Frat Mixers and Stock Options
Like many fast-growing companies looking for help, VarsityBooks.com has not been shy about tapping students for part-time positions. In fact, VarsityBooks.com, an online college-textbook retailer based in Washington, D.C., relies heavily on a network of student sales reps to spread the word on campuses around the country. But it is no ordinary part-time job. The VarsityBooks.com hiring package includes an hourly wage, sales commissions, bonuses, a PalmPilot, and training to help create a campus-specific marketing plan. Several times a year, VarsityBooks.com even flies the student reps to attend two-day conferences akin to corporate sales meetings.
But to really make the grade, VarsityBooks.com felt that it had to offer more. In a surprise move last summer, president and CEO Eric Kuhn announced to a gathering of 250 lead campus reps that they would also receive company stock options. The students promptly gave the CEO a standing ovation.
"It was a big surprise," says Igor Frenkel, a junior at Rice University, who was present at the announcement. "It's really awesome. We're part owners of the company." Frenkel had signed on as a lead campus rep for VarsityBooks.com last spring and now has a team of three student reps working for him.
Jon Kaplan, vice-president of strategic planning, believes options are crucial to recruiting and motivating even the youngest members of the workforce. And stock options are an inexpensive perk -- at least for now -- for a company trying to reduce its already sky-high costs. (In 1998, VarsityBooks.com lost $2 million on $100,000 in sales.) So far, VarsityBooks.com has granted 627 student reps options to purchase 100 shares each at an exercise price of $5 a share. The options vest in one year.
The tactic clearly isn't for every company. Full-time employees could resent the move to give equity to part-timers who are not even through school. And at VarsityBooks.com, the options ultimately could receive a failing grade as a recruitment tool. When the company went public, in February, the stock opened at $12 but ended its first day of trading two points down and remained there through the first month of trading. At that rate, the stock proceeds would pay only for a semester's worth of books. Kaplan concedes that the options "will be hard to retire on." And yet students like Frenkel are still upbeat. "It will take a few semesters of results to see the stock go up," he says.
CEO Kuhn is also undaunted. He says VarsityBooks.com will continue offering stock options. Just 18 months ago the company had a smattering of student employees. Today there are now more than 500 lead reps and a total of 2,000 students promoting the company on campuses in all 50 states. Kuhn says, "Having 2,000 student reps is a very cost-efficient way to market."