Why big high tech companies are losing the talent war

November 22, 2006 | Auren Hoffman | Comments |
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[Disclosure: Auren works at Rapleaf, a startup, and is thus biased towards startups.]

Big companies are losing their “A” players and they’re struggling to attract “B” players. In an industry where everything is about people, large tech companies are in trouble because they are losing the talent war. And keep in mind, an “A” player in an organization can usually produce the same results as three “B” players.

Joining a big company is irrational in today’s market

Why would you want to join a big high tech company (Yahoo, Microsoft, eBay, HP, Oracle, or Cisco) when you can join a cool startup? [Disclosure: Auren is NOT a shareholder in any public high-tech company] At a big company you’re stuck with corporate politics, paralysis decision making, and a lack of getting things done. At a small company you’re having fun, pursuing your dream, and actually getting things done.

Job security is about a wash. While start-ups tend to go under, big companies are always doing lay-offs and good people are often getting fired due to corporate politics and purges. Thinking about cash compensation, if you make $130K at a big company, you’ll likely make $110K at a funded start-up — a significant difference ($11K after taxes), but not astronomical. Also let’s not forget the stock compensation which has no comparison.

In today’s hot startup market, it is essentially irrational to join a big company. That means that big companies are only attracting “B” and “C” players or they are attracting irrational A players. And they are losing all those great “A” players they hired in the dog days of 2002 (most of which now have fully vested stock-options).

Essentially, when the economy is good and massive amount of startup activity is happening, the big companies suffer. Just think about it…when you see the Google $1.65 billion acquisition of YouTube, does that make you want to work more for a Google or for a potential YouTube?

Now there are some rational “A” players that are still going to large companies. In order to recruit rockstar engineers, companies like Google significantly increase the pay and offer too many perks to list. And some people have their own reasons to join these tech companies. Niall Kennedy, a true “A” player, joined Microsoft last April because he wanted to be at the epicenter of the PC user experience. Like a scientist attracted to a university with great resources, Niall was attracted to Microsoft not to make a personal profit but to build true, long-lasting innovations. Unfortunately Niall left four months later when he realized corporate bureaucracy can stifle innovation.

When people like Niall (who make career calculations based on doing something cool rather than on compensation) are leaving big companies, you know these Microsofts and HPs are in serious trouble. Too bad for them.

In fact, the only rational reason that I can think of to work for one of these large tech companies is if you want to work less (or eat free gourmet food). If you are content with working 35-40 hours a week and are not interested in growing your career at this point in your life, then working for a large company is a good short-term decision.

Rapleaf recently hired five people. None of those people were seriously considering working at large firms (and we actually recruited some of them out of large firms) but all of them were considering other startups. Rapleaf was competing for talent with other startups.

Now I know someone that just joined a company a large tech company is going to get mad at me. That person might well be an A Player because there are always personal factors (like you get to work directly with Vince Cerf). However, large tech companies are, on the whole, getting whipped by start-ups in the battle for talent.

The big macro trend in technology is the big sucking sound coming out of the large tech companies. Whooooosh!

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About the Author, Auren Hoffman

Auren is CEO of Rapleaf -- portable ratings for buyers and sellers. He was formerly Chair of Stonebrick Group and the Connector Group. Previously, he founded and sold three Internet companies before age 30: BridgePath (sold in 2002), Kyber Systems (sold in 1997), and GetRelevant (sold in 2002). Auren is a trustee of the Junior State of America Foundation and Chairman of Lead21. He is the founder of the Silicon Forum. Auren holds a B.S.E. in Industrial Engineering and Operations Research from the UC Berkeley. He writes a widely read blog called Summation (www.summation.net).

  • Pete
    "if you make $130K at a big company, you’ll likely make $110K at a funded start-up"

    Where does he get these figures from?

    He also forgets to mention that during the critical period before the startup gets funded, you need to attract A-players who can work for next-to-nothing. And in such situation, it is not clear at all how the big-companies are losing the war for talent:

    If he's ever searched for A-players, especially those who didn't make big money in the bubble, he should know that that fight isn't easy.
  • John Doe
    I agree that the comments are not "well thought through" and it could have been approached at differently. With that said, I work at one of the multi-billion $ companies mentioned in the article and Auren is right. We have LOST A TON of folks. Annualized in Q3 we lost 25% of our workforce in certain areas. Were they all 'A' players? No, but many of them were. Really sad to see them go... I have my own reasons for not jumping into the startup world, but I'll save that for later.
  • Regarding Ben Metcalfe and "snarky":
    Vint Cerf's full name is "Vinton G. Cerf", not "Vincent".
    After all the work he and the other Internet pioneers have done to provide "instant access" information, it seems it takes very little effort to google "vint cerf" and read his official bio:
    www.google.com/corporate/execs.html.
    Of course, "snarky is as snarky does", right Ben?
  • Big, small, 'A' players, 'B' players - so what! The job market is dynamic. An organization's ability to attract and retain the best talent is a function of challenging and rewarding work, competitive compensation, etc.
  • I think what you're getting at is, the Internet (now especially) is wide-open with opportunity, where a lone gun can give up girls and hygiene for a few months, do the thing right and make it big. Same deal in the early 90's with the 3D animation gold rush.

    But don't forget the multitudes of desperate, poor hackers out there working for peanuts places like oDesk, in crappy conditions I can't even imagine comfy here in Austin, Texas, USA.
  • Roy
    Most of the growth in the world's economy happens via second tier companies and entrepreneurship of small businesses. The upper tier grows very slowly. Opportunities there are very limited. This is exactly how Silicon Valley became filled with giant companies; through the entrepreneurship of the small. Excellent article, and years ahead of people's ability to understand such things.
  • Gary McPherson
    I'm thinking plagiarism. This article reads like something out of the mid-90's. Let me give you a clue about big companies. They aren't going with 'C' players, they are going offshore. Yea, that dirty little word. BTW, so are startups. They are using these guys to replace their 'C' players and even some 'B' players.

    While the retro memories were nice, this article simply does not hold water in this decade. Also, I don't know anyone who is hopping around like we did back in the 90's. There's a job change here and there, but those of us who survived the bubble don't see the point in making the same mistakes twice.
  • Casey
    Just read this excerpt from the article:

    "In today’s hot startup market, it is essentially irrational to join a big company. That means that big companies _are_ _only_ attracting “B” and “C” players or they are attracting irrational A players."

    That's got to be the worst claim I've ever heard in an online business article. To say something bold like that with no warrants sounds pretty 'irrational' to me. This article is such a marketing ploy for some day's work no business model easily spammable rating system. What's worse (besides the obvious attempt to lure the audience in with a misleading title that includes eye popping keywords like 'high tech', 'talent', 'war') is this guy is in no position to write an article like this. I don't see any of the 'big' high tech companies he mentions in the article on his resume. This is just a bad case of blog spam. Screw Rapleaf.
  • Excellent article. Startups are hard driving, onto the subject. No place for slackers or corporate BS. Auren, would you email me or call - I have a few questions to asks you by the way on another subject.
  • John
    who is this butternut?
  • Ted
    This is one of the dumber articles I've read in a long time. Remind me to having nothing to do with "rapleaf" whatever that is.
  • this is obviously another journalistic maneuver by some CEO attempting to promote his name and startup. Well, nice work, however a little over simplification here and exaggeration. We all know there are tons of smart people in the Valley and everywhere. All these people have intrinsically different motivations, financial goals, and criterias in choosing jobs. Hence, attempting to say that big companies losing "A" players is a little too overarching. We all know how difficult it is to get the right talent and fit in hiring.

    Please, do more analysis, stop doing all this "National Enquirer" type of article- it is not balanced, and will alienate the majority of readers who can't relate to this.
  • big company needs more junior or middle level talents, but startup needs more senior or executive level talents. they have big different demands, I think.
  • I think, Lynne, you're being unfairly snarky with Auren as "Vint" is a generally recognized abridged version of "Vincent". So technically he is not wrong by simply using the man's full name. It's no different to someone calling me Benjamin over Ben.

    I think the article lacks warrants and is a little simplistic. Whilst I think the general observation is true, it's fair to say there are many "A" team people who continue to work for big corps - but then we don't know how much they've been able to inflate their salary accordingly. I don't think it's quite as 'back and white' as Auren writes... But at the end of the day if Yahoo! (just an example here folks!) wants to offer a potential 'A grader' x5 the normal salary to stay put then I can see why they would seriously consider taking it.

    My take on all of this is that there are two types of people -- those who want to lead and those who want to follow. There is nothing wrong with the latter, it's just the type of folk who want to knuckle down a get on with the challenges of engineering/design/product developer/whatever their specialism.

    The followers often go work for big companies because there often tends to be bigger rewards for the value of their craft, bigger challenges and the opportunity to work on higher-profile projects. Those who want to lead often go work in smaller companies or start-ups because it's more easier to be able to command the project or company.

    The interesting case is those who are 'leaders' or those who become 'leaders' who work in a large company. Some get to rise to the top and be 'seen' and others get frustrated and leave. At the end of the day, you can only have so many 'visible' people in a large company. Think about it -- how many public-profile individuals - other than executives - can you name who work for Google? Microsoft, maybe a few more than Google because it's a larger company. And what about Yahoo!, other than those who work for Flickr or the other bought-in startups who had a public profile pre-Yahoo!?

    It's the 'leaders' who perhaps are the most valuable to a company - big or small - and often they demand profile and reputation/status rather than pay. They'll go wherever they can get their status.
  • jack
    a sad article.... i am a start-up guy myself, so i started reading with interest... but i find the arguments used simplistic and lame. thumbs down.
  • Elmur Fudd
    "If you are content with working 35-40 hours a week..."

    which world are you living in man? more like 45-60 in all "big" companies I know of...
  • Rik
    This article really lacks warrants. He's basically trying to use an extreme title/position as a controversial gateway (or excuse) to just tell the world why he personally prefers a startup over a big company. His proof/reasoning that large companies are losing the A talent to startups and not vice versa is pretty silly and over generalized. I mean, he cites just one case of a person leaving Microsoft to build his own startup, when most techies I know can easily list ten cases where people left Microsoft for other big companies like Google or Yahoo. What a waste of reading time.
  • Kevin
    This is one of the most absurd articles I've seen in a long time. If I had funded this company, it would not have been with this idiot at the helm.
  • too cool
    this reads as if it were written on a 45 minute train ride, stream of consciousness... you go from discussing the pros of working at youtube vs. google after the $1.65B acquisition, then talk about an "a" player's decisions being based on doing something cool rather than on compensation. i'm not sure there's any merit to the premise of this article, but if there is, it's undermined by the proposed arguments.
  • I've gotten to "work directly" with Vint Cerf, co-inventor of TCP/IP and "Father of the Internet". He's advised on my papers, patents, and companies. Is "Vince Cerf" his half-brother or something, Auren? :-)
  • Jim
    This is a bubble article if I ever read one. There are many A players or good people working at big companies. I know because as a startup I have tried to recruit them! Most are smart enough to know that there is little chance they are working at the one startup out of 100,000 that will turn into a YouTube so you have to be able to offer them something more then that and competing with big company benefits and pay can be challenging. Many startups will go under or sell for small amounts where employee options earn them little so offering a future is important. I have many friends that stayed put in late 90s era and were sitting pretty in 2002, when that boom went bust. Its all about risk. Some people, and smart ones too, choose to moderate their risk by taking a safer route. You have to respect that because that is sometimes the best choice.
  • looks like Auren got kicked out of a large company he wanted to get into. And hence all this vengeance.
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