Human resource issues and challenges for e-business.

Mitchell, Margaret E.

Abstract

E-business has changed the way in which business is conducted. In this paper these changes are analyzed for specific human resource management (HRM) functions: (HR) planning, job analysis and job design, recruitment and selection, orientation, training, and compensation. All these functions are affected by changes in the business environment, technology, and potential labor force of e-business. These changes create challenges for human resource professionals who must recognize the inherent differences between e-business and traditional brick-and-mortar business. HR professionals must adapt to these changes quickly in order to maximize the performance of e-business.

Introduction

The increasing use of the Internet and the accompanying emergence of a Web-based economy have lead to changes in business conditions and practices. Some observers have predicted that these changes will transform the nature of business (Ulrich, 2000). Attention related to these changes often focuses on changes in the way in which business is conducted. These changes include those found for customer relations, marketing, inventory control, and/or other functions clearly affecting the way in which business is conducted. However, it is important to note that all changes related to the way in which business is conducted affect employees working in these business, whether they are directly or indirectly related to the "E" side of the changing business. Effects on employees often are forgotten (or at least given lower priority) as businesses focus on the more obvious changes associated with e-business.

In this paper changes related to e-business are considered along with observed and/or recommended changes in the human resource management (HRM) of businesses that either focus on e-business or include e-business as one of the methods used to conduct business.

The Change to E-business

E-business redefines traditional business models. It uses a business strategy employing digital media and network technology in order to optimize customer value delivery. It utilizes Internet-based computing, which supports the open flow of information between systems. E-business uses business portals (established over the Internet) to interact with customers. Technology is used as the actual cause and the driver of the business strategy so that the product or service is developed, better choices are provided to the customer, and delivery options are enhanced (Karakanian, 2000).

Some of the most obvious changes found in the move from traditional business to e-business include the rapid speed of accessing information, the greater availability of information, the increasing speed with which business can be conducted, and reduction in the effects of geographical distance on methods used to conduct business. However, the move to e-business, which has been described as a move to a new economy, goes beyond using the Internet as a tool. The changes require modifying the way in which business is conducted and success is measured. These changes are reflected in words such as the following: full customer service (Siebel, 1999); profiling (Siebel, 1999); enterprise relationship management (Siebel 1999); competing on affiliation (Evans & Wurster, 1999); deconstruction (referring or new forms of industry) (Evans & Wurster, 1999); navigators (referring to those who control entry to the Web) (Evans & Wurster, 1999); ecosystems (Tapscott, 1999); digital bazaars (Schwartz, 1999); invisible inventory (Siebel, 1999); virtual integration (Magretta, 1999); e-business community (Tapscott, 1999); virtual marketplace (Siebel, 1999); and richness and reach of information (Evans & Wurster, 1999).

Effects of E-business on Human Resource Management

Human resource management obviously is affected by the move to e-business. Effects include a compressed technology cycle, growing demand for faster and better service, and greater dependence on speed as the determinant of success (Greengard, 2000). Human resource management professionals can address these effects if they recognize the opportunities and threats inherent in conducting e-business. For example, Greengard (2000) identified seven guidelines for human resource professionals who want to maximize the benefits of e-business and move at the necessary speed:

1. Understand the fact that the Internet makes e-business fundamentally different from other methods of conducting business. E-business requires identifying new ways to communicate and new business models, so there must be more creative thinking and less bureaucracy. The Internet creates new opportunities. However, the possible benefits of these opportunities can be realized only if people move quickly and effectively enough to take advantage of them.

2. Obtain the support of senior management HR needs to justify the need for specific changes and show the possible benefits of these changes.

3. Create a task force or team who can make decisions quickly. In many cases these teams must include members from different departments because successful e-business requires participation from different departments. Also, the team members must be able to communicate effectively and understand the concerns of others. All this teamwork and communication must be completed at an increasingly fast pace. Decisions must be made quickly, and recommended actions must be implemented swiftly.

4. Use Return-On-Investment (ROI) calculations different from the conventional ones. Many initiatives in e-business are so new that it is difficult to measure the ROI directly. Also, many of the required changes include costs that lead to benefits such as greater loyalty and increased retention. The potential productivity gains are enormous, but these gains are difficult to measure by traditional methods of computing ROI.

5. Work with other departments to make sound business decisions. Other departments and Information Technology (IT) staff provide needed information so that HR can see the effect of various decisions on the whole organization, not only HR.

6. Create an IT system that is flexible and scalable. The most appropriate hardware and software are needed in order to make the business run effectively.

7. Do not let fear of mistakes slow decisions and actions. The best systems can include mistakes (especially in the early stages). The correct infrastructure and strategy must be clearly defined. Specific changes can be identified later. In fact, firms should expect that the increased desire for speed will result in mistakes. The fear of making these mistakes should not prevent action. Rather, the expectation of making mistakes should be used as a justification for constantly analyzing conditions and making changes as soon as possible.

Changing the Way in Human Resource Professionals Do Their Jobs

The Web is changing all aspects of conducting business, but HR is one of the latest functions to be affected by the use of Web-based technology (Karakanian, 2000). The delay found in responding to Internet use is most likely due to a variety of reasons. First, the effects on HR are not so obvious as those found on functions such as sales and customer service. Second, HR's effects on a firm's profitability are not so direct or easily measured as those found for many other functions, so attempts to maximize profits by taking advantage of Web-based changes typically are not going to be directed to HR functions before other functions. Third, certain HR professionals (especially those who entered the field many years ago) traditionally are not so quantitatively and technologically oriented as professionals in areas such as finance or operations.

Ulrich (2000) observed that HR professionals can experience a gap between understanding a Web-based economy and actually adapting systems to take advantage of the new economy. Understanding the capability offered by the Internet and designing an HR system to deliver optimal HR services in a Web-based economy may not be so easy as it sounds. Ulrich (2000) offered three guidelines for designing an HR system that becomes operational and works best in a Web-based economy:

1. Build new organizational capabilities, rather than focusing on structures or hierarchies. Capabilities can be considered the corporate DNA, culture, shared mindset, firm equity or brand, key success factors, or processes. Successful HR professionals will take the desire to succeed in a Web-based economy and transform this desire into specific capabilities.

2. Create innovative HR practices that instill the desired capabilities into the organization. These HR practices include the traditional HR practices such as staffing, training and development, compensation, and so forth. Also, these practices recognize the constraints presented by the new rules of a Web-based economy and work within these constraints.

3. Apply Web-based technology to HR practices and the HR function. This application requires forming alliances between HR and IT so that integrated solutions to business problems can be developed and implemented. Some of these solutions are directed toward administrative functions performed by HR departments--for example, payroll processing and benefits administration. Other solutions are directed toward transformational functions of HR--for example, training and employee relations.

CHANGES IN SPECIFIC HUMAN RESOURCE FUNCTIONS

When a business moves toward becoming an e-business, the human resource function also must change in order to maximize the level of operating under the new conditions. Changes are necessary whether e-business is a small part of the business or the focus of the business.

Human Resource Planning

The most obvious changes for human resource planning concern the need to identify employees with skills different from those found in more traditional organizations. Typically, e-business employees must be identified faster than they would need to be identified before the move toward e-business.

Employees working in e-business often are entering jobs that did not exist before (for example, Web master) and are working in an organization or division that did not exist before. Therefore, problems basic to human resource planning in general are exaggerated for e-business.

Traditional problems such as predicting the future need for employees, specifying the needed skills of these employees, identifying reporting relationships, and developing succession plans become more difficult under conditions in which future needs are so difficult to predict. These problems create more difficulties than usual since the need to respond to change is more crucial for e-business than for traditional business. Businesses competing in an e-business environment can be left behind their competitors if they cannot respond quickly enough to change and anticipate future needs.

In some cases e-businesses cannot keep up with the need for additional employees with the needed skills in areas such as information technology (IT). Therefore, key jobs may remain empty, or an employer may choose to outsource specific functions.

If key jobs remain empty, the existing IT employees may be given additional work in order to compensate for the shortage of needed employees. The increasing burden on existing IT staff can lead to job dissatisfaction and/or burnout. If employee burnout results in employees leaving the organization, the shortage of needed workers only becomes worse (Eckhouse, 1999).

The most-needed employees often are aware that they easily can find an attractive job in an active job market in which their skills are in high demand. They may choose to look for another job, or another employer and/or a professional recruiter may actively recruit them. Thus, employers can be losing the very employees they most want to retain.

A firm also may choose to outsource in order to compensate for the shortage of needed workers. This choice may work. However, outsourcing must be managed carefully, and it is seldom wise to outsource functions that include core competencies or are critical to the organization's success.

In all cases, the shortage of needed workers and the speed with which changing needs must be identified and addressed create problems related to human resource planning. When e-businesses are compared with other businesses, the e-businesses most likely will find that the usual problems related to human resource planning increase in number and complexity.

A related human resource planning problem concerns organizational design. Some firms find that the change to e-business can best be accommodated by changing their organizational design. They may choose to create a separate "dot-com" division that handles the e-business part of their operation. This separate dot-com unit usually is expected to be integrated onto the rest of the operation. In some cases the firms may actually create a spin-off dot-com organization. These separate divisions and/or spin-off organizations typically have a more entrepreneurial culture that is consistent with the operation of e-business. The resulting organizations are better able than their parent companies to attract the type of IT talent needed for rapid e-business development and successful competition in the e-business world (Schutte, 2000).

Job Analysis and Job Design

One of the most obvious changes related to job design and job analysis concerns the descriptions of jobs found in e-business. Many of the jobs found in e-business did not exist in traditional brick-and-mortar organizations, so new job titles are created. New positions (for example, Vice President of E-Commerce) are created, and the employees holding these positions are responsible for the creation and execution of e-commerce (Preston, 1999).

The traditional process used for job analysis and design requires analyzing work, designing jobs needed to accomplish work, analyzing jobs, preparing job descriptions, and creating job titles. This process requires modification in an environment in which the work and jobs could have significantly changed by the time the analysis process is completed. The people working in e-business are heavily influenced by the need for speed and adjusting to change. A methodical process of job analysis and job design can be a luxury and/or distraction in this environment. Also, e-business changes so fast that job titles lose their meaning when the responsibilities and required knowledge for these jobs change.

When the jobs existing in successful e-business are analyzed, they include skills different from those needed in traditional brick-and-mortar businesses. In addition to the obvious IT skills, employees must have business skills appropriate for success in the fast-paced and ever changing world of e-commerce. For example, Schafer (2000) sees an e-business team as a complex combination of high-achieving individuals who have technical and business skills.

The team must include technical staff like Web architects and designers, infrastructure specialists, Web developers, a Web site manager, Internet security experts, and a team administrator. The team also needs business-focused staff like content experts for marketing or sales and specialists like Web graphics designers. E-business employees need IT-related programming and analysis skills. They also need skills and knowledge related to strategic planning, relationship management, project management, content creation/management, and integration.

A wide range of specific skills, knowledge, aptitudes, and other characteristics (KSAO's) are desirable. Also, these KSAO's must exist in the proper combination so that the set of people working in the particular e-business can work together to accomplish the desired goals.

A final issue concerns the criteria used to design individual jobs for e-business. Since many of the skills needed for e-business are in short supply, skills that are in short supply (usually related to IT) must be used most efficiently. Certain non-IT tasks can be shifted to non-IT staff so that the IT staff can have more time to use the skills found less frequently. For example, Violino and Chheda (1999) recommend considering the need for responsibilities such as report writing, routine coding, and systems administration. In many cases these responsibilities can be given to non-IT staff, and the IT staff can have more time to utilize their IT-responsibilities. This type of job design may require the IT and non-IT staff to work closely together. Also, training may be needed for the non-IT staff (to understand more about the relationship with the IT tasks) and the IT staff (to understand more about delegating tasks and working with non-IT staff).

Recruitment and Selection

Recruitment and selection are extremely important for e-business in order to find the people who can provide the needed KSAO's. Unfortunately, recruitment and selection are more difficult for e-business than for traditional business. Growth can be very fast, and there is a shortage of certain skills. Recruitment and selection must be completed quickly in order to satisfy the needs of a rapidly changing e-business. The traditional recruitment process is followed by a selection system used to identify the best recruit(s) from a field of possible employees. If employers choose to follow this traditional process, they often will lose the best recruits.

The selection process in e-business often must use a decision process focusing on the minimum necessary qualifications, rather than taking the time to identify the best possible recruit. If an e-business can identify a recruit who possesses the minimum necessary qualifications, a successful e-business may optimize its selection process by immediately extending a job offer. If the e-business takes the time necessary to evaluate all possible recruits and identify the best possible one, the best recruits may have accepted other job offers or no longer be interested in the job for other reasons.

There also is a shortage of needed skills and a culture that encourages employees to think of themselves as highly valued resources for which employers should compete. In general, employees who have highly valued e-business skills see concepts like long-term employment and company loyalty about as relevant as punch cards operating on mainframe computers.

The aforementioned conditions lead to difficulties in finding appropriate employees for e-business. Therefore, recruiters must cast their recruitment nets far and wide in order to attract the needed employees (Wagner, 2000).

The shortage of needed skills also leads to a very competitive atmosphere for attracting e-business talent. Employers may have to think of potential employees as "customers" and try to attract these potential employees through marketing efforts. Applicants may have to receive the same kind of attention focused on potential customers. In fact, DeJong (2000) concluded that marketing executives may have to move into HR so that they can utilize marketing strategies such as building brand image to attract highly needed employees. The employer may have to market itself to potential employees as aggressively as it markets its products to potential customers. After the person is hired, the employer may have to continue to market itself to employees in a way similar to the way it tries to maintain customers.

The aforementioned conditions can lead to a bidding war among employers for needed employees. Higher salaries, attractive benefits, and other forms of compensation definitely make a potential employer attractive. However, increasing compensation alone does not necessarily attract the most (or the best) employees. Technology vendors or dot-coms often can attract potential employees through their culture (Shafer, 2000).

Schafer (2000) concluded that the most talented IT employees are attracted to the hottest projects and are very willing to change jobs if they find a new position with a high-profile challenge. She offers the following ways to attract talented e-business staff:

1. Offer a "hot job" that uses tools like Java, UML, XML, or some combination of tools.

2. Have a "cool" corporate culture. In addition to obvious characteristics such as a casual dress policy, this culture includes amenities like health facilities, a stocked snack bar, a continuous supply of music, and an over-the-top-of-the-line desktop environment.

3. Pay for a home office wired with DSL or an ISDN line.

Many of the most talented e-business employees are looking to their work as a source of personal satisfaction and a desirable lifestyle. Therefore, traditional methods for recruitment must be tailored to appeal to their unique desires. For example, consider this job ad recruiting for Web staff:

 From our beach-centric environment to our impressive roster of mainstream
 and up-and-coming clients, we keep you creatively engaged and strategically
 in the loop. Your voice is part of the blueprint, not background noise ...
 Wouldn't it be refreshing to find a place that treats people well, develops
 cool projects and has fun doing it? Decide for yourself--if you're a Web
 programmer, producer or designer, send your resume (Schafer, 2000).

An employer also must consider retention issues when deciding on recruitment strategies. Compensation can be used as a method for encouraging employees to stay. However, other factors also must be considered. For example, Shafer (2000) believes that organizational culture and product development are key factors in retaining e-business employees. A team-oriented environment that fosters loyalty and commitment from staff can be effective methods for retaining employees.

Orientation

Orientation for e-business takes on new meaning and importance. Effective orientation must go beyond the basic tasks of providing basic information concerning the firm, completing necessary forms, and describing employment policies and procedures. In addition to addressing basic needs such as enrolling in the health insurance program and obtaining identification for the security system, orientation programs must welcome employees to the organizational culture and reinforce their decision to join the organization. Effective orientation can be an important means for integrating employees into the organization and making sure they are satisfied with their new jobs. Successful orientation can help the employer maximize retention (which is a challenge for e-business employers).

Howard Klein suggests that employers view their new employees as immigrants who need to learn about their new employers in the same way that immigrants need to learn about their new country. This learning must go beyond acquiring information about performance expectations and include information on history, language, rules, and culture. If new employees understand the organization's values and feel as if they are part of the organization, their sense of belonging and commitment will be increased (Hutchins, 2000).

Orientation can be a powerful tool for integrating new talent into the organization and assuring the acquisition of the desired principles and values. It is important that these principles and values be acquired as soon as possible because change occurs so rapidly (Hutchins, 2000).

Technological changes alter the nature of work through possibilities such as telecommuting. Therefore, orientation programs must change the way in which they interact with employees and integrate them into the workplace. These changes are exaggerated in many e-businesses in which some or all of the employees are part of a virtual workplace that does not require them to be in the same location as other employees.

CDG & Associates (a virtual organization employing 75 consultants located in various places around the country) provides an excellent example of a successful orientation program. CDG consultants, who install HRIS systems, are linked to each other by computer networks. The geographic distance among employees presents challenges that CDG addresses by fostering a sense of shared culture and values as soon as employees are hired.

The orientation process begins during recruitment and continues after the employee is hired. They use a "virtual introduction" system for newcomers who post photos of themselves on the CDG intranet. The photos are supplemented with brief biographies that give information on topics such as work history and hobbies (Hutchins, 2000).

CDG's orientation process also includes between one and three weeks at the main office, where new employees are given basic information about benefits and employment policies. They also participate in communication seminars and psychological profiling that shows them where they fit into CDG. Also, new-hire partners are assigned to new consultants so that these new employees will have someone to provide guidance when they are out in the field. Finally, CDG has new consultants work through a practice application (or in some cases a real assignment) so that they start working right away. New employees enjoy the opportunity to utilize their skills and demonstrate their success. CDG has a retention rate of 93 percent, which CDG President Cynthia Driskill attributes to the intensive orientation and nurturing environment (Hutchins, 2000).

The value of orientation programs for e-business can be maximized by following the recommendations offered by Cadwell (1988) and applying these suggestions to the e-business environment. Cadwell (1988) observed that effective orientation can take as long as one year. It begins as soon as the person is hired and extends beyond the first introduction. The person should feel welcome and develop a positive perception of the employer. This feeling is reinforced by personally involving the supervisor in the orientation. At the end of the first day employees should feel that they made the right decision by joining the organization. Finally, the new employee should not spend excessive amounts of time completing paperwork. Training for the actual job should begin as soon as possible. Cadwell's (1988) recommendations are especially important for e-business employees who are eager to begin their work and are likely to be annoyed by administrative details that can be tedious. Effective orientation is a necessity, not a luxury, in an environment like e-business that is associated with rapid change and high turnover (Hutchins, 2000).

Training

E-business' rapid change and the sophisticated technology mean that continuous and extensive training is necessary. However, successful training for e-business goes beyond increasing the speed of training and including new content. Even employees who are not directly involved in the "e" part of e-business must constantly be retrained in order to keep up with the latest technology.

The shortage of IT employees leads some firms to initiate massive retraining programs in order to develop needed skills in current employees (Richter, 2000). Such retraining efforts contribute to the success of e-business in a variety of ways. First, retraining programs produce employees with the needed skills. Since these employees already work for the organization, they do not require orientation or an adjustment period to become integrated into the employing organization. Second, retraining programs reduce the anxiety and potential opposition of long-term employees who may see the move to e-business as a way to eliminate them and replace them with new employees who have the latest skills. If retraining programs are truly successful, they produce employees who will have the needed skills and are less likely than new employees to contribute to one of e-business' major human resource problems--that is, high turnover.

Mentoring is another type of training that is especially valuable in e-business. This type of training is found in entrepreneurial businesses that begin as e-businesses as well as traditional organizations that are adding e-business to existing methods of conducting business.

Entrepreneurial E-Businesses

Entrepreneurs who start successful e-businesses often discover that they need additional skills after the early days of entrepreneurial development. The first-time e-business entrepreneur often evokes images of a technological genius having a great idea while operating out of a garage or basement in the earliest days of development. The initial success, which can be based on the great idea, must be followed by later development in order to move out of the garage or basement and grow into a business with continued success. Successful later development requires skills and knowledge not always found with first-time entrepreneurs. Therefore, a new type of mentor has emerged, referred to as the mentor capitalist by Leonard and Swap (2000).

These mentor capitalists typically are successful business people who do not want to be involved directly in beginning new businesses. However, they love the thrill of entrepreneurship. They provide entrepreneurs with skill and knowledge related to tasks such as finding investors and locating top employees. By providing the necessary skill and knowledge, these mentor capitalists guide new entrepreneurs on the road to growth and continued success. These mentor capitalists usually are older and more experienced than the entrepreneurs. Both the entrepreneur and the mentor have skills and knowledge lacked by the other person, so they form a complementary relationship that is mutually beneficial.

Businesses That Add E-Business as a Method for Conducting Business

When businesses add e-business as one of the methods used to conduct business, they need a different type of mentoring. They may experience a division among existing and new employees. The division between these two types of employees does not necessarily correspond to the date of hire or the age of the employee, but it may be attributed to these characteristics. If employees see themselves as dividing between the "old employees" and the "new employees," the business may experience some real problems in implementing successful e-business. Such divisions seldom result in cooperative relationships among employees. Also, the "old employees" have knowledge needed to make the business run. In fact, the "old employees" are likely to be the ones managing the new employees and holding the highest positions in the organization.

In the aforementioned conditions the salient division among employees is related to the technological abilities and interest of employees, as well as to the degree to which they are involved in the "e" side of the organization. The challenge for the organization is based on the need to utilize the skills, knowledge, and experience of ALL its employees. Successful training related to this need is found in mentoring programs that often are described as "reverse mentoring." Traditional mentoring programs pair a new employee (as the mentee) with a mentoring employee who has worked in the organization for a significant period of time. Reverse mentoring programs differ from traditional mentoring programs because they pair a new technologically sophisticated employee (as the mentor) with an employee who has worked in the organization significantly longer than the new employee has. For example, General Electric (GE) paired younger Web-savvy employees in mentoring relationships with older employees.

The "older" employees were encouraged to find technologically sophisticated employee mentors, whose ages typically ranged from twenties to early thirties. These mentors formed relationships with GE veteran employees whose ages typically ranged from late thirties to sixties. Even CEO Jack Welch, one of the executives in his sixties, had a mentor. The mentors taught their mentees to embrace the Internet. The mentors acted like teachers who met with their students to surf the Web, answer questions, and discuss articles and books the mentees read as homework (Schutte, 2000).

When these reverse mentoring programs are implemented successfully, they have a very positive effect. They facilitate the acquisition of the technologically sophisticated knowledge needed to successfully conduct e-business. They also help to integrate new employees into the organization and avoid an unhealthy division that can occur between employees involved in the "new" and "old" way of conducting business.

When reverse mentoring programs are unsuccessful, they can make problems worse. Reverse mentoring typically is implemented as part of an organizational change, which cannot be simply mandated. Higgins, Trotter, Ablon, Pearson, Mohan, and Wind (2000) concluded that the organizational change issues cannot be ignored when a firm is trying to implement a program of change. Also, true mentoring extends beyond mere coaching to include career and psychosocial support. New staff and senior staff must become integrated. The new staff want recognition of their technological skills and knowledge. The senior staff expect their experience and knowledge to be valued and respected. The reverse mentoring is expected to be an opportunity for mutual growth and learning. If such a program is attempted without recognizing the complexities related to organizational change, the fear and insecurity of both the mentors and the mentees could dominate.

The worst possible situation occurs if programs such as reverse mentoring are mandated without any explanation or attempt to involve people in the planning necessary to effect change. Under these conditions two opposing camps can develop: (1) the new more technologically sophisticated employees and (2) the continuing less technologically sophisticated employees. If these two sets of employees are not integrated effectively, potential conflict will grow. If they are forced to work together without addressing the complex dynamics of working together, an organization could be creating enormous difficulties.

Compensation

E-business faces many challenges related to compensation. The most obvious problem concerns the continually escalating salaries needed to attract and retain employees with much needed and difficult-to-find skills and knowledge. The increased demand for e-business skills, combined with the shortage of employees with these skills, has resulted in booming payrolls. For example, responses to Wagner's (2000) survey of IT managers found that over 80 percent of these managers reported salary requirement for their staff as having increased during the past year. The mean such increase was, in fact, 17.2 percent.

Compensation changes so fast that employers may find it difficult to keep track of the changes for certain highly needed skills. Some employers reported the need to constantly conduct market surveys in order to obtain accurate data. Salaries increased so fast that salary data were out-of-date as soon as they were collected (Wagner, 2000).

Employers also must analyze the role played by compensation before assuming that increased compensation is the only (or even the best) way to attract and retain employees. Factors other than compensation influence employees' decision to work for a specific employer. The only real loyalty of e-talent is to their work (Schafer, 2000). In the rush to attract e-business talent, employers still must try to control costs (for recruitment, retention, and compensation). These costs should not enter the stratosphere (Schafer, 2000).

If employers use compensation as the only way to attract and retain employees, the resulting environment includes a bidding war in which employees are constantly changing employers every time they receive a new offer. A better strategy is to keep track of market rates while carefully identifying the other reasons for employees' decisions to join or leave an employer. Also, alternatives such as retraining current employees actually may be more efficient in the long run than trying to compete with other employers through compensation alone.

Compensation packages for e-business may include many different forms of compensation. In addition to standard compensation items such as salary and signing bonuses, e-businesses try to offer other types of compensation that employees value.

For example, employees may want expenses paid for leasing and insuring an expensive sports car, purchasing an expensive home computer system, or an elaborate music system. Benefits may go beyond traditional ones such as health insurance and pensions. Desirable benefits may include services such as concierge service to take care of personal errands like picking up laundry, waiting for the plumber, or pet sitting for an employee's sick cat.

Some e-businesses (most notably dot-coms) have used different types of direct compensation. For example, employees may be given equity in the firm. If the firm is successful, it may later go public or be bought out by venture capitalists. In these cases the value of the employee's equity may be over a million dollars. The likelihood of becoming a millionaire overnight from such a series of events is unlikely. However, e-business folklore includes stories of twenty-something individuals who became millionaires after working for only a few years. Even though these events are unlikely, the chance to be part of one of these sensational stories appeals to certain e-business employees who consider themselves risk takers who are part of a new and exciting industry.

For some employees the glow associated with startup e-businesses has faded since many dot-coms have failed. Employees are becoming more aware of the instability of many dot-coms. They realize that there is a tradeoff between the potential financial gains of dot-coms and their instability (Wagner, 2000).

Internal equity issues also must be considered when compensation systems are defined and evaluated. Certain positions (such as Web developer) may be obtaining pay increases of at least twenty percent in addition to various premiums and special benefits. This may create feelings of internal inequity for other employees who consider their skills equally important to the firm's success. Employees who are not in the highest demand jobs may experience morale problems because of lower wages or less glamour associated with their jobs (Wagner, 2000). Employers may address internal equity issues by developing compensation packages that include more variable pay for jobs that are in high demand. This will help to preserve internal equity without raising everyone's salary.

The severity of internal equity problems varies by industry. The least problems are found in small firms devoted exclusively to e-business. In these firms most of the employees have very competitive skills, and they work in a very completive industry.

The greatest problems are found for firms that include e-business as only a part of their overall business. In this case only some of the employees have skills that are likely to have their compensation raised in order to address external equity concerns. This is especially true in industries like retail and insurance, where IT salaries traditionally have lagged behind those found in other industries (Schafer, 2000). These firms generally have to rely on factors other than compensation to attract and retain employees--for example, culture, benefits, or location.

Compensation will always be an issue, but it is not the only way to keeps employees. Creating a team environment as well as developing loyalty and commitment are very important. These non-compensation factors may go a long way toward keeping the e-business team intact. In the long run, the organization's culture, product development, and recognition for employees' achievements are very important for retaining e-talent (Schafer, 2000).

The importance of the actual work also must be considered. Many e-business employees want to feel that they are part of the latest technology and are working on projects that are constantly challenging them to move ahead technologically.

DISCUSSION AND CONCLUSIONS

E-business presents challenges for human resource management. In order to meet the changing needs of E-business, human resource professionals must respond to the changing demands of E-business by analyzing the needs of the organization, current employees, and potential employees. Responses must be made more quickly than in more traditional business because of the greater speed with which E-business is conducted.

Human resource professionals can make significant contributions to the success of E-businesses. The role of HRM must not be ignored when more obvious functions such as IT and Marketing become the focus of change.

REFERENCES

Cadwell, C. (1988). New employee orientation: A practical guide for supervisors. Menlo Park, CA: Crisp Publications.

DeJong, J. Back to the future--employees are returning to traditional companies as the allure of dot-coms fades. VAR Business, October 30.

Eckhouse, J. (1999). Too many jobs, too few workers. Information Week, July 5.

Evans, p., & Wurster, T. (1999). Blown to bits: How the new economics of information transforms strategy. Cambridge, MA: Harvard Business Press.

Greengard, S. (2000). The need for speed. Workforce, 79, 20-21.

Karakanian, M. (2000). Are human resources departments ready for E-HR? Information Systems Management, 17, 35-39.

Higgins, M. C., Trotter, L., Ablon, S. L., Pearson, St., Mohan, M., & Wind, Y. (2000). What should C.J. do? Harvard Business Review, 78, 43-48.

Hutchins, J. (2000). Getting to know you. Workforce, 79, 44-47.

Leonard, D., & Swap, W. (2000). Gurus in the garage. Harvard Business Review, 78, 71-79.

Magretta, J. (Ed.). (1999). Managing in the new economy. Cambridge, MA: Harvard Business Press.

Preston, R. (1999). New breed of Internet exec is born. Internet Week, October 25, 54-55.

Richter, K. (2000). European staff feel the effects of E-commerce--Retraining programs grow in response to shortage of tech-savvy workers. Wall Street Journal, June 7, 2000.

Margaret E. Mitchell
Management and Organization Department
Connecticut State University
New Britain, CT 06050