Coming of age

With stock options in the tank and get-rich-quick dreams dashed, Internet companies are finding yet another heralded dot-com tradition in question: the culture of mandatory fun. Nowadays, more employees are demanding cash for overtime rather than a plate of barbecue or a microbrew.
Written by Laura Lorek, Contributor

With stock options in the tank and get-rich-quick dreams dashed, Internet companies are finding yet another heralded dot-com tradition in question: the culture of mandatory fun. Nowadays, more employees are demanding cash for overtime rather than a plate of barbecue or a microbrew. They want time off instead of must-attend company picnics on the weekend to play paintball.

Not long ago, it was that fun environment and buckets of stock options that led many workers from old-line companies to dot-com start-ups. But since the stock market took a dive in April and many Internet companies fell out of favor with investors, more employees are finding that the start-ups aren't yielding the riches or satisfaction they had hoped for.

Suddenly, that culture of bosses who don't discipline or provide structure, cubicles that double as kennels, endless hours at offices equipped with pool tables, beanbag chairs, jukeboxes and in-house bars is pushing some Internet employees back into the traditional workplace. It's also forcing the companies to consider growing up.

"I don't miss the foosball, I don't miss walking around in my flip-flops," said Tracey R. Collins, a 22-year-old veteran of two Internet start-ups.

"There's something to be said for a little structure and stability," said Collins, now an associate at Pan Communications in Andover, Mass. "I like knowing I can leave the office at 5:30 p.m. or 6 p.m. and that it's still going to be there."

As the 10th employee of LifeSimple.com, an online scheduling site, Collins worked long hours, holidays and weekends. But in September 1999, the company went out of business without any warning.

Collins then joined Computer.com as the third employee. The Internet computer retailer launched during the Super Bowl in 1999 with an expensive ad campaign. Again, Collins worked through Thanksgiving, Christmas and New Year's. But she quit in May to join a traditional marketing and public relations firm.

Both Lifesimple and Computer.com had very relaxed work environments. People brought their dogs to work. They climbed up onto the roof with their laptops and worked while sunbathing. Employees had meetings while playing foosball. People walked around barefoot.

"The free-spirited dot-com culture came with a price tag that was basically your life,'' Collins said. "I'm just so happy to be back to business."

Collins is not alone. The downdraft in the market is causing more people to move from the new economy to more stable companies, said Rick A. Smith, a headhunter at Spencer Stuart in Atlanta. And Internet companies are becoming more selective in hiring executives, he said.

"The type of talent companies are looking for is a mix of new-world and old-world experience," Smith said.

The type of executives Spencer Stuart is recruiting has changed from people in their late 20s with three or four years of experience to candidates in their 30s or 40s with 10 or more years of work experience, Smith said.

"In general, there has been a dramatic maturation in the marketplace," Smith said.

The cappuccinos and microbrews may still be flowing freely at many dot-coms, but some are adopting more corporate-like structures to ensure too much fun doesn't come at the expense of profits and growth.

Take Dash, a fast-growing Internet advertising company in New York. It raised $50 million in venture capital. But even during the high times, it didn't spend its millions on Super Bowl ads or company parties, said 31-year-old Daniel Kaufman, one of the company's founders.

Dash has been run more like a corporation because the four founders have all had other Internet companies and they felt they needed some structure to succeed, Kaufman said. The company has a relaxed environment. There's no dress code, and dogs are allowed to roam freely. But it doesn't have on-site manicurists or massage therapists.

What sets this dot-com apart from many other Internet start-ups is that it has always had a human resources manager, a corporate attorney and policies regarding standards of conduct. And every employee gets a handbook that spells out corporate policy.

"It's a pretty serious place and people work pretty hard,'' Kaufman said. "We're not throwing keg parties on Friday, but we still go out and have a lot of fun."

At ELetter, an Internet sales and marketing company in San Jose, lavish and kooky perks are out and old-style benefits are back in vogue, said Manish Mehta, the company's 32-year-old president and chief executive.

"These days it's not the perks that will get you the people and keep them," Mehta said. "Employees want to know that the company has a solid business plan and that it makes money."

ELetter still offers employees on-site massages and caters lunch every couple of weeks. But it has done away with extravagant off-site parties, Mehta said. Now, the 40-employee company rewards people for their hard work with money and time off, he said.

Less than 3 percent of all Internet companies spend money lavishly on parties and other perks, said Tom Kippola, managing director at marketing strategy firm The Chasm Group in San Mateo, Calif., and a venture partner at Voyager Capital.

"Most companies are responsible about their spending," he said, emphasizing that a little fun is OK.

But one person's fun is another person's headache.

At least one executive grew frustrated with how long it took to get things done at an e-commerce service provider. She complained that top executives wasted a lot of time in endless meetings and the mandatory fun atmosphere grated on her. Employees were told that if they wanted to have a meeting over a game of Ping-Pong, they should, she said. And a "dogs welcome" policy turned the office into a near kennel.

"Some people do long for the days when everyone came to work and wore a suit and tie and sat at their desks without dogs," said Shawna M. Swanson, a senior associate specializing in employment law at law firm Fenwick & West in Palo Alto, Calif.

"Some companies want to give the utmost freedom to their employees," Swanson said.

A lot of people think they can sue to keep dogs out of the workplace or to make people wear shoes in the office, but these are not legal issues, Swanson said.

At Petstore.com, everyone worked in a warehouse. There were not only dogs, but snakes, iguanas, parrots and ferrets wandering around, said Abigail Jacobs, a former employee. When it rained, the roof leaked. But they thought it was fun, she said.

"I was just wowed by the dot-com environment and the stock options," she said.

But the kooky culture wasn't enough to keep the company afloat, and Jacobs left shortly before Petstore was sold to Pets.com. She joined BlueLight.com, an Internet online service and retailer backed by Kmart in San Francisco. BlueLight is an Internet company with a casual workplace, but with the stability of a traditional company behind it, Jacobs said.

"It's like a start-up environment without the scary feeling," Jacobs said. "The culture is really fun. But we're not throwing lavish parties."

Mandatory fun at technology companies is not something that sprang up with the Internet. In the 1970s, Silicon Valley's Tandem and Apple Computer threw big beer bashes. In the 1980s, Rolm and Borland built Olympic swimming pools. Genetech had weekly hula contests and beer bashes.

Then many of the tech companies grew up and began holding brown-bag substance-abuse lunches and afternoon sexual harassment seminars. As their billion-dollar valuations inflated, so did their liability concerns. They hired corporate attorneys and instituted company policies.

Even the free-spirited Excite@Home banned pets in the workplace because of sanitary reasons and allergies, said Stephanie Rudnick, the company's spokeswoman.

Now the April dot-com devaluation on Wall Street is making everyone take notice of fun in the workplace once again. Outlandish perks are always easier to justify when a stock price is soaring. Investors also begin to worry that the fun work culture can become the point rather than the perk.

Whether fun-based mission statements, foosball tables, video games, inflatable furniture, beanbag chairs, annual retreats and cultural czars can actually help a company build profits is debatable.

Some, like Jim Collins, co-author of Built to Last, a book examining corporate success, said it doesn't help. He finds very little evidence that a laid-back environment filled with employee perks has anything to do with becoming a great company.

In fact, mandatory fun can become a liability if it is mistaken as the company's primary focus, he said.

"People like to be part of something that wins and succeeds,'' Collins said.

Companies that create a culture of discipline win, he said, pointing to Cisco Systems and Intel.

"I can't think of a single traditional dot-com company that has cultivated a serious culture of discipline. Eventually there will be one, but it hasn't happened yet,'' Collins said.

The very best people never work just for the money or the perks; they want to be in a place where they can have an impact and in a work force populated by hard-working people who get things done, Collins said. They also hate hypocrisy and thrive in an environment that has a high degree of consistency, he said.

Whether a company has foosball tables or swimming pools doesn't matter in the end, Collins said. It's whether the people are motivated, happy and hard working.

Executives at Excite@Home think their people fit that mold.

The 6-year-old Internet company fights to keep a fun start-up culture at the workplace, even though it plans to add 1,800 employees to its work force of 2,700 in the next six months, Rudnick said.

Six months ago, the top executives at the Redwood City, Calif., company instituted the corporate happy hour to answer questions from employees and to have a little fun.

Employees banter over beer, wine and chicken wings every Friday at 4 p.m.

"The competition in this market for good people is really fierce,'' Rudnick said. "So we're not going to stop doing cool things for the employees.''

But even at Excite@Home, the perks are changing as workers grow out of their 20s and into their 30s and 40s. Along with its two spiral slides, climbing wall, roller hockey court and gym, it is adding breastfeeding rooms and looking into on-site child care.

"The people who started these companies are all growing up now and getting married and having kids,'' Rudnick said, right before running off to her on-site kickboxing class. "But they still want to have fun."

Halter tops, hot pants, long hours, close quarters, a casual environment and a young work force make the dot-com workplace a hotbed for potential sexual harassment lawsuits.

Problems with failed romances among managers and employees, explicit Web sites and off-color jokes are causing a number of managers at Internet companies to rethink their corporate culture and institute policies and procedures for preventing hostile workplace environments.

Legal experts predict sexual harassment lawsuits will escalate as stock prices drop, companies teeter on bankruptcy and workers become disenchanted with crass co-workers.

"Internet start-up companies by their nature are major targets for sexual harassment litigation,'' said Shawna M. Swanson, senior associate specializing in employment law at law firm Fenwick & West in Palo Alto, Calif.

The dot-com companies have a young work force with a casual environment, which sometimes includes in-office happy hours. Also, sometimes the entrepreneurs who start the companies have an anti-corporate outlook that keeps them from instituting policies and training programs to prevent problems.

"They try to make it a very fun place to work, and that can lead to problems,'' Swanson said. "Without policies in the workplace, that means anything goes. Employees tell dirty jokes or check out pornographic sites on the Internet.''

Long hours at work also mean employees turn to each other for a social life and dating. And managers sometimes forget they need to treat everyone with respect, both in and out of the office, Swanson said.

A few high-profile sexual harassment lawsuits have already been filed against Internet companies.

In January, a former employee sued Pseudo Programs, an Internet TV network in New York, claiming male employees at Pseudo often called female employees "bimbos'' and forced them to look at sexually explicit material on the Internet.

Pseudo called the accusations "completely without merit.''

Another New York Internet company, Juno Online Services, was slapped with lawsuits by two former female employees last fall. The women alleged they had been told they would lose their jobs if they broke off their relationships with the senior executives they were dating.

Juno's spokeswoman said the company denies the accusations. Both cases have been referred to arbitration.

"I'm seeing a number of sex harassment claims by small start-up companies,'' said Brian Greig, a litigation and employment lawyer and partner at law firm Fulbright & Jaworski in Austin, Texas. "They usually coincide with some point in the company's financial life, either another round of funding or an initial public offering. Most of them are settled. When there is a lot of money at stake, the companies don't want the attention a lawsuit might bring.''

About 90 percent of sexual harassment complaints are settled before they get to the lawsuit stage, according to legal experts.

A lot of start-up companies do not have policies to help prevent harassing behavior, making them ripe targets for lawsuits.

Many of the start-ups do not even have human resources managers to handle employee complaints, and many of the laws don't apply to companies until they have 15 employees.

As a company grows, managers sometimes get too wrapped up in raising capital and expanding their business, so they forget about hiring someone to take care of employee concerns, said P.J. Bouchard, a human resources consultant in Phoenix.

"If you have a really young founder, they sort of just go down a path of destruction,'' said Bouchard, who is co-author of Getting Your Shift Together: Making Sense of the Organizational Culture and Change. "They go from one extreme to the other,'' she said. "They equate structure in the workplace with rigidity.''

Then they begin to learn that if they don't have some layers of structure, they have complete chaos, Bouchard said.

That's why many Internet companies are beginning to use employee handbooks, hire or outsource human resources, and send managers to training classes to comply with federal laws.

TouchScape, an online customer service and marketing company in Phoenix, hired an executive coach and consultants to provide structure for its 40 employees, said Brian Hoover, the company's president and chief executive.

"It's just good business to establish the appropriate culture,'' Hoover said.

Those who do not take employee issues seriously are simply looking for trouble, said Heather Gatley, a labor and employment attorney at law firm Steel, Hector and Davis in Miami.

As long as the economy is robust, the sexual harassment lawsuits will just trickle in, Gatley said.

"Some employees leave a company if things get too bad and they've got six other job offers waiting,'' she said.

But if the economy heads south, disgruntled employees with fewer opportunities will head to the nearest law firm.

"It's only a matter of time before we see more complaints from these companies,'' Gatley said.

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