What are the HR secrets of a successful dotcom?

The dotcom companies that have survived and gone on to thrive are those
which have put in place formal HR practices and strategies, according to the
findings of new research by the Involvement and Participation Association and
Equity Incentives.

But while the research shows evidence of widespread use of high commitment
management practices, it also shows that the implementation of bundled HR
procedures tends to be ad hoc and unstructured, especially in a company’s early

"An HR strategy is rarely a concern when a dotcom business is launched
and is only likely to become worthy of attention some 18 months to two years
into its life," says Graham Dietz of the IPA and one of the authors of the
report. "CEOs often express regret at this oversight. Each of our case
study firms [featured in the report] has slowly formalised its employment involvement
initiatives, coming to resemble more ordered, traditional firms."

The findings were reported on at an event introduced by the DTI’s Minister
of State for Employment Relations, Alan Johnson, who stated that it is possible
to have proper HR structures in place and maintain the freedom "which
allows creativity and innovation to flourish".

"An HR structure does not have to mean autocratic practices," he
explains. "Implementation of modern management practices can help create
the right work environment that will secure the future of the business and
ensure success is lasting and enduring."

Such random adoption of practices and strategies was also borne out by
responses in the field of employee consultation. Although 70 per cent of respondents
reported using informal employee consultation "as and when required",
it proved impossible to assess the quality of this or how effective it was at
making staff feel involved in their work.

"There are what we call black holes of indefinable, unclassifiable,
informal employee consultation going on at dotcoms that, it seems, cannot be
captured by conventional industrial relations research designs," says

The trigger for the research was a discussion between the IPA and Equity
Incentives – the latter interested in the extent of financial participation
such as share options and profit-sharing schemes. It shows that dotcoms are far
more adventurous in their use of financial schemes than the national average,
and are often three times more likely to run them in the first place.

Seventy-four per cent of the dotcom respondents run schemes for managers and
63 per cent for non-management employees. However, when asked why they operate
such schemes, all gave the response, "because everyone else does".

Other findings showed that 70 per cent are working more than 40 hours a
week, with the mean at 51 hours. A third of respondents reported working over
60 hours a week, with two clocking up 80 plus hours. Trade unions have yet to
penetrate the dotcom sector with no respondent companies recognising a union.

A total of 225 UK-owned and UK-based e-businesses were randomly chosen and
contacted for the research by the IPA. However, only 37 of the 225 companies
submitted usable responses, giving an overall rate of 17 per cent. Twenty-five
companies declined the invitation to participate and, indicative of the dotcom
crash of the last 12 months, 10 companies had ceased trading when the IPA
contacted them one month later.

"Dotcoms must realise that people management is critical for business
success, and hence bring in HR expertise to manage change and implement
strategy. Interestingly, investors seem to want to impose order and structure
on firms in or around the 18-month to two-year stage," says Dietz.

The report costs £10 and can be purchased from the IPA by calling 020-7354
8040. To read a case study from the report see Staying Alive in the Dotcom
Bubble at www.personneltoday.com/features.

The DTI has a link to the research on its e-business support website at www.beyondbricks.com

Popular practices

– Informal solicitation of staff feedback on decisions

– Relatively inclusive decision-making procedures and
opportunities for staff input, notably team briefings and even formal joint
consultative committees

– Staff training

– Employee share ownership

Less common practices

– Formal performance appraisals

– Profit-related pay

– Policies guaranteeing employment security

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