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America Online Boots Up for Hypergrowth

December 1, 1995
Related Topics: Internet, Growth, Candidate Sourcing, Featured Article
The following article is meant to be interactive. Feel free to personalize your experience by reading the KEYWORDS in any order you choose.

KEYWORD: New Medium
It's Thursday night. You've got a major decision to make: Tune in to Seinfeld? Or plug in to America Online? For the majority of U.S. households, the former is more likely. But if you're a human resources executive like Mark Stavish, you might be more wired to doubleclick your way through cyberspace. "Lots of people ask us about Microsoft. It's a formidable competitor. But if you think about it, our competition is Jerry," says Stavish, vice president of human resources for Vienna, Virginia-based America Online Inc.

Say what? Think about it. In the 1940s, Americans started watching TV. Now, as we enter the 21st century, newer revolutions are occurring in the world of technology and communications. For example, the online computer industry is a relatively new medium, still dwarfed by broadcast and cable TV. But down the Information Superhighway, companies such as AOL hope to drive online content, multimedia and the Internet in a more engaging way. So when Stavish and AOL's CEO and president, Steve Case, talk about market potential and competitive edge, they're talking about how online services and the Internet are changing the way you and I obtain information, seek entertainment, communicate, buy products and learn new things. "Our aim is to build a mass market for interactive services. To do so, we must reach out to the 93% of households that don't currently subscribe to any online service," Case has been quoted as saying. "It's not about technology. It's about building a community."

Clearly, AOL and its competitors have a long way to go. But every new frontier has its pathbreakers—and America Online is one of them. In just 10 years, the company has evolved from a tiny start-up in Vienna, known as Quantum Computer Services Inc., to one of the leading and fastest-growing commercial online services in the United States today. Call it hypergrowth. Founded in 1985, AOL recently announced it had more than tripled its community in one year to 3.5 million subscribers—including its trial members. Approximately 79% of all AOL members are male; 71% are between the ages of 18 and 44; and 46% hold executive, management or professional positions. In addition to its impressive growth in members, AOL also has grown in terms of revenues ($358.5 million for fiscal 1995 compared to $165 million in 1994), its strategic alliances and its information data base. Moreover, AOL's work force more than quadrupled from 500 in 1994 to 2,700 in June, says Stavish.

Why the phenomenal growth? According to a Personnel Journal survey of HR professionals, 97% believe online services will change how they do their jobs. This holds true across the board. Folks are signing up with AOL for a wide variety of features: E-mail, access to the Internet, online conferences, news and magazines, weather, sports, stock quotes, software files, computing support, online classes and much more.

AOL views itself as a guide that provides organized tours of this new electronic frontier. Similarly, the 10-month-old HR department at AOL is carefully guiding a predominantly new and younger work force (many of them are Generation Xers) to meet the subscribers' increasing demands for superquick, real-time information and customer service. What hypergrowth has meant for Stavish and his staff of 26 is speeding up recruitment and training for cyberspace while building a solid HR infrastructure that will serve AOL's ever-changing needs and direction, including globalization. "It's like building an airplane in midflight," says Stavish. So, fasten your seatbelts, ladies and gentlemen—and prepare for take-off.

KEYWORD: Beginnings
Whenever CEO Steve Case used to hear the word surf, he thought about Hawaii, where he was raised. Little did he realize bigger waves were crashing on the horizon. By the time Case was ready for college, he headed to Williams College in Williamstown, Massachusetts to study political science. Upon graduation, he obtained his first job selling shampoo for Procter & Gamble Co. Then came a stint with PepsiCo Inc. in Kansas, conducting customer surveys and focus groups in the Pizza Hut division. Although his hunger for fast foods waned, his appetite for computer sales grew. In 1982, Case bought his first computer, a Kaypro. He also added a modem and signed on to The Source, an earlier online service. "I thought it [connecting online] was magical then. I still think it's magical today," he says.

Later that year, Case decided to get wired full-time. He joined Control Video Corp.—a start-up that provided home video games over the phone. It was there he met Jim Kimsey and Marc Seriff, eventual co-founders of America Online. With Kimsey providing the financial expertise, Seriff the technological expertise and Case the marketing know-how, Quantum was born. The entrepreneurial trio, however, knew from the beginning that their business strategy would require building key alliances. Quantum, therefore, delivered the online service to Commodore International Ltd. users in exchange for the latter company's agreement to bundle QuantumLink with its computers and modems. Within a couple of years, Quantum's various offerings were consolidated under the name America Online. Among its competitors today are CompuServe, Prodigy, Microsoft Corp., AT&T—not to mention the Internet, the world's largest computer network with more than 30 million users.

According to San Francisco-based Odyssey, a marketing research firm, there are approximately 96 million households in the United States. About 27% of these households have personal computers; 63% of those with PCs use them for business; 16% have PCs and modems; and 6% have PCs and CD-ROM drives. But only 7% of PC owners subscribe to an online service. While these figures challenge some of the media's hype about home-computer sales, AOL and others are still poised to steer the new medium from a niche market to a mass market with a broad consumer appeal.

With the population explosion in subscribers and employees, it's certainly no wonder that Case hired Stavish in February to build up an HR department from scratch. "Typically, in small technology companies, HR grows up through finance because of the payroll and benefits," says Stavish. "So when I came to AOL, we had 900 employees, and there was no HR function except for those two areas. With the rapid growth, people were unbelievably stretched. That's what I inherited."

KEYWORD: Human Resources
Although the online services industry creates an unprecedented electronic context for AOL's employees, partners and customers, HR's mission is universal. Says Stavish: "We need to keep employees' distractions to a minimum. But we also need to work with our executive team to improve our organizational capability."

Fortunately, Stavish brings years of HR experience to this new work environment. A graduate of Iowa State University, he received a master's degree in industrial relations before taking a position in 1978 with Mobil Oil Co. in Fairfax, Virginia, primarily as an HR generalist. After nine years, he left the company to become an employee-relations manager for Pepsi-Cola Company's bottling operations for western Pennsylvania and West Virginia. From 700 employees, the operations grew overnight through an acquisition to 1,500 employees. "I was immersed in acquisition and integration activities," he recalls. Later, he moved to Pepsi-Cola's headquarters in Somers, New York to negotiate contracts nationally for the company and to focus on management development during a major growth spurt and total quality movement.

Stavish wasn't planning to leave the company when an executive search firm first asked him to consider joining AOL. He knew very little about the company's services then: "I played around with it a bit, but I didn't know much about online services," he says. After considering what seemed like a career opportunity of a lifetime—a fast-growing company in a new market segment—Stavish decided to come aboard.

Within 10 months, Stavish has established an HR department that now includes 13 HR professionals who oversee compensation and benefits, staffing, training and other basic HR functions. Thirteen additional employees provide administrative support for the relatively new department. Most are located at company headquarters in Virginia, but several of the generalists anchor HR functions where AOL has a large concentration of employees—in Tucson, Arizona; Jacksonville, Florida; and Ogden, Utah.

Launching an HR department at AOL, he says, has been similar to introducing online services to new consumers. At Pepsi-Cola, the HR functions had credibility. The company had tradition, a reputation and industrywide respect. But when you work at a company that never had an HR department, "You have to sell the function and educate people around you about how you can help them. You have to build your own credibility," he says. That means assembling a new HR team and developing a strong management team that will in turn unleash the company's energetic work force.

Says Kathy Ryan, vice president of AOL Productions, the content creation studio for America Online: "The scope of what HR needs to do for us is so much broader than before. We don't just need to have a group that processes paychecks. HR needs to help us figure out ways to communicate between our different [divisions]; keep us working together; manage new employees and incorporate them efficiently into the organization. HR is an extremely important area."

As vice president of HR, Stavish also has been given responsibility to work with AOL's executive team to strengthen the company's culture and core values, organizational capacity and work processes. America Online's executive team currently is organized into three main operating divisions headed by senior-level vice presidents: AOL Technologies; AOL Services and AOL Enterprises. In addition, the senior vice presidents of AOL International, Corporate Development, and Finance and Administration (where HR resides) also report directly to the CEO.

In an earlier discussion with Stavish, Case expressed his concern about employee respect. "[Case] has a highly evolved sense of right and wrong. He wants to make sure our employees are treated right at AOL." The company's working environment has been described as fun and informal—although quite demanding. "We can't afford to have a high turnover rate at our call centers. Otherwise, our members get poor service," he says. And in the world of online services, too many busy signals, frozen screens and generic advise ("Ma'am, try reinstalling your software...") certainly will perforate an ulcer. So clearly, online customer service begins with hiring the right online employees.

KEYWORD: Recruitment
Most of AOL's employees fall into three basic categories: call-center representatives, content producers (the cool guys) and computer programmers—the ones who integrate the content with AOL's program system. In terms of numbers, the greatest employment need is for the call centers, according to Dan Gillick, director of staffing for AOL Technologies, AOL Services and AOL Enterprises. He explains, "We have a continuous need for very qualified Member Services employees."

Imagine you've signed on—your screen name is HRboss and your password is turnip. Once you've made your online connection, you see or hear the message, "Welcome, you've got mail!" Your face lights up as you discover seven messages awaiting you—including a greeting from an overseas colleague in London. So far, so good. Then you successfully download the attached file (your colleague's monthly expense report, including several high-tea meetings). But when you click Download, the screen freezes, and your stomach tightens. At this point, most users would click Member Services and pursue one of three options: Dial an 800 toll-free number; send an E-mail to AOL; or simply go to Tech Live for instant advice online. This is where Member Services representatives step in.

Call-center representatives are divided into two groups. One group answers the toll-free telephone calls for free software, pricing, billing and other general questions. The second group offers the technical support for those who have already installed the software, but have technical problems as new users. Half of this second group responds to E-mail requests, and the other half provides the live interactive assistance known as Tech Live.

"You have to sell the function and educate people around you about how you can help."
Mark Stavish,
AOL Vice President of HR

By the time AOL users seek help, they're often tired, frustrated and impatient—if not incoherent. "The biggest thing in terms of customer service is empathy," says Mary Daffron, a long-time employee who worked her way through the positions of customer-service representative, training specialist, education manager, and service delivery manager to her current position as corporate training manager. "These novices are our target. They're either using computers for the first time or it's their first time using online services. Empathizing with their confusion takes you a long way."

AOL, she says, hopes to encourage more users to seek assistance via E-mail and Tech Live , but for now the general public still prefers to dial toll-free numbers. "So when we're [signing up] so many people a day, and one out of two tries to contact us and get customer support within their first 30 days, you get a huge number of calls," she explains. Call-center representatives comprise 60% of AOL's work force. Each averages approximately 45 calls a day. Adds Daffron: "We've taken a very aggressive approach to hiring, training and getting people on board to help our customers."

Member Services representatives are most successfully recruited through local job fairs, says Gillick. Job recruiters conduct these fairs in local hotels where AOL has opened its three new call centers. Each center in Tucson, Jacksonville and Ogden employs between 500 and 800 workers. Weeks before the Jacksonville center opened, AOL was featured in a front-page newspaper article. The article mentioned the local job fair. As a result, more than 2,000 people showed up to fill out the applications.

"We initially hired approximately 200 people. Today we have about 600 employees over there," says Gillick. A call-center representative, he says, doesn't have to be a computer wiz, but an affinity for online services doesn't hurt. Some have associate of arts degrees or previous experience in other call-center environments. "We're paying competitively for our employees," he says. Stavish says call-center representatives can earn between $7 and $9 an hour, depending on their experience. "We can create a significant applicant flow very quickly and staff those centers immediately."

One of the ways in which HR provides training for customer-service representatives is through a Quality Monitoring Form. Supervisors can assess a representative's interactions with a customer by observing the following behaviors: During the greeting of the call, did the representative thank and welcome the member to AOL, identify himself or herself by name and reconfirm the existing information with the member? During the troubleshooting period of the call, did the representative invite the member to describe the problem, walk the member through corrective steps while keeping instructions at an appropriate level? During the resolution stage of the call, did the representative achieve an accurate resolution or explain some other solutions? And finally, did the representative ensure the member understood the explanations before hanging up, and did he or she follow through on any commitments made during the phone call? These kinds of skills require special training, especially if your younger employees don't have years of work experience.

Keyword: Go-getters
Managing AOL's Generation Xers has its positive and negative sides, according to Daffron. They're an asset in terms of being technically quick, creative and energetic. But the HR challenge with this group is they lack experience in the working world. "My perception is they don't readily appreciate creating processes. They need balance," she says. "When you're young, things are fast-paced. But you have to pace yourself or you wear yourself out and lose interest." That's why supervisors at the call centers often treat their employees to special social activities, such as a day at an amusement park, a sports event or a local tourist attraction.

The second and third major categories of employees are the content producers and computer programmers. Gillick says that as AOL continues to expand its information data base and reach a broader cross section of consumers, HR will need to create a stronger presence on college campuses. "We're not a small company anymore, and the type of young professionals we're looking for are bright, flexible, entrepreneurial and have a better aptitude for online services than me (Gillick majored in economics and attended law school while working for Blue Bell, Pennsylvania-based Unisys Corp. as an employment representative). It's real important to tap into that talent pool." In addition to campus recruiting, AOL also searches for computer-literate programmers via the Web site Online Career Center ( on the Internet.

Most of AOL's current employees in these categories are in their mid-30s. Sixty percent are single and equally represented by gender. But Gillick says AOL increasingly will search for producers and programmers from the nation's leading universities and colleges. "They cultivate very bright people who have an interest in this fledgling industry," he says.

Typically, content producers are the ones who love to dream up what information goes online. For example, AOL features a variety of areas ranging from Business Week Online to Merriam-Webster's Word of the Day (mnemonic) or Oprah's online discussion on "Little Girls Obsessed With Their Looks." Many of the content producers have college degrees, and some have come out of the entertainment industry, according to Stavish. These employees are required to be innovative and content-oriented. "There's no roadmap out there because we're creating a new medium," he says. AOL pays its content producers annual salaries that range between $30,000 and $40,000.

Programmers—the ones who build and design the software that supports AOL's online services—are even more specialized. "These are highly skilled professionals with technical expertise," says Gillick. Recruiters typically look for individuals with an understanding of Windows and/or Macintosh platforms, as well as good accounting management skills, because these employees must often work with the information providers, such as The New York Times, to build their areas online. Programmers, according to Stavish, are paid between $50,000 and $80,000.

But whether AOL is recruiting call-center representatives, content producers or computer programmers, HR makes the same pitch: "First and foremost, we present our company as one that's growing incredibly quickly in a brand-new medium. We're in a ground-floor industry that literally changes every day. That's why it's such a challenging place to work," says Gillick.

KEYWORD: Training
If there's anyone qualified to oversee the non-technical training of managers and employees, it's Mary Daffron. As manager of corporate training, she knows what it's like to answer the phones, respond to E-mail, develop training material from scratch and manage a call center. She also can explain why people like to work at America Online. "One of the great things about our company is the potential for personal growth," she says. Although Daffron graduated from Virginia Polytechnic Institute and State University with a bachelor of science degree in industrial engineering, she decided not to pursue that career path. "I didn't want to be an engineer because it didn't have as much people interaction as I wanted," she says. In 1988, she saw an advertisement in The Washington Post for a customer-service representative at Quantum Computer Services. "At first, I thought [online communication] would alienate people because they wouldn't be face-to-face. But my opinion has changed. It can really enhance communication," says Daffron, whose parents and two sisters used to sign on to their own private chat room once a week.

Having worked her way up through the ranks, Daffron also knows that the best way to train employees is to properly train AOL's management. "It's a new function in the company and HR," she says. "We're still defining it." HR currently is developing a plan to provide the non-technical, universal training for employees. (AOL Technologies provides the training for technical representatives and programmers; AOL Services provides the technical training for content producers.)

Daffron says the most pressing need right now is to train the supervisors, managers and directors who oversee the general employee population—regardless of the division. By conducting management interviews and some employee focus groups, Daffron has identified some of the broader issues that management must address. Among them: team building, sexual harassment, performance reviews and problem resolution. "My responsibility is to assess those needs," she says. Although AOL hasn't formally instituted company work teams, HR is a virtual team that relies on individual and collective expertise. As these broader issues are addressed, HR will work more closely with the various division directors, she says.

Another important part of training is instilling AOL's corporate values of building a community—not just in cyberspace, but within the corporate family. Training and education, therefore, has been designed to reflect the same fun and friendliness AOL users are accustomed to. For example, when human resources is conducting call-center training, employees embark on treasure hunts online to become familiar with the information data base. Technical employees are given an opportunity to take a computer apart to see how it functions. "It also depends on the personality of the trainers. But there's a contagious energy around this place," she says.

Stavish agrees. In July, AOL convened an all-employee videoconference that was televised at all of the remote locations. "It was like a rock concert," says Stavish. "Here we were presenting our business plan and showing our new products—and people were getting so excited. There was power and energy in that room," he says. That energy, he adds, also permeates smaller groups. When AOL built its various facilities, designers created conversation pits with sofas so three or four employees could huddle over pressing issues. In fact, AOL's working environment is so relaxing that Stavish felt overdressed one day when he arrived in Dockers and a T-shirt. "We encourage our employees to be informal. There's not much emphasis on regimented meetings and start-and-quit times. But we do make other high demands. Our ability to make a quick impact are the premiums we place on our people." For example, when millions of people were awaiting the verdict on the O.J. Simpson trial, AOL Services had to be prepared. The sheer number of users and customer-service requests were expected to skyrocket minutes after the jury's decision. That particular news item impacted AOL's news areas, chat rooms, E-mail and gateways to myriad Internet Web sites.

"It's a constant struggle to meet customer service demands. The biggest thing is to put more tools at our work stations so our representatives can enhance their efficiency and consistency," says Daffron. One way HR has facilitated that process is by providing a problem-resolution data base called Vantive™. When a customer complains that the modem isn't connecting to the local server, call-center representatives can trouble-shoot by asking callers to describe the symptoms of the problem; looking up the possible causes; and offering concrete solutions.

KEYWORD: Strategic Alliances
Given the nature of online services, companies like AOL could never meet their customers' information, education and entertainment appetite without key partnerships. Within the last several years, the company has aligned with more than 300 leading hardware and software companies to develop new technologies. AOL also has partnered with dozens of companies to expand the content and marketing of its services: Time Warner, ABC, Knight-Ridder, Hachette Filipacchi and IBM, to name a few. Through its joint venture with Bertelsmann AG—one of the world's largest media companies, AOL plans to extend its global presence in Europe—beginning in Germany, France and the United Kingdom.

In fact, HR recently dispatched its first global team of content producers to Hamburg, Germany to help launch AOL services overseas. "That, in and of itself, creates potential recruitment [and training] issues," says Gillick. Does AOL send domestic employees abroad, or bring foreign nationals to be trained in the United States before returning home? Or both? Human resources, Gillick says, has been involved in preparing AOL's first team of content producers for a 90-day exchange program with Bertelsmann AG. The four AOL producers are expected to work with local representatives to build content and develop screens for Europe-based consumers. Sure, it sounds exciting. But Gillick says HR had to become global specialists within a very short time. First, the four producers had to be assured they would have jobs when they returned. Then there were meetings about the purpose of the venture so they would be clear about their tasks. Not to mention critical HR issues such as compensation, travel, visas, housing and cultural training. "This has been new territory for us. We had to do research to figure out what issues they would face—and then put together a program that's very competitive," says Gillick.

Being competitive, however, doesn't only mean going global. Through its joint ventures, AOL also has successfully attracted a core of domestic talent, described as infopreneurs. Earlier this year, the company launched the AOL Greenhouse to give these entrepreneurs the opportunity and production support they needed to add new content to AOL Services. Among the first Greenhouse participants were E. David Ellington and Malcolm CasSelle of San Francisco-based NetNoir Inc. They created NetNoir Online, which serves as a gateway between the traditional online world and Afro-centric culture.

Users can download interviews with musician Herbie Hancock, read articles about affirmative action or the first black HMO, check global news from Africa or view the pictures and profiles of prominent African-American professionals and entrepreneurs. "I saw a hole in the market, and [we] wanted to fill it," says Ellington, a former entertainment lawyer who submitted the proposal to Ted Leonsis, president of AOL Services. "He loved the idea and told us we were the perfect kind of company for the Greenhouse." Other Greenhouse favorites, he adds, are Motley Fool—an online investment area with an attitude—and iGolf.

Indeed, with so many choices, AOL's electronic community is growing quicker than a mouse click. For HR, it means balancing the critical short-term needs with the long-term strategy of grooming managers, strengthening the corporate identity and culture, addressing the broader issues of diversity and sexual harassment, and becoming more of a strategic partner within the company. "At this point in time, we're not high enough in the evolutionary scale, but I can certainly foresee the day when that's going to happen," says Stavish.

KEYWORD: Strategic or Seinfeld?

Personnel Journal, December 1995, Vol. 74, No. 12, pp. 28-37.

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