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Technology Is Holy in the Ancient Land of Israel

January 15, 2004
Related Topics: Global Outlook, Featured Article

    "Israel is a start-up country," says Gal Almog, CEO of Redmatch, based in Rosh Ha'ayin, Israel. "We started with nothing, we dreamed about it and we created it."

    Almog, whose firm creates "talent relationship management" technology that powers employment Web sites, is describing Israel as a nation, but he’s also talking about Redmatch. The start-up, already making several million dollars a year, is ambitiously and aggressively looking to expand, and will soon announce a deal with a large Midwestern newspaper chain.

    The employees at Redmatch, and others who make up Israel’s brainy talent base, are churning out technological innovations faster than you can say "Mighty Morphin Power Rangers"--toys that, incidentally, were produced by an Israeli whose family had fled persecution in Egypt.

    Israel is trying to emerge from a bitter, dramatic recession, the worst in its history. The bus and café bombings also have taken a steep toll on the country’s tourism business. This sharp drop in tourism, coupled with the technology crash, has deepened the poverty in neighborhoods throughout Jerusalem and elsewhere in Israel.

If and when the security situation and the global economy improve, high-tech Israeli companies are poised to grow rapidly. Israel has the highest number of start-up businesses per capita in the world, according to AMIDEX, a mutual-fund company that invests in Israel’s 35 largest companies. Israel is at or near the top when it comes to most other per-capita metrics of intellectual achievement, including more scientific papers, more museums, more engineers and more home computers. Technology appears in Israel where you least expect it. At the Dead Sea, where camels roam the land near Kibbutz Kalia, employees use the latest in Israeli technology to monitor the insemination patterns of cattle. Israeli-made workforce-management technology is used to track employees’ time.

    Almog attributes some of Israel's tech success to the realities of life in this tiny sliver of land, inhabited by about 6.7 million people. Many Israelis have served in the military, where they've gained an unparalleled work ethic, focused on survival, at a young age. In the meantime, they've picked up technology that they're adapting to the private sector. Almog himself served in an elite, much-studied unit of the Israel Defense Forces, and was involved in several high-risk covert operations.

    His talent-management technology, which he’s selling mainly to newspapers, involves "gap analysis." When a candidate applies for a nursing job online, for example, the software recognizes the nursing skills he needs as well as those he lacks. An online assessment then automatically queries the candidate, zeroing in on what he can and can't do.

    Almog charges newspapers by the job listing. He figures that if a newspaper pays him, for example, $1,000 per month based on 100 job listings at $10 a listing, that newspaper can turn around and charge an employer somewhere in the neighborhood of $3,000 for posting those 100 jobs at $30 per listing. The newspaper, in this example, sends Almog a check for $1,000, and makes $3,000 from an employer looking to recruit.

    Almog says his matching technology saves employers the trouble of receiving vast numbers of unwanted résumés, and he believes that employers will pay a premium for that.

Ahead but behind
    Many tech giants have divisions in Israel, including HP, Motorola, Dell and Qualcomm. Israeli technology is so deeply ingrained in the daily office life of Americans, most don’t even know that what they’re using was designed by an Israeli: Instant Messenger; the latest Intel chips; cell phones; Windows NT software; voice mail; computer firewalls.

    The Israeli businesses have the brains, but they are lacking in other areas. The country is several years behind the United States in the areas of workforce management, public relations and marketing. Or, as Almog says, the country is a start-up, and so "unfortunately, to a large extent, it's managed like a start-up, with a lack of discipline and a lack of procedures."

    Workforce-management executives here crave information from the West. Barron’s and Forbes are sold in bookstores, as you might expect, and at one Jerusalem office of the United Nations, the California-based Workforce Week (associated with this Web site) arrives on Tuesdays. Though some Israelis joke that they live in the "51st state"--working intimately with Americans on business, medical and military projects--life here is very different from that in North America. Starbucks opened up a few coffee shops here but closed them when the prices and taste lacked appeal among the Israelis.

American-style management
    There are some Israeli companies with workforce-management practices as sophisticated as some in the United States. One is Partner Communications, a mobile-phone company where Amnon Gideon serves as vice president of human resources.

    Partner has 3,108 employees, and trades on the Nasdaq. It is investing about $3 million annually in employee training, and Gideon, a Motorola veteran, is a major player at the company, reporting to the CEO and serving on the senior management team. The company has amenities that rival those of many American companies its size--a pub, a gym, a discounted cafeteria, laundry facilities and travel agents who book trips for employees.

    Gideon uses Gallup to assess employee motivation each year, supplementing the information with tools from an Israeli company called Yahav. He divides employees into four categories: strivers, truly dedicated, truly loyal and disconnected. The strivers, he says, are "hysterical" about the company, so excited about their work that they tend to burn out. The loyal employees do good work, but to them it's just a job. By training managers better, Gideon hopes to increase the percentage of employees that fall into the "truly dedicated" category.

    Partner pays Yahav more than $60,000 for the survey. Gideon simply points to Partner's business results as proof that the money is worth it. Research done in Israel, the United States and elsewhere shows that happier employees produce better service for customers. Partner has grown rapidly, from zero cellular subscribers in 1999 to 2 million today, and has a market cap of about $1.4 billion.

    Part of Gideon's work is to ingrain the company's values throughout the organization. Many of those company values are familiar to Americans, such as "integrity." Others are difficult to define in English, such as the company value efshar, a Hebrew word that at Partner is a shorthand way of saying "You can accomplish anything."

    As to why Israelis, including his employees, have been so successful in technology, Gideon says, "It would take a Ph.D. in anthropology to analyze it." He attributes it mainly to the competitiveness of Israelis, as well as the technology training and survival instincts that people have acquired in the military (where if they fail, the nation is gone). It may simply be their determination to build a better life for themselves. Many Israelis are refugees from Libya, Syria, Iraq and Ethiopia; tens of thousands of Ethiopian Jews have fled and are still fleeing poverty and persecution in Ethiopia and making harrowing journeys to Israel.

Vital signs up
    Everyone in Israel has a different opinion as to whether the economy is getting better, but most agree that the recession seems at least to have bottomed out. Although rates of poverty are high and unemployment stands at 10 percent, the country’s GDP is rising. Also, foreign investment is increasing, and American companies like Kodak have been buying Israeli companies in recent years. So have the Europeans: SAP bought TopTier Software for $400 million.

    The stock market is up, too, thanks in part to recent events in Iraq. The Tel Aviv Stock Exchange rose 3.4 percent after the capture of Saddam Hussein, whom Israelis regarded as a real threat to their survival. Hussein had paid families $25,000 if one of their children died in the process of killing a Jewish Israeli, and he had rained missiles on Israel during the first Gulf War.

    To keep the bull market and the economy moving, Finance Minister Benjamin Netanyahu is trying to reduce taxes, reform the welfare system and set up a new retirement program that is similar to an American "defined contribution" plan. Employers and employees would begin to pay into the retirement plan seven months after an employee starts work.

    Meanwhile, the Israelis keep inventing. A team of students at a university called Technion, often referred to as the MIT of Israel, is developing software that can recognize an employee’s typing habits. This would stop someone from using the employee’s computer without authorization.

    While violence in the Middle East has taken its toll on the Israeli economy, some of Israel’s technological advances would not have occurred if terrorism didn’t exist. Medical advances happen rapidly in wartime, and Israeli doctors are applying what they’ve learned to hip fractures and insulin injections, as well as diagnosis and prevention of cancer and Alzheimer’s disease. Among the other technological breakthroughs: one company, Export Erez, has designed a line of bulletproof clothing--for children.

Recent Articles by Todd Raphael

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