"The Reinvention of Collective Bargaining"

[Jim Westrich]

High-tech job hunters develop pack mentality 
     By Courtney Macavinta and Dawn Kawamoto
     Staff Writers, CNET News.com
     June 9, 1999, 11:55 a.m. PT 

     When it became clear that AT&T Labs wasn't going to spin out its a2b
Music division, employees who pined for a start-up atmosphere decided to
leave. But instead of brushing up their individual resumes, the group
packaged itself together, and several talent-hungry companies lined up to
talk business.

     In reaction to the competitive high-tech job market and breakneck
product development cycles, companies and venture capitalists are starting
to recruit teams with winning track records instead of cherry-picking stars
one by one. One prominent venture capitalist calls this trend "the
reinvention of collective bargaining." 

     Perhaps the most well-known example of team job hunting was an
unconventional item posted in late April on the online auction site eBay. A
seller advertised an "entire ISP management and engineering team" of 16
people that was on the block for $3.14 million. 

     Although the sellers yanked the item two days later, eBay says it
wasn't a hoax. Kevin Pursglove, an eBay spokesman, said the team indicated
it had a change of heart when contacted by the online auction company
several days later. 

      In the case of the a2b Music exodus, company cofounders Larry Miller
and Howie Singer led 12 senior  managers and technologists out of AT&T to
join Reciprocal, which provides digital rights management services and
products to the online music industry.

      "Time is the most precious commodity these days, more precious than
capital, and a focused team that  works well together provides a real
competitive value. I don't think that was lost on Reciprocal," said Miller,
 who is the president of the company's music division.

      "AT&T owned the intellectual property we created. They owned the
brand we created and the underlying technology that we employed. But they
didn't own the people," Miller added. "Reciprocal wanted to enter this
sector up to their eyeballs, and we had a talented, deep group of people
who could help them accomplish that." 

       For employers, there are several potential advantages to hiring a
team. 

      "It was an exciting prospect to hire a team of people who already
worked well together, understood each  other's personality, and could hit
the ground with the ability to run faster," said Reciprocal president Paul
Bandrowski. 

     He added that teams tend to move faster from the first day, because
they're more likely to step forward to ask questions and use each other as
resources for issues they don't understand. 


     There are potential downsides to hiring ready-made groups, however. 

     Issues to guard against are the creation of two corporate cultures, an
alienation of employees who are not part of the newly hired team, and a
magnified problem where objectives and expectations are misunderstood. 

     Package deal

     Another example of a mass defection comes from Phil Constantinou, a
member of Atrieva's San Francisco product development team. Atrieva offers
technology that allows users to back up PC files using a Web browser. The
team was willing to negotiate its compensation as a group, rather than on
an individual basis, in an effort to stick together. 

     The four engineers and two product design specialists previously had
worked with one or several of the members of the group, but they never had
an opportunity to work for the same company. 

     "We decided that as a group we had complementary skills and wanted to
work together on projects. It was a process we started in December, and it
evolved over months," Constantinou said. 

     The team initially approached VantagePoint Venture Partners of San
Bruno, California, about funding a start-up for the group. The plans soon
changed when VantagePoint suggested the team of engineers and product
designers join an existing start-up it funded--Atrieva. 

     Constantinou said members of the group--some of whom were consultants
or worked for various companies--were all on board at Atrieva by May 15. 

     "We created their San Francisco office," said Constantinou of the
Seattle-based company. "We already have a fully functioning operation and
are creating enough leverage to move the company forward." 

     Accentuate the positive

     With all the potential upside, Reciprocal's Bandrowski noted that
steps can be taken to minimize the potential problems with hiring groups. 

     Before hiring a team, he suggests that employers communicate to the
team their expectations on the objectives that must be met. And once the
team is hired, each member should be hooked up with an employee outside the
team to learn the corporate culture and processes, he said. 

     "It's good to have each member separated from the team for 30 to 60
days," Bandrowski said. "This way, three things happen: the culture seeps
in faster, you eliminate some of the reinforcements that came with the old
culture, and the team members are able to build relationships faster
outside the team by having one-on-one contact." 

     Some venture capitalists and headhunters note that the trend toward
hiring teams so far has manifested itself within particular areas. 

     For example, Scott Sandell, a partner with New Enterprise Associates,
said engineering and sales are usually the two groups that encounter the
most group hiring. 

     "Their skills are more general," Sandell said. 

     Geoffrey Yang, a partner with Institutional Venture Partners, said
that although one in ten potential job candidates requests to bring along a
team of employees, he wishes the ratio was higher. 

     "My attitude is that's great if they want to bring people with them,"
Yang said. "If that person brings a whole team, [the employer will] likely
give that person more equity" in the company, he said. 

     Burning bridges?

     Although the prospect of employing a team of engineers who have
previously worked together may appeal to many start-ups, one venture
capitalist noted that doing so can be risky if it will anger the company
from which the employees are coming. 

     Mike Schuh, general partner with Foundation Capital, noted that the
start-ups and companies with the outflow of employees often are in a
similar business. And during these times, start-ups have to be wary of
alienating a potential partner down the line. 

     Nonetheless, Bandrowski believes the trend toward teams will increase
in coming years. 

     "There is a huge opportunity with start-ups, and people recognize they
can make a lot of money," he said. "And big companies that don't understand
the value of their people and appreciate how important it is to be
entrepreneurial are subject to a team loss."



". . . [A] wired world can't tolerate the intervention of state programs
that only hurt the poor by preventing them from making the conceptual leap
to postmodernism . . .  why not allow them to benefit from the dynamism of
bits and bytes moving across the globe in a way that's, well, sort of
hip?"

--Louis Risotto in "Re>Wired"