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Have dots & HAVE NOTS

Entrepreneur, Jan, 2001 by Chris Penttila

THE STAFF AT YOUR BRICK-AND-MORTAR BUSINESS ARE JEALOUS OF YOUR DOTCOMMERS. HOW CAN YOU KEEP THE PEACE?

Shawn Jenkins could guess what was coming. One of his employees at American Pensions sat across from him with a legal pad full of numbers--and asked for more money. What made this different from other discussions about pay? This brick-and-mortar employee with some database experience had done his research on salaries in the high-tech industry, and he knew how much tech workers earn. He also had an ever-present reminder of this profit potential: the company's new dotcom subsidiary, Benefitfocus.com Inc. "He asked for a raise, and it was due to our dotcom venture," Jenkins says.

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Jenkins, 33, president and CEO of Benefitfocus, had watched as two companies--the brick-and-mortar business and the dotcom spinoff--fought to coexist in the same building. On one side was American Pensions Inc., a 30-employee Mount Pleasant, South Carolina, company that services corporate-sponsored retirement plans and where Jenkins is a partner. On the other side of the company's headquarters was the "Green Room," an 850-square-foot room housing 11 programmers. Sales and administrative staff were in a nearby conference room. Both rooms full of people worked for Benefitfocus, a company that lets clients manage the health and retirement benefits of their employees online.

But as Jenkins found out, hiring techies creates a new pay structure--and new problems. Soaring demand has pushed compensation packages for tech workers through the roof. Estimates show that while annual pay for nontechies is increasing 4 percent per year, pay for techies is increasing 10 to 15 percent annually.

The numbers speak for themselves. According to Salary.com, a Web site that lets users view pay scales for almost any type of job, the median base salary of a Web designer with beginner's experience is roughly $51,000. Beginning webmaster? $52,000. Web content engineer? $71,000. The salaries for those jobs can top out at $55,000 to $80,000 annually. And those figures don't include stock options, percentage of company ownership and other benefits. In fact, a September 2000 study conducted by The Standard, an Internet-focused online magazine, found that overall compensation packages for IT workers average $104,000 annually.

The stellar pay of dotcommers makes nontechie pay seem paltry in comparison. Another search of Salary.com shows that a typical office manager earns about $37,000, a data entry supervisor makes about the same, and an administrative assistant pulls in a little less: $33,000. All these salaries tend to top out at $39,000 to $45,000.

Jenkins' American Pensions employees earn base salaries, quarterly incentives and annual bonuses based on the company's performance. But when Jenkins recruited for Benefitfocus, he had to go the extra mile: paying recruiters and offering part ownership and generous salaries to new recruits. Jenkins acknowledges he's paying techies more because of their technical abilities and market demand. "I'm paying people with two years of tech experience more than I'm paying accountants who have been on board for five or six years," he says.

What we're seeing today is a two-tiered pay system that shows no sign of changing any time soon. It doesn't help that the media have made geekdom cool, even glamorous, with technology CEOs as hot as pro athletes or movie stars. Nontechies may feel inadequate in pay and skills--and employers can be put in the awkward position of trying to keep everyone happy with their salaries, their benefits... even their line of work.

RISK & REWARD

Tech workers are used to compensation packages that offer more stock options than cash, and they know the dangers of working for companies that might not make it. Although market volatility has encouraged entrepreneurs to dole out less stock, the perception remains that techies receive generous options and become instant millionaires.

Jenkins says that although American Pensions employees haven't approached him about working for the dotcom, they have made comments about the potential rewards. "Two American Pensions employees told me that in three years I'll never have to work again," Jenkins says. "I said, 'That might be true, or I might lose my house.' I think it sunk in that this is a tremendous risk. [The dotcom] could come crashing down at any time."

Many employers, however, never address the risks and instead bide their compensation strategies from employees. Employers need to explain differences in compensation as an investment in the future of the whole company, says Andrew DuBrin, an industrial psychologist and professor of management at the Rochester Institute of Technology in Rochester, New York. "The CEO has to say, 'We have to pay to scale to get the talent we need for the company to move forward.' The CEO has to show that [hiring techies] is part of a strategy to benefit everyone in the company," he says.

Business Services Industry

Have dots & HAVE NOTS

Entrepreneur, Jan, 2001 by Chris Penttila

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