In the first of an occasional series on all aspects of e-business, Marie Fimrite, director of the City office of international career management consultancy Drake Beam Morin, provides the answers
Q I have been offered a position as human capital director for a new dotcom company. While I’ll have more responsibility, it can’t pay me what I currently make but is offering me stock options. How do I know what the options are worth?
A Valuing options can be daunting and might involve a lot of guesswork, especially if the company’s stock isn’t publicly traded. There are three main ways to exercise options:
- Pay cash for your shares,
- Swap employer stock you already own for new shares,
- Borrow money from a stockbroker while at the same time selling enough shares to cover your costs.
Of course, you can’t know for sure how much a stock will be trading for a year from now, but you can take a stab at it by reviewing the stock’s history by getting reports from securities analysts who make stock price projections. The chances of hitting the options jackpot will be a lot higher if you join an early stage company that later takes off.
Unfortunately, start-ups are at the greatest risk of failing, too. Besides determining what your options are worth, make sure you understand the key terms of the programme, including the vesting period and expiration dates. That determines how long you have to wait before you can exercise your options, and how long you’ll have to use them. The shorter the vesting period, the better. Options typically vest in two to three years, so it is to your advantage that the options vest immediately if your company gets acquired. Ask if the programme has such a clause. And don’t forget to ask about the tax consequences of exercising your options, which can be tricky.
Q I work for a well-established b2b site. Unfortunately, one of our key backers has had to withdraw a finance offer and, in the current climate, we’re struggling to raise additional working capital. We’re over-resourced and need to make cost savings. The managing director has asked me to help single out staff for redundancy. I’ve hired plenty of people in my career but never fired anyone. Where do I start?
A Check the legal position – speak to the company solicitor and find out what the correct legal procedure is. For instance, how long is the notification period?
Under the 1996 ER Act, an employer must give at least one week’s notice after one month of employment, two weeks after two months and so on, up to 12 weeks. You can ask someone to leave immediately, but you must pay them for the notification period, plus vacation, benefits and sick time.
Figure out what it is going to cost you in separation expenses and then determine how many people you need to let go.
Decide what criteria you are going to use to determine who goes. It may be performance-based, skills-based, length of employment or a combination. Whatever you decide to use, make sure that you have solid proof that the employee affected does fall into that category.
Be careful that you don’t randomly just select people on the basis of whether you like them or not – this will get you into a heap of trouble!
Call a meeting to announce business reason for the downsizing, state the selection criteria for redundancy and give a clear time line for when this will take place.
Q We receive hundreds of job applications each week and are wasting a huge amount of time sifting the few good ones from the many bad. I’ve heard that there are scanners which will read CVs, but are they effective?
A What you have noticed is indeed a growing trend. More and more companies are taking advantage of the latest technology to store CVs received from jobseekers and later scan them into to "match" open position specifications.
Those automated CV management systems search for key words describing education, experience, skills and accomplishments.
Once a job profile has been defined, you’ll need to compile a key word list to reflect the skills, knowledge, work experience and interpersonal skills that support the profile. The computer then scans the database and records the number of "hits". The more hits in a candidate’s CV, the greater the odds that you will want to interview them.
But, as you’d expect, scanners aren’t as versatile as humans. They won’t read between the lines and they can’t, for example, read staples! They’re not that good with coloured paper, unusual fonts and font sizes or text that has been underlined or shaded.
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