New-economy firms can learn lessons from old

The prolific technology industry has finally grown up a little, and now it finds itself faced with many of the same challenges traditional industry confronts. As investment brokers and venture capitalists revise their laissez-faire attitude to innovative IT companies, there is growing pressure for new businesses to look and act like old economy firms.

Central to this is the presence of a strong management team that instils confidence in employees, clients and investors.

While this may seem an obvious prerequisite, particularly given the glut of recruitment companies touting themselves as "IT specialists", the message coming back over and over again is there are too many companies with good technology, but weak management teams.

Ms Rachel Shelmerdine, managing director of IT head hunter company, Mitchell James, points to a number of reasons for this.

"Most start-ups are set up by a techie or two. They bring the business to a certain level but fall down when it comes to needing commercial expertise and developing sales and marketing skills," she says.

Ms Shelmerdine says company founders tend to be very reluctant to give up the reins, even though they know they lack the skills to make their businesses profitable and develop a global presence.

Ms Shelmerdine established Mitchell James last year when she saw a gap in the market for targeted match-making between middle to senior management and high growth IT businesses needing commercial teams.

To date, she says, the Irish recruitment market has offered a disservice to IT firms. "Instead of building good partnership relationships with their clients most recruitment companies are just looking to make a quick buck out of the current wave."

Mitchell James works solely for client companies seeking personnel.

By not working for individuals, it eliminates the trend of throwing unsuitable candidates at prospective firms until one sticks.

Ms Shelmerdine believes recruitment agencies spend little or no time matching candidates to job specifications, because they know companies are so desperate to take on more personnel, at any cost.

The result is lost company time and high staff turnover. As it becomes more difficult to get suitable management, Ms Shelmerdine says candidates can increasingly be found with non-IT backgrounds.

"Technology companies are becoming increasingly accessible for traditional managers," she says.

"Business is business and the same disciplines can be applied to technology as any other sector. You still need finance, marketing and sales channels. We see increasing numbers interested in looking outside the industry for people."

Now IT companies are actively seeking candidates in their 40s with more rounded experience. They find it gives the company greater gravitas and business acumen when trying to reach into traditional business sectors.

Ms Shelmerdine is critical of the failure of successive recruitment companies or the IT industry to address the growing skills shortage problem.

There is a lot to be learned by drawing on the experience in the US, which has a more mature IT market than Europe.

One of the biggest obstacles to successful recruitment placements in the Republic is indecisiveness on the part of hiring companies, says Ms Shelmerdine.

"Some companies take up to six weeks to make an offer, when speed is of the essence," she says. "A lot of US companies will conduct first and second round interviews in the same day. Not only is this efficient, but it gives candidates the impression this is the kind of company they want to work for."

AOL and Microsoft are typical examples. AOL will collect a prospective recruit, bring them to the campus and run them by a number of key AOL executives in a single day.

Once hired, Ms Shelmerdine points to the benefit of making people feel valued within an organisation. "It is important employees don't feel they are clones of each other, and there is a sense of shared ownership. This can be reinforced through good training, strong corporate identity and good communication lines."

Although the classic IT start-up can trace its roots back to twentysomething technology enthusiasts with a Coke fixation (of the soft drink variety), as they begin to grow the momentum often exceeds the capabilities of those within the organisation.

Ms Shelmerdine says this needs to be anticipated by more companies if they have serious ambitions about competing globally. "The most successful companies hire people who are a little too big for their position initially, but the company gradually grows to fit them."

Typically, Ms Shelmerdine says, these are people who can steer the company beyond public flotation - a time when a company really needs to begin proving itself.

Another pitfall can often be over-compensating on the management front by placing too many layers on top of the core workforce. "The most successful companies are flat structured, allowing information to flow freely," Ms Shelmerdine says. "Layers of management have the same effect as Chinese whispers. By the time the message filters through to the top, the employee has left the organisation."