November 20, 2003 -- (WEB HOST INDUSTRY REVIEW) -- Even less-than-stellar Web hosting companies don't have much trouble retaining their best technical employees today, as the economy itself is proving to be an effective employee retention tool within most industries.
In the days of free-flowing venture capital, grandiose benefits often kept an Internet service provider's best employees from being lured away by competitors - a predator replaced today by customers wanting to host their own Web sites.
The issue of employee retention and extravagant benefits has been upended by the current state of the job market, says analyst Lydia Leong of Gartner Inc. (Gartner.com), a research firm based in Stamford, Connecticut.
Such perks as corporate chefs and employee access to corporate yachts have been replaced by the general attitude of "Be grateful you have a job, because a lot of your colleagues don't," Leong says.
"This is not the time when you want to be job hunting... the industry at the moment isn't as obsessed with retention the way they used to be, because of the sheer glut of personnel out there."
Leong adds, "I don't know of anyone in the industry right now who shouldn't be worried about their job... if you work for big outsourcers like IBM or EDS, you are worried that someday they are going to move those jobs to India. If you work for a smaller hosting company there is a strong probability that you may be merging with somebody else, and some people will be laid off."
Leong says some companies have been foolishly taking advantage of the current job market, which obviously favors employers, by operating a negative, reward-free environment.
The worst thing is to create a syndrome whereby if the economy picks up, "[employees] will say, 'hey, I don't have to take this anymore' and they leave, which is a devastating blow for a company," Leong says.
Profitable companies are still paying bonuses and implementing at perks as incentives, not at levels similar to the excesses of the dot-com era. In fact, Leong considers an intangible such as soda machines to be a bellwether of not only how employees are being treated, but also of a company's financial health.
"If the soda is free, times are good; 'we like our employees' and/or the money is flowing. If it's 25 cents, it's break even, and times are still good. If it's at the $1 point or beyond, [companies are saying] 'we are so desperate we are willing to hose our own employees over soda,'" she says. "Soda machines are a really interesting indicator, especially when you come back and you see the price has gone up. If they are starting to look what soda is costing, that's when they are really taking a close look at their bottom line."
Retaining the best employees can be worrisome in any economy, says Richard Dym, chief marketing officer for Santa Clara, Calif.-based OpSource (OpSource.net), a privately funded managed services provider founded about 15 months ago. During that time, it has acquired four other companies and grown to 65 employees and nearly $10 million in annual revenue.
"I don't want to say the economy is so bad nobody is getting lured away, but the reality is because of the very slow growth in the hosting and services world there is less pressure in terms of recruiting from competitors... but there is no question your best people have reputations, and you are always somewhat at risk they will leave," Dym says. "It isn't necessarily your competitors you have to worry about. What you do have to worry about sometimes though are your customers."
The ever-present challenge for ISPs is that someday a good customer will decide to take Web hosting services in house rather than continue to outsource, which could lead to the loss of experienced staff.
"Let's face it, who are they more likely to try to want to pick up if they are going to bring the services in-house? They want the people who have been doing it for them," Dym says.
Few providers protect themselves with no-hire clauses in their hosting contracts, "because you just don't want to pick a fight with your best customers. It's a very difficult situation," he says.
Sometimes the geographic location of the company itself is a key benefit.
Such is the case at Ulysses, Kan.-based Pioneer Communications (PionComm.net), a telephone, cable television, digital TV, and Internet service provider whose corporate culture is shaped by its rural setting in the southwest corner of the state, where the main industries are oil and gas, farming, and Pioneer Communications. The town of 6,000 residents is 300 miles from any city. A slower lifestyle and a decent wage and benefits package has made employee turnover almost a non-issue among Pioneer's 140-member staff, says Kelly Johnson, data communications manager. With 12 years tenure, he is still considered a newcomer.
"Our wages surpass most in the area... technicians, we offer the ability to utilize their training, and we offer some of the best equipment to work with. Due to our location, we do not outsource many services. Our technicians know that we depend upon their talents, and this brings the best out of them," Johnson says.
Access to the best equipment and flexible working hours are considered musts to keep technicians happy, who are mostly home grown and have learned their jobs hands on. Johnson hires more for ability to learn about technology than a college degree and is concerned about hiring anyone from a big city. "I want them to be familiar with our culture. If you wake up at 2 a.m. and can't sleep, you can't go down the street to watch a movie. That's not going to happen here," Johnson says.
Working at Pioneer is all about a strong family culture, a two-minute commute, and employees who want to be able to work and "still watch their kids play sports or participate in school events," he says.
Thomas Cunningham, chairman and chief executive officer of Alabanza Corporation (Alabanza.com), a hosting automation firm, says in addition to decent compensation and benefits packages, employees want many intangibles that only a company of conscience can provide. The privately held company's 125 employees take turns working at a nearby soup kitchen
Topping the list of intangibles are employees' desire for creativity and innovation, honesty and integrity, continuous feedback about their job performance and the resources to improve, Cunningham says.
While intangibles are important in any job market, the instability of today's economy makes it near impossible to give employees what they want most of all - which, according to Leong, is "the assurance that they are going to be employed."
