The following is a comparison of traditional organizations (Brick & Mortar) and start-up or technology driven companies (Dot-Coms). Dot-Com is a shorthand name for high technology firms whether they are e-commerce, B2B, software developers, or Internet services firms.

What is here is only the tip of the iceberg and is full of over-generalizations and stereotypes. It is decidedly not research-based and I invite anyone to correct my assumptions or add to the content. The premise behind the exercise is that the human resources pro-fession, if it is to serve the new type of organization emerging in e-commerce, will need to reinvent itself and completely re-think its tools and processes.

The factors on which I compare these types of companies are intended to form an evolutionary chain from the most basic (compliance) to the most advanced (fully integrated HR strategy) HR activities. But in the end, they are arbitrary and highly inter-related.

Table of Contents:

I. State and Federal Compliance

Brick & Mortar

Compliance is a must! Risking lawsuits for discrimination, safety violations or back pay issues is simply poor management.

The stakes may be high because of larger numbers of employees and the fact that violations may be systemic, increasing the possibility of class-action litigation.

Dot-Coms

Compliance is a must! Risking lawsuits for discrimination, safety violations or back pay issues is simply poor management.

Violations are less likely to be systemic and more likely to be caused by rash decisions and ignorance of the laws. The stakes are high, but for different reasons. The firm may be highly leveraged and lawsuits could lead to investor uncertainty.

II. Policies

Brick & Mortar

Brick and Mortars have a long history of HR policy development based on experiences of problems in treating people equitably. The more serious the problems, the more strict the policies that emerge to avoid them in the future. The proliferation of extensive HR policies also tends to signal a lack of trust in middle and first-line management on the part of upper management.

Dot-Coms

Policies are few to non-existent. Often viewed as speed bumps to action or creativity, policies are installed only when ignoring the problem doesn’t work. While the increases in the number of employees is very rapid, there may be a wide-spread understanding that chaos is normal and inconsistencies will happen. As the growth curve reaches a critical point (don’t know what point) or begins to flatten, the cry for greater controls and consistent HR processes starts to be heard from management just as the need for greater financial controls was felt very early on.

When implemented, policies are brief, to the point and less rigid than in established businesses. There is probably very little in the way of paper or binders with respect to HR.

III. Communication

Brick & Mortar

Messages to the work force are usually formal and go through several layers of approval before being disseminated. Intranets are used to maintain absolute control of message content in an attempt to make the message misinterpretation-proof.

The need to communicate is usually recognized very quickly by specialists and technical experts within the company, but the need often takes a back seat to deliberations over the message and the media.

Solicitation of upward communication is also usually done through a structured process such as suggestion boxes or employee opinion surveys. These are extremely valuable practices but can be dangerous if the organization does not follow through with needed changes once the data is analyzed. Failure to follow through or fully communicate why, can cause widespread cynicism among employees and management alike and such cynicism can begin to take on a life of its own.

Dot-Coms

Messages are broadly disseminated as soon as the need for dissemination is recognized. The fastest medium available is used and it is assumed that everyone will be paying attention and seeking out information because of the stake they have in the success of the fledgling enterprise.

The need to communicate may be overlooked in the fast-paced, high-pressure environment. People are expected to find out what they need to know because no one has time to focus just on communication.

Solicitation of upward communication is almost nonexistent because of assumptions about the nature of the employees (people with many employment options who will not be afraid to speak up and be heard). This can be a fallacy, however, because people with many employment options may simply exercise those options rather than express concerns or dissatisfactions. It is important to set up efficient and effective channels of upward communication as a cultural norm so that the organization can flex and evolve in a way that keeps it vibrant and fun.

IV. Core HR Processes: Staffing & Employment

Brick & Mortar

Staffing and employment in the traditional organization has become the key HR process due to the difficulty all employers are experiencing in finding and keeping good talent. Compared to the Dot-Coms, the traditional organization has a lot going for it, but is also at a disadvantage in some respects.

On the plus side, the established organization has a full slate of benefits and protections to offer the potential candidate as well as glossy promotional materials and a brand identity.

On the other hand, the traditional, established organization has internal pay equity issues to deal with and typically will not simply pay what a prospective employee is asking for, because of salary compression problems. Special inducements such as cars, signing bonuses and even personal executive coaches are becoming common place in the larger brick-and-mortar organizations.

If there is an established posting and requisition process for recruiting and hiring, these processes are probably in need of major redesign in order to keep up with the hiring demands of managers.

Because there is a human resources information system, there is likely to be good data on cost per hire, cycle time and the quality of hires.

Dot-Coms

Staffing and employment in the Dot-Com is the HR function. The challenge is to keep up with customer requirements for service and new product development. The strategy is simply "get the talent and put it to work!" Team managers and department heads are generally empowered to recruit and hire employees without involving HR.

There is no time to develop a process for forecasting hiring needs, documenting employee requisitions or designing job descriptions. It is also likely there is no employee orientation program, no glossy benefits brochures and no representation of the company as a place to settle in and build a career.

The recruiter or hiring manager may make pay level decisions on the spot and there is little concern for internal pay equity. The staffing specialist or HR Manager in the Dot-Com likely has more latitude in negotiating salaries than in a traditional firm.

In some cases, company stock is exchanged for base compensation to control run-away salary offers. (Stock may even be bartered for services such as consulting or search firms.)

Because of its smaller size, the Dot-Com can quickly and effectively utilize recruitment bonus programs for current employees. There is no HRIS and cost per hire is not considered an issue. The cycle time target is now and quality, though it isn’t measured, is considered to be critical.

V. Core HR Processes: Performance Management

Brick & Mortar

Depending on the age of the company the traditional firm is on its fifth or sixth iteration of a performance appraisal process and actively seeking to replace it with one that works. Typically this is done by creating a project and putting talented HR professionals on the team to benchmark the processes of other companies who are, themselves, benchmarking still other companies to copy their process.

The companies that have evolved beyond this circular approach may be using team-based measures or a balanced score card approach to performance management. There is a stronger measurement orientation in these firms than in those still rooted in "appraising" individuals in a reportcard fashion.

Dot-Coms

In the Dot-Com performance is a dead-line-to-deadline issue with little or no post-assessment. Perceptions of individual and team performance are formed on the fly and can influence the dynamics of the interactions that occur on a day-to-day basis. However, there is little time to dwell on past occurrences and, in fact, success probably depends on the ability to learn from (and even celebrate) mistakes rather than punishing people for making them.

The leadership inclinations to be punitive or constructive with respect to mistakes will vary widely among the dot-coms depending on the personalities and style of the founder(s). As with many other issues in these companies, consistency will be difficult because of the absence of controls, wide distribution of power, and the sheer speed with which decisions are made.

VI. Core HR Processes: Learning & Development

Brick & Mortar

There is an entire spectrum on this factor in the Brick & Mortar companies. On one end of the spectrum are those firms that don’t do training because it is costly. In the middle are those that do training because it is a visible sign of taking action to address organizational problems. And on the other end are those companies that are creating a learning organization because they recognize the competitive advantage to be had by the continuous growth of employees in mind and spirit.

Dot-Coms

Learning, in the Dot-Coms, is a given. Keeping a technical edge is vital to survival. Development of the "soft" skills like leadership or interpersonal effectiveness will not get much play. What may be the most needed is the ability to reflect quietly, listen to one another deeply and conduct dialogue, all of which are the antithesis of the frenetic pace that characterizes this kind of firm.

It is possible that realization of the need for this kind of learning will come only after the industry is shaken out and the surviving companies are financially in a position to direct their attention to organizational effectiveness and renewal.

VII. Core HR Processes: Reward System

Brick & Mortar

Depending on their size, the Brick & Morter firms will have a structured Salary Administration Program that includes job analysis, job evaluation, pay ranges, and a set merit pay increase program that is updated annually based on inflation, business results, and employee costs relative to other cost categories.

On the benefits side, these companies will have a wide range of benefits that were established over the years and which have become almost a legacy. In recent years the cost of health programs have forced employers to seek to reduce their exposure by reducing the subsidies for the insurance. This trend shows no sign of abating in the foreseeable future and the whole issue has become a "no-win" situation for employers. To the extent that the employer is seen as closely associated with the health insurance program, employee attitudes can be seriously affected by a situation that is virtually out of the hands of the employer.

The greatest strategic need is to fit or align the salaries and benefits offered with employees’ needs in order to retain the talent necessary to grow and prosper. But because profit margins may not be keeping pace with the economy as a whole or with the career mobility of many employee groups, employers have also begun to look for non-monetary reward mechanisms to keep their best people.

Although retention of talent as an issue is beginning to impact the Brick & Morter companies, in the larger ones, it takes much longer for this impact to be recognized. Those that are not using leading indicators (such as measures of employee commitment or satisfaction) may not be prepared to respond and will be playing "catch-up" when employees start leaving in large numbers.

Dot-Coms

In the Dot-Coms, reward systems are characterized by the Navy Seals motto: "whatever it takes." Financial rewards are an integral part of the recruitment strategy and, because of the stakes involved, money is the easiest thing to throw at a potential employee. Just as in recruiting, the hiring manager is likely to have wide discretion in offering starting salaries, signon bonuses, and performance bonuses. If there is a human resources officer, he/she is likely to have arrived on the scene too late to establish sound, future-focused reward systems to prevent the problems that could arise as a result of running out of control.

Although health insurance benefits are more expensive on a per employee basis, the overall cost is not seen as significant compared to the need to add people quickly.

The greatest strategic need is to establish streamlined, but sound practices and initiatives and avoid precedents that will limit the leaders’ ability to adapt to changing business conditions. This is difficult in a fast-paced environment, especially if the HR function is seen as irrelevant to this kind of company.

Taken in total, reward systems (meaning direct and deferred pay, benefits, savings programs, vacations, bonus plans, etc. as well as intrinsic rewards) hold the greatest promise for re-invention within the Dot-Coms. If re-invented poorly, however, they can be one of the greatest risks to survival because of the potential for running out of control and because of the resentments and hard feelings created when someone tries to get them under control.

VIII. Information & Measurement

Brick & Mortar

In the smaller Brick & Mortar companies, information tends to be manually generated and stored because costly technology resources are dedicated to the accounting and operational side of the business. In larger corporations HR information systems are established and maintained to do as much of the transactional HR work as possible. Because of changes in employment laws, the upheaval in the healthcare industry and strategic shifts in reward system thinking, HR information systems are becoming high-maintenance investments that rarely perform as promised.

In smaller companies, measurement of HR processes doesn’t happen.

In large corporations there is likely too much measurement going on and very little focus or integration with the strategic direction of the company. For example, some companies regularly measure employee attitudes but never really link these measures with organizational performance measures.

In the super large corporations, where there is an abundance of financial resources, there is significant research and advanced use of measures to better demonstrate and predict the drivers of overall performance.

Dot-Coms

Because of their genesis in technology the Dot-Com culture is comfortable with paperless systems and data-driven decisions. The HR information is not likely to be automated though, because of the small number of employees. Recent developments have produced software that is geared toward smaller employers and those companies that survive the first wave of consolidation will probably take advantage of these products.

Measurement of HR processes is another matter. The perception is that there is no time to stop and measure results around any process that doesn’t have a direct link to obtaining, delighting and retaining customers for the new firm. Measurement implies analysis and analysis is the enemy of speed. And speed is the way to competitive advantage. On the other hand, due to the smaller size of the organization and its simpler structure, analysis is more feasible and can be done more quickly as long as the company is willing to invest in resources (people) that are not adding value in the short term.

To the extent that a Dot-Com can find ways to establish simple and effective information and measurement systems amid all the chaos, it will position itself well when consolidation begins.

IX. Strategy

Brick & Mortar

Human resource strategy in a highly evolved Brick & Morter is an integral component of the business strategy. In less evolved organizations it is probably no more than a "to-do" list and any relationship to the business strategy is almost coincidental. What tends to develop in this situation is a HR department that is testing itself against other HR departments rather than against the needs of the organization.

To develop an appropriate HR strategy, requires a strong desire to empower line management and senior leaders with the specialized skills, expertise and knowledge that the HR professionals worked so hard to obtain. It also requires the ability to shift the responsibility for HR matters back to where it belongs with the leadership of the organization. If this sounds like working oneself out of a job, it is exactly what I am suggesting. The reality is that the more this is done, the more value the organization will see in the role, and if there were such a thing as job security, it would be heightened rather than diminished.

Dot-Coms

Human resource strategy has but one aim: to attract, retain and promote the growth of human capital for the benefit of the organization and its constituents including employees. This means that the strategy of the business is the key driver of HR strategy. This is a critical point for the Dot-Com. If the company is being built purely to sell, the strategy will take it in one direction. If it is being built to last, it will go in a totally different direction. The key to strategy evolution for the Dot-Com is to recognize precisely when new skills in running the business need to replace or supplement the skills that got it where it is. For example, if the Dot-Com has a human resources professional on staff, the chances are that person is highly specialized in recruiting (or will be after a few weeks). At some critical point, however, the hiring frenzy will slow down and the job will call for a different skill set. This is no different from any organization but in the Dot-Com, it is a monthly or quarterly concern, where-as in the Brick & Mortar the change takes place so slowly, it is almost imperceptible (and often goes unnoticed until bad things begin to happen).

The implications of this comparison depend on how much of what is said can be validated in the real world of commerce and e-commerce. So the first task is to create some hypotheses and start testing them out. Beyond that, assuming there is some grain of truth in this, some implications that might be investigated are:

1. Education of HR professionals

The mix of HR competencies and their emphasis may need to change. There will be less point to learning the details of the HR processes and a greater need for a more liberal education. Issues of diversity, organizational culture, the spirituality of work, and work-life integration will come to the forefront as business improvement issues. More broadly educated, multi-disciplined HR people will be needed in both types of business. There may evolve a different learning track for e-HR professionals where the typical semester course is condensed into a week, emphasis is on PC skills and software and graduation requires expertise in skills that are only projected to be needed.

2. Out-tasking of HR work

On the surface, this would seem to be a given. All the large "sophisticated" companies have pared down their HR function as a cost containment strategy, and the Dot-Coms don’t really have time to fuss with non value-added activities, so what’s to decide? The point that most out-sourcing strategies miss is that there are certain HR functions that should never be out-sourced. In the frenzy to cut costs, whole departments were lopped off because they were viewed as non-strategic and expensive. Functions that were viewed as strategic were kept intact. What should have been lopped off instead were the transactional parts of all the functions so that what is left is a complete strategic resource capable of participating in the business decisions on a partnership basis. New entrepreneurial and Dot-Com companies would do well to slowly but steadily build their HR capabilities at a strategic level.

3. Professional Service Centers

The means by which HR and other organizational services are delivered will need to be re-engineered or completely reinvented. The trend towards "self-service" in employee benefits and training will likely be expanded into such things as job bidding, coaching and mentoring services. Systems to make this possible will need to be developed outside of any single organization so the development costs can be spread over many companies. The question is whether professional service centers will evolve around a functional expertise (such as functional PEO’s) or whether "shadow" service companies will be built to offer integrated support service solutions.

4. Organizational Destructuring

Another implication has to do with how organizations are structured (or not structured) to accomplish their purpose. The Dot-Coms that survive will have done so because of the people and the way they work together to achieve business objectives to which they are communally committed. This will not happen if a pyramid-type structure is imposed on the organization and traditional patriarchal forms of leadership are employed.

5. Lessons from the Dot-Coms

There will be an opportunity for the Brick & Mortar companies to learn from observing the Dot-Com phenomenon. The lessons will include things to avoid as well as things to emulate. One lesson that I think we will learn is that there are certain fundamental things that will not be transformed. As Peter Block reminds us, taking advantage of technology "does not make questions of purpose or meaning any easier or harder. The people in the new economy are the same people who were in the old economy. We make a mistake if we think that technology can substitute for relationship, that the promise of quick and large rewards can now motivate, or that a web site can create a sense of belonging."1

Regardless of whether all, some or none of the thoughts expressed here are correct, I believe there is a need to have some conversations about such differences and what can, in fact, be learned from them. As a profession that aims to provide sustenance to organizations through the procurement, growth, retention and deployment of human capital, Human Resources has an obligation to encourage and enable these conversations whenever and wherever people are interested.