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Healthy versus Unhealthy Employee Contracts
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Healthy Work hard, be part of corporate culture, have healthy and balanced lifestyle, grow with the company. In return, receive salary, bonus, long-term incentives, training, feedback, good people to work with, and challenging work. Unhealthy Work hard, sacrifice personal life.
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In return get rich in 2 to 3 years or sooner.
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CHAPTER NINE Building Healthy Employee-Employer Contracts
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Shaheen, however, resigned 18 months later in the wake of Webvan s terrible performance and impending bankruptcy. He left the company with the promise of $375,000 annually for the rest of his life, in addition to a $6.7 million loan from the company to pay taxes on a Webvan stock purchase, which was forgiven. I won t comment on Shaheen s leadership of Webvan except to note his timing in taking the job was horrible, given the quickness with which the bubble burst after his decision. But it had all the earmarks of an executive making the wrong move for the wrong reasons. Sadly I ve seen companies with healthy contracts turn into ones with unhealthy agreements. An example is Whittman-Hart, which at one time was one of the finest information-technology consulting firms around. They hired great people and offered attractive career paths. The culture was fun, collaborative, and progressive. They had well-designed mechanisms to manage performance and provide feedback. Their compensation program was thoughtful, articulate, and predicated on paying people for performance. Like all too many technology companies, Whittman-Hart got infected with the belief that the stock market held the key to explosive growth and vast wealth. The company granted stock options, went public, and people started to think they could make a lot of money in a short period of time. The employment contract took a turn for the worse, but the core health of the company was still intact. Then at the height of the dot-com boom, the company changed its name to MarchFirst and acquired US Web, a conglomerate of Internet firms, for a huge price. They made the acquisition in hopes of riding the Internet wave. Their new businesses, however, were more promise than substance. Within 18 months, it sought bankruptcy protection. In time the more desirable remnants of the company were bought by Divine Interventures, a software and technology consulting firm whose culture was nothing like that of the old Whittman-Hart. From a long-term strategy, the focus shifted to quarter-by-quarter results. Everyone seemed to be in a perpetual state of panic or near panic with one fire drill after another. This is typical of companies that have lost coherent vision beyond the quest to get the
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PART TWO Elements of the Solution
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stock price up. Employees and management alike focus on quarterly earnings (or lack thereof) and the stock market s response. Whittman-Hart was not alone in its fate. This was and is true of many, many companies. In fact today the business landscape is pockmarked with these imploded companies, some of which are still surviving. The long-term survivors will be those that create a broader, healthier, long-term contract with their employees.
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LESSONS OF THE NEW ECONOMY
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Today companies have an opportunity to learn from past mistakes and successes. Companies with poor employment contracts have a chance to begin anew with healthier and more balanced agreements. This does not mean we should or can turn the clock back to the 1980s and declare it business as usual. On the positive side part of the exuberance we felt in the 1990s was completely rational. The hope we had for the new economy was not all mass hysteria; there was and is some truth and substance to it. There were, indeed, lessons to be learned from the new economy: 1. The value of human capital. We preached, learned, and came to believe we had entered the age of human capital. We recognized the contribution of people who are at least as valuable, if not more so, than physical assets and financial capital. This was absolutely true and remains the case today. 2. The need to reflect the value of human capital through some type of investment vehicle. The widespread granting of stock options to employees was not just a fluke nor did it only serve to assuage some guilt about enormous executive grants (although it did that too). Broad-based option grants were and are a very profound statement about the value of human beings individually and collectively. 3. The onset of the information age is real. Technology greatly enhances and improves the value and magnitude of human contribution. It also makes it faster and far easier to spread and share information, ideas, and knowledge.
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