectual muscle in the marketplace.
Small businesses can avoid that fate by acting bigger than they are–both in word and deed. Through creativity and hard work, an actual or perceived negative can be turned into a plus, a reason why skilled, motivated IT pros would want to work for a small shop rather than for the monolith across town–and stick around to see it grow into its aspirations.
Talking the talk
In today’s global e-marketplace, survival for any business depends on how quickly it can react to change, jump on new markets, and backpedal out of markets on the wane. A company can’t do that without the requisite IT talent-which makes things tough for a small, no-name company in an excruciatingly tight IT labor market. Employers that aren’t trendy, or who are looking for very specific skills, have to work hard to attract viable job candidates, touting their accomplishments and offering incentives that level the playing field with the big guys.
New Century Technology canvasses the country for its consultants, advertising in newspapers and on Web recruiting sites and hoisting the flag at job fairs. Highlights of the HR pitch to job candidates include those high salaries (possible because of fat margins in business-technology consulting), a more generous benefits package than IBM’s, and a collegial atmosphere. “What we end up doing is selling the benefits of a small company,” Ken Halford says.
Flarion Technologies, a year-old spinoff of Lucent Technologies, is equally aggressive in its recruiting. The firm needs scarce radio frequency (RF) and integrated circuit engineers–and fast, if it is to realize its goal of revolutionizing wireless Internet access with a new broadband technology called flash-OFDM. The Bedminster, N.J., company currently employs about 90 people, 80 percent of them engineers, and plans to add another 50 people this year.
Vice President of Engineering Russ Dauer allows that he can’t match the kind of salary and benefit packages offered by Lucent or Intel, his previous employer; a start-up backed by venture capital has to try to keep its burn rate low. Instead, Flarion offers stock options and the excitement of working on cutting-edge technology. “We’ve been very successful in hiring people with what we have here,” Dauer says.
Flarion also reduced its burn rate by hiring T. Williams Consulting, a high-tech strategic staffing firm based in Collegeville, Pa., to orchestrate the recruiting process–placing ads, scouring Internet job boards, paying for employee referrals and targeting passive job seekers at engineering firms. T. Williams charges a flat retainer of about $16,000 a month for the services of an on-site account manager who typically hires two or three people monthly. That’s a bargain when you consider that headhunters typically charge 25 to 30 percent of a new hire’s salary-a $30,000 cut from the salary of a highly qualified engineer.
A company that can’t offer big paychecks or stock options and doesn’t exactly ride the leading edge of technology (“Wanted: network administrator for small but growing sanitation firm”) has its work cut out for it in the recruiting game. One strategy for small, nondescript IT employers is retraining workers who would otherwise remain unemployed.
It’s much cheaper to retrain a COBOL programmer or network manager to write Java or develop Web content than it is to hire a person with those skills out of college, or lure someone away from another firm. The most cost-effective training medium today is the Internet; companies such as SmartForce.com www.smartforce.com and Saba Software www.saba.com offer online certifications galore in Microsoft, Cisco, Java, XML, and Internet security technologies. And online training exchanges such as RFP Exchange rfp.thinq.com bring together vendors to bid on RFPs, driving down training costs for small firms.
Walking the walk
Tech thrills and generous compensation can’t sustain an IT workforce for long. Stock options have lost their luster, especially in shell-shocked Silicon Valley, and six-figure salaries don’t make up for 80-hour work weeks and slipshod management. Sooner or later, a skilled IT staffer will respond to the siren song of a larger company that offers comparable or better pay, more vacation, a saner environment, and swank corporate amenities.
Small businesses can minimize defections by nurturing the sense of meaningful participation that attracted employees in the first place. Many ambitious IT pros would rather be an engine of change than a cog in a giant, impersonal machine, observes Mike Sweeny, managing director of project staffing at T. Williams. “If you’re part of a large team, you’re just going to be one little piece in the puzzle,” he says. “In a smaller company the development staff might be six people. So you’re going to have much more input, and your value to the organization gets recognized a lot more.”
When employees leave, it’s usually because they don’t like either what they’re doing or their boss, says Kim Morrison, COO of E-smith, Inc., a Boston-based provider of Linux-based network servers and managed services. The solution is smart, sensitive management that addresses those concerns before they can corrode the worker-employee relationship. “There needs to be competitive compensation and all those other things,” she says, “but first and foremost, you have to be a good employer offering meaningful work in a context that feels good to people.”
One crucial element of the IT work experience that often gets neglected in small firms is training. IT workers, aware that they must constantly hone and diversify their skills in order to stay marketable, value the opportunity to learn on the job. E-smith holds regular internal seminars to keep its technical staff up to date on the latest developments in Linux and the open-source movement.
Not that IT staffers at small firms don’t appreciate perks as much as their Fortune 1000 brethren. An entire industry has sprung up to cater to the creature comforts and emotional needs of stressed-out IT workers. BeyondWork Inc., a Santa Clara, Calif. firm, provides its clients’ employees with “work/life” benefits such as cruises, handheld computers, errand services, golf outings, and in-office massages.
That’s the thinking behind New Century Technology’s “Team New Century” program, introduced last fall. Surveys and focus groups elicit feedback on job satisfaction; employees receive acclaim and awards at monthly meetings; and freebies-catered breakfasts, chair massages, free movie tickets, Christmas gift wrapping by representatives of a local charity-abound. Last fall the company staged an indoor golf tournament in the office, fueled by pizza. “We’re constantly having to think about what can we do to make them feel great about being here and not leave,” Halford says.
Flexing those IT muscles
Accomplished, contented IT employees aren’t much good to a company that doesn’t know how to harness its diverse skills to drive the business forward. Recruiting and utilizing IT professionals go hand in hand. An employer must have a firm idea of what it wants to accomplish before posting want ads. Who replies to those ads–or who they become on the job–will determine how human resources can be leveraged to attain tactical and strategic goals.
Individual effort somehow must be integrated into a company’s overarching mission, and nowhere is this more vital than in IT, an integral element of any organization in the age of e-business. Innovative small businesses try to structure their IT staffs in a way that gives techies the freedom to transcend their traditional roles as network minders and code jockeys.
Large companies tend to segment their IT staffs, creating separate units to manage infrastructure, develop applications, and drum up business. If your IT staff consists of six people, it makes sense to create a potpourri of talent. One employee may be a pure developer who excels at pumping out code on deadline; another may relish reconfiguring routers; and a third and fourth, besides being pretty good technicians, may have an instinct for business development or marketing.
Peter Bresler, director of Towers Perrin’s e-consulting practice in Chicago, says IT can serve as an “external scanning mechanism” for small companies. Staffers encouraged to keep their eyes open–and rewarded for strategic thinking–may spot new technologies worth acquiring, or sniff out potential customers and strategic partners. “The challenge for leaders in these small companies is not to try to turn every IT person into a business development person,” Bresler says, “but to recognize that there are some people who might be able to add value in ways beyond their job description.”
Forming cross-disciplinary teams is one way to bring hidden talents to the surface and to allow ITers to get involved in the larger picture–an organizational model pioneered by auto manufacturers such as Saturn. By talking to sales representatives, hardware engineers get a clearer picture of what customers want. By talking to marketing, Web designers gain insight into how a new technology or service will be positioned with current offerings. Exchanging diverse ideas and perspectives via e-mail, instant messaging, or in face-to-face meetings speeds up the creative process and yields solutions that otherwise would never come to light.
One Towers Perrin client, a multinational energy company, has adopted the “Hollywood model,” a cross-disciplinary approach based on the movie-making process. Just as actors, writers, and cinematographers blend their talents in the studio for a few weeks before disbanding, employees and outside consultants convene to work on a specific e-business project before moving on to their next assignment. The company takes the tinseltown analogy literally, dubbing its HR head the “e-casting director.”
Human capital is any company’s great strength, and like strength, it will fade if not put to work wisely. A small business may not be able to confer blue-chip status, pay princely salaries, or enroll its employees in Club Med. But it can challenge its IT workforce intellectually, foster a fun and pleasant office environment, and maximize resources through smart organization and teamwork. Above all, an enterprise of modest size can offer workers something that most large companies cannot, for love nor money: a chance to stand up and be counted, to make a genuine difference in the fortunes of their employer-and by extension, their own.
The right resources can produce the right virtual human capital
Doing all the right things to recruit and retain, but still getting sand kicked in your face? Then consider outsourcing. There are plenty of opportunities to obtain the services of consultants or freelancers who may end up doing a better job than the permanent, full-time IT pros you can’t find or keep.
Outsourcing makes a lot of sense for start-ups or small businesses with cyclical business models. When a major product rollout ends or an e-business initiative falters, a $70,000 salary becomes a lead weight on the bottom line. One way to modulate IT demand and relieve recruiting pressure at the same time is to hire a small, permanent staff, then supplement it as needed with contract workers.
Matrix Resources Inc., an IT staffing company based in Atlanta, calls this the “core group” strategy. The systems analysts, programmers, technical writers, and other specialists that Matrix supplies its clients generally cost more in hourly fees than full-timers do. But they don’t demand severance packages, and their narrow focus makes them highly productive.
“We don’t go in and recommend this as a cost-savings measure, per se,” says Don Palmer, director of Matrix’s permanent placement division. “It’s more a question of how you wisely address the business opportunities out there. Does the situation dictate, because maybe there’s a peak and valley associated with the need, some mix of permanent and consultant?”
At most companies, CIOs are the ones doing the outsourcing. But Support.com, a Redwood City, Calif., start-up that automates and personalizes IT user support on the Web, turns that relationship on its head.
The company is too small to justify employing a seasoned CIO-as if it could find one in Silicon Valley. Instead, Support.com relies on a team of “virtual CIOs,” provided by If & Then Inc. of San Jose, to direct the rollout of its ERP, customer relationship management (CRM), and data warehousing products. The virtual approach lets the firm tap into a deep reservoir of knowledge, while giving it the staffing flexibility it needs at an early stage of development.
“The key advantage If & Then brought was tremendous experience,” says Mark Williams, Support.com’s IT director. “Each of their consultants has been through these kinds of enterprise application rollouts many, many times.”
For eight months last year, a former Apple executive with 30 years of IT experience served as the company’s CIO, communicating with Williams and four other staffers by phone, e-mail, and videoconference when he wasn’t on site. Two other If &Then consultants, all CIOs in past lives, helped Support.com launch its products. The onsite consultant also acted as Williams’ mentor, lending a hand with general IT planning and even filling in for him when he was on paternity leave.
A new virtual CIO recently took the reins, quickly brought up to speed by the outgoing team at If & Then. Williams says that after this year’s ERP, CRM, and data warehousing launches he may scale back the service-which costs about $10,000 a month for CIO services one day a week-to devote more time to internal matters.