Just how different are internet-style reward packages?

E-PAY

Just how different are internet-style reward packages?

Much of the dot-com compensation package mirrors rewards found in more established businesses. But while not revolutionary, there are elements which make dot-comp unique, finds a new study by Cornell University, published in a recent edition of the prestigious US pay journal WorldatWork.

The research suggests that as internet companies grow, so do the development of monetary rewards. What’ s more, once a dot-com has floated, compensation systems begin to take on a very traditional form.

Author Mike Wanderer says: At a fundamental level, dot-comp in the post-IPO phase is merely the application of traditional compensation practices in the internet space .

But the rate of change in the industry, volatile performance of dot-com shares, transparency of pay and a fusion of industries make internet-style rewards something new .

Dot-com rewards similar to traditional compensation . . .

The Cornell survey found that dot-com reward packages had much in common with more traditional compensation:

• Basic elements of compensation: The post-IPO compensation system for online employees is replete with short-term incentives, competitive base pay, stock options, benefits packages and performance rewards. Hardly unique. But as one US-based dot-com quoted in the report said: What’ s different is the mix of those components in the total rewards scheme, with the emphasis on equity being the most significant.
  

• Competitive base pay: Employees in these dot-coms are no longer willing to sacrifice lower base pay in return for potentially lucrative stock options.

• Internal equity: Post-IPO internet companies, like their more traditional counterparts, place a great deal of emphasis on ensuring that their pay levels are internally consistent.

. . . but also unique

Although the underlying components of internet-style rewards do not appear to be new , the survey uncovered elements of internet packages that do make dot-comp unique .

• Fusion of industries : While the compensation tools are not vastly different from what we have seen before, the diverse nature of the workforces employed by online business is extreme . This employee diversity may drive a need for greater flexibility. What works for one group in terms of programmes and communications may not be effective with another, says Wanderer.

• Pace of change : In a rapidly-changing industry, finding good, timely market pay data is fraught with difficulties.
  

• Top performer treatment for all employees : Traditionally, stock options are reserved for senior managers. In dot-coms, they are seen as an entitlement.

Four phases in evolution of internet pay . . .

1. Start-up phase	Base pay well below market equity primary means of attracting talent.
2. Developmental phase	Equity still main compensation focus limited salary increases but not market-level cash.
3. IPO launch	Market pay levels needed to retain proven employees.
4. Post-IPO	Upon going public, competitive/market-driven base pay internal equity principle more of an issue stock options still required regardless of pay level communicating values of options crucial.

Source: Dot-comp: a ‘ traditional’ pay plan with a cutting edge , by Mike Wanderer, WorldatWork Journal, fourth quarter 2000.

A final word

Want to know more?

Title: Dot-comp: a ‘ traditional’ pay plan with a cutting edge , by Mike Wanderer, WorldatWork Journal, fourth quarter 2000.

Methodology: A Cornell university graduate course conducted a series of interviews with 15 post-IPO internet companies.

Availability: Contact WorldatWork, 14040 N. Northsight Blvd, Scottsdale, Arizona, USA AZ 85260, tel: 001 480 951 9191 or email worldatworkjournal@worldatwork.org.

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