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How Dot-coms Learned To Value Tried and True

HR can create an attractive start-up environment byemphasizing learning opportunities, paying attention to individual needs, and promoting a sense of meaningful work.

April 26, 2001
Related Topics: HR Services and Administration, Miscellaneous Legal Issues
In hindsight, the first wave of dot-com companies was rife with humanresources problems. The famously laid-back work environment, which madecompanies especially appealing to younger workers, also bred lax attitudestoward morale, sexual-discrimination issues, and interdepartmentalcommunication.

    After the dot-com crash of 2000, it was easy for observers to pick throughthe remains of crashed online companies to see where things had gone wrong. TheIndustry Standard magazine, for example, noted that several companies had leftthemselves wide open to sexual-harassment charges by not even having the properpolicies in place. This was corroborated in The New York Times, which inFebruary reported several incidences of mistreatment of female employees.Examples included women being referred to as "bimbos" by coworkers,forced to view Internet pornography, and threatened with a loss of employmentafter they broke off relationships with male executives.

    Other human resources problems were more procedural, but nonethelessrelevant. Many companies eschewed performance evaluations, according to TheIndustry Standard, and were left unable to "document against employeelawsuits claiming they were underpaid and overworked, not promoted, or let gounfairly."

    The dangers of ignoring HR came to a head during the recent rash of masslayoffs, when several dot-com businesses such as and APB Online,Inc., found themselves being sued by former employees for wrongful dismissal. Wall Street Journal business writer Kemba J. Dunham reported that "manydot-coms lack seasoned human-resources managers or even written human-resourcespolicies."

    Sheri Cardo, public director of relations for KnowledgePoint, says herclients tell her that most start-ups wait until their second wave offund-raising before they pay attention to HR -- and then it's too late.KnowledgePoint produces HRMS software, including performance-evaluation programsthat are used by several small companies, among them

    With 33 employees -- a number that increases at a rate of about one or two newpeople a week -- is too small for a full-fledged HR department, andtoo big not to have one. Kathie Pierro, assistant to the company's CEO and theperson responsible for the company's HR programs, has a strategy that beginswith outsourcing all the "mechanical" functions of HR -- such as payrolland benefits management -- to a single company. This, she says, is less expensivethan hiring a second HR person.

    Pierro says that outsourcing and the use of HR computer programs lets herdeal with the more human HR issues associated with any new company. "Whilea creative team -- and all dot-coms are essentially creative companies -- needs theright type of environment in which to flourish, team members are still human andneed a certain kind of structure to feel secure. When explosive growth surroundsyou, you need to know that at least certain rules apply."

    Debbie Sotelo, an HR manager for, has found that communication isan underlying problem for many start-ups. She points in particular to problemsin the interview process, when a candidate receives different job descriptionsfrom different supervisors, and in production, when project managers receivedifferent instructions from different project team members.

    The HR problems that plagued the first wave of dot-coms were hardly the onlyfactors that contributed to their downfall. Rosabeth Moss Kanter, author ofthe bookE-Volve!: Succeeding in the Digital Culture ofTomorrow, believes that marketforces were responsible for the lion's share of the damage. Still, she seesplenty of opportunities for good HR policies to contribute to a start-up'sstrengths.

    "The new wave needs to focus less on greed as a motivator," Kantersays, "and focus more on the long-term creation of meaning and value, alongwith long-term economic value...Some of the early start-up owners thought theywould make their money by selling the company to someone else."

    Kanter says that HR can create an attractive start-up environment byemphasizing learning opportunities, paying attention to individual needs, andpromoting a sense of meaningful work. "The money has to be fair, but itdoesn't have to be everything."

Workforce, May 2001, p. 15-- Subscribe Now!

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