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    It is better
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    John Sumser

    is more
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    John Gall

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    really well than
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    John Sumser

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  • Fighting The Tide (From The Archives)

    (July 01, 1999) In recent weeks, we've been entertained by recurring stories of old school managers who want to control the detailed timing, content and flow of information about their companies. Somehow, they think that the only good news about their operations (as they define it) should be circulated. They harass and bully their vendors and employees looking to blame someone when the bad news creeps out of the closet. They clamp down and threaten. They issue ultimatums and new policies. They're fighting a losing battle. The mindset is antiquated and Industrial (the most derogative term we know for describing inappropriate management styles).

    The destruction of old style monolithic images of a company is the essence of digital communications. On the web, every employee is the PR and Marketing department. Every action in the workplace is public and accountable. Every strategic decision is open for assessment in public. A company's culture is subject to visible critique. Published information is subject to ridicule. Unpublished information is subject to collection and distribution. Corporate privacy is a thing of the past. Attempts to manage the truth take on an overwhelming feel of dysfunctional denial.

    The real quandary is that isolated incidents, transmitted over the web to potentially large audiences, shape a company's image. The problem is that for many companies the attention to quality was placed on products and services, not employee relations. Customers could fight by switching vendors. It wasn't as easy for employees. The continued labor shortage is rapidly changing that dynamic.

    Imagine being a Recruiter for xxxxx. The company, a large industrial giant, is in transition and is moving slowly towards the 21st century. Unfortunately, the internal strife associated with big company life now has a visible public outlet.

    I haven't learned one thing at xxxxx. The only reason I am staying here for more than a year is 1. so I don't have to pay back the 2,000 they shelled out for my move 2. they require little work because everyone sits around and bullshits about the work they are supposed to be doing, so that lets you work on more important things.. like reading up on Java or writing some c++ code for your own use!I code at home all the time, and have learned a lot.. at home!!! BAHAHAHAHA!!!

    (from the message boards at VaultReports)

    Another insider says:
    The unwillingness to retain skilled employees has led to extreme attrition rates at most sites among the engineering staff. and generally low morale. Also, typical of large companies, xxxxx is slow to accomplish things (lots of talk and little action), lots of office politics and lots of dead wood. Recent obsessions with ISO, six sigma, and SEI CMM have also led to increased paperwork duties among the engineering staff and loss of productivity. The new CEO is sacrificing long term improvements for short term stock price increases, so watch out for sporadic, seemingly illogical layoff spasms as well as low pay increase budgets.

    (from the message boards at VaultReports)

    The message boards include pointers to a website that chronicles the "misdeeds" of the company.

    VaultReports always includes a disclaimer that reads:

    The xxxxx Employee Message Board is not affiliated with or endorsed by xxxxx. Needless to say, the opinions expressed on VaultReports.com Message Boards reflect the opinions of the participants and not of VaultReports.com. These messages are only the opinion of the poster, are no substitute for your own research, and should not be relied upon to make a career decision or any other purpose.

    You can imagine, however, the fury on Mahogany Row during the meeting in which these comments first graced a weekly PowerPoint presentation. More than a few large companies have begun suing the posters. But, they are swimming against the tide.

    Seen in the right light, broad public disclosure of information and opinion is good for companies, their investors and their employees. It's an admittedly tough pill to swallow at first; it seems like things would be easier if the only story that needed to be told was a rosy one cooked up by a PR firm. But that era, and its simplistic view of information, has ended. The fussing and bullying of Industrial era managers will ultimately be the reason that their Boards replace them with newer, younger players who are more adept at functioning in an information rich environment.

    Recruiters, who have always had to fight a one to one battle with corporate PR, are on the frontlines of the change. Learning to present a company as a rich mix of diverse players is a growing challenge. If you are not tracking the VaultReports message boards about your company, it's time to start. (You might also want to track several of the investor message boards.) The truth about your company, which is always going to be a mix of varying opinions, is being published. That truth will become an indispensable component of the Recruiter's toolkit.

    - John Sumser, © TwoColorHat. All Rights Reserved.

    Independence Day III (A Question Of Balance)

    (June 30, 1999) Making the market work will be an enduring challenge for the management team at The Monster Talent Market. Given that the most likely early players will be IT contractors, making sure that there is an adequate supply of potential workers is liable to be an expensive proposition. The IT shortage is accelerating with recent estimates of a the deficit reaching 1.3 Million workers (doubling every year).

    On first look, a dramatic shortage seems like a perfect context for an auction. You'd guess that workers would want to capitalize on the possibility for very rapid growth in wages. You'd guess that employers would do whatever it takes to engage scarce workers in a dialog. It would be tempting to think that auction markets would obey the "if you build it they will come" rule (even though nothing else does).

    Unfortunately for the owners of labor auctions, both sides are much more dependent on results than other auction markets. If workers don't find work easily, they won't return. If employers don't find candidates, they won't engage in the auction in the first place. Unlike an EBay auction for disposable commodities, a labor market has to produce consistent results for all of the players or they will look for other approaches.

    That puts The Monster Talent Market squarely in the business of developing a labor supply. It's a much more research driven problem than simply using advertising to drive eyeballs to a site. Given the broad availability of resources for scarce workers, the day to day marketplace will force any successful auction operation to offer increasingly precise and relevant value (above and beyond the market itself) to the labor supply. This will (rather obviously) force a kind of specialization that will test Monster's predisposition towards large branded offerings.

    So, the fundamental challenge facing the Talent Market team is priming the pump and keeping it primed. Executed well, it's a goldmine. Executed slightly less than well and it has the potential to be an Edsel.

    For an interesting look at a different type of talent auction, check out this article in The Red Herring.

    - John Sumser, © TwoColorHat. All Rights Reserved.

    Independence Day II (If We Ran The Zoo)

    (June 29, 1999) Being the leader sucks. (Can you tell we've been on vacation with a bunch of teenagers?) Little Davids try to gain Goliath status by claiming to be in your league. Badly informed analysts claim that you have no place in a Staffing Industry stock play. Other analysts deeply understate your value proposition. You get a bigger bump in your stock price from an ad buy than a market transforming revolution. The lawyers make you generate really long license and liability documents (see yesterday's column). If the insiders weren't so busy selling their holdings (everyone else is buying their own stock in our sector), we'd be crying great big tears for the team at TMP.

    But, they've created another gold mine. The learning curve looks tough (and we're going to suggest some interesting loopholes) but, TMP has figured out how to begin to get Internet Recruiting transactions priced in the right ball park. The tears we would have cried are overcome by the sincerest form of jealousy.

    Assuming that TMP can get the balance between opportunities and project employees right (and that ought to be easy in this market), they've created a solution that makes everyone a winner. Let's do some math.

    Even though the Reuters reporter suggested that 10% would translate into $2,000, we believe that the revenue per transaction is more likely to be $10,000. Typically, the kinds of contractors who would use a service like The Monster Talent Market are billed to the employer at a rate between $40 and $200 per hour. In the current system, a temporary / contract firm takes between 20% and 30% of each dollar. On a 90 day contract (worth $19,200 to $96,000), the agency nets between $3,840 and $28,800. At 10%, the net is between $1,920 and $9,600. On an annual basis, that's between $7,680 and $38,400 straight into Monster's coffers for providing the marketplace.

    Who is going to like this? Contractors will. For a simple paperwork exercise, they can gain a minimum 10% raise. Employers will. Getting the transaction done for a firm 20% (the Monster and employee shares combined) saves them money on the average.

    Who is going to hate this? Staffing firms, Online Services that cater exclusively to Staffing Firms and the infrastructure that supports the aging 20th Century Staffing Industry.

    With 150 registered contractors in early June, we bet that The Monster Talent Market opens its doors with 1500 profiles in place. Assuming that they get their work through the service for just one year, that's roughly $22,500,000 on transactions that make everyone involved a winner. 15,000 players would imply a market generating a quarter billion dollars in fees per year. (The perceived technical shortage is more than 30 times that number...500K or $4.5 Billion. And that's just for starters.

    Our reading of the legalese (see yesterday's article) leaves a very interesting loophole and an opportunity that we expect to see evolve rapidly, given the financial possibilities.

    Since the structure of The Monster Talent Market assumes that there are only two components of the transaction, and since those transactions will take a serious quantity of time, we expect to see the emergence of players who alternately act as both buyers and sellers. We expect to see a relatively quick emergence of something similar to options trading. We expect to see direct transfers of money to candidates as a part of the process.

    We expect to see the flourishing of microjobs (projects with durations of one to two hours) on The Monster Talent Market.

    It would work like this:

    Recruiter X posts a very high paying (say $300/hr) one hour job opening for a highly sought class of applicant (SAP, UNIX, Web, Java). The job is to fill out a profile that is strikingly similar to The Monster Talent Market contractor profile. The Recruiter, with profile in hand, then begins to peddle candidates as a seller, acting as a go between on transactions. Perhaps the Recruiter will offer a stream of value added services to the candidate (benefits, liability insurance, legal counsel, resume cleanup, project advice). In a range of cases, we can imagine the Recruiter paying for the privilege of representing the candidate.

    It's not far fetched. It's also not the only loophole to be found in the structure.

    What is clear is that The Monster Talent Market is going to rearrange the timing of cash, probably add a touch of wage inflation over the long haul and create an aftermarket like nobody's business.

    It's going to be fun to watch.

    - John Sumser, © TwoColorHat. All Rights Reserved.

    Independence Day

    (June 28, 1999) Get Ready. You are going to need to understand and explain this one. We've been predicting the emergence of talent auctions for some time now. They are here in a very significant way.

    If you haven't heard, on July 4, Monster.com will introduce its new service: The Monster Talent Market. It is a project based market in which contractors and employers can find each other and negotiate employment contracts.

    The basics are summed up in the three documents that serve as the legal foundation of the Marketplace.

    The core business model involves taking a fee from both sides of the transaction. Independent contractors pay a fee for advertising their services. Employers pay a percentage of the value of the total contract with a contractor. Monster retains the rights to use all of the data from both sides as they see fit.

    They are well worth the time it takes to read them (we've preserved copies in our archives for your convenience). Beneath the legalese is an extremely well considered attempt to redefine the employment market.

    This is no small compliment from us. We have long maintained that size is Monster's most crippling feature and the reason that innovation has not been their long suit. The introduction of The Monster Talent Market has radically altered our perceptions.

    The play positions Monster as the Charles Schwab of the employment industry. It puts an end, for once and for all, to silly conversations about the Internet as an advertising only medium. It takes account of demographics and bets that the reduction of friction is central to business effectiveness. It places Monster in direct competition with Temporary Agencies, Contract Employment Firms and Temp To Perm Search Businesses. It gives HR a way to turn contract hiring directly over to hiring managers. It creates a market path directly to those hiring managers.

    There are a number of very interesting ramifications and implications generated by the launch of The Monster Talent Market. We'll be covering them through the week.

    - John Sumser, © TwoColorHat. All Rights Reserved.

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