The Appeasement Trap

Palmer says that even the people he can find are hard to deal with, because they know that they're in the driver's seat. "They've got leverage, and they're going to use it," he says. "Maybe they're not asking about stock options, but they're definitely more savvy about salaries and bonus plans."

It's easy to give in to the temptation to give recruits everything they ask for and to fall deeper into the appeasement trap out of sheer desperation. Tony Coretto once recruited an entry-level programmer at a salary of around $40,000. He even sweetened the deal with a $5,000 signing bonus. "The guy wound up leaving within four months anyway," says Coretto. "To his credit, though, he did give me back the bonus." Coretto says the guy left for a job that provided more benefits, including education reimbursement for the employee's wife. "I'm too small to afford that," says Coretto, "and I don't want to set the precedent of keeping up with every single thing another company offers. Those are hard dollar costs that rarely pay off."

Coretto has discovered empirically what the pundits have been saying for years: throwing money at people doesn't work. According to John J. Clancy, professor at Washington University in St. Louis and author of The Old Dispensation: Loyalty in Business (Fairleigh Dickinson University Press, 1999), "The two most primitive ways to motivate people are threats and bribery. And neither works very well in the long run."

Do employees today want too much? Sorry, that's the wrong question. You might as well ask if it's wrong for Jim Carrey to get $20 million per movie or for Kevin Garnett of the Minnesota Timberwolves to have a $121-million contract. In cold, hard terms, the answer is no, not if the market will bear it. "Employees are asking for as much as they can get, and in a free market there's no reason to fault them for that," says Peter Cappelli, a professor at the Wharton School, and author of The New Deal at Work (Harvard Business School Press, 1999). "The more interesting question is, Are employers paying more for people than they should?"

Because the game of appeasement is one you'll lose. The sad irony of the appeasement trap is that the companies that fall into it by continually upping the monetary ante succeed in attracting only the people most likely to leave at the first sign of a better deal.

"There's so much opportunity, but I can't find the skilled workers I need."

It's easy to blame the current hiring scramble on the record-breaking bullish economy and the attendant Internet gold rush. But there's a bit more to it than that. What we're witnessing, observers say, is a fundamental shift in the nature of the employment relationship -- at the employers' expense.

According to Allan A. Kennedy, author of The End of Shareholder Value (Perseus, 2000), there have certainly been plenty of times since the Industrial Revolution that employers have had the upper hand. "For centuries employees have been relatively helpless pawns in the job market," he writes. "That formula is changing. ... Finally, the employee gets to call the shots. Employers beware."

What's more, employers have only themselves to blame, at least as far as Wharton's Cappelli is concerned. He says that all that downsizing in the 1980s and 1990s marked the beginnings of the sea change. Corporations violated the notion of a safety net and demolished the concept of employment for life. Enter a sadder-but-wiser, market-driven workforce, who heeded the message that they needed to look out for themselves.

And it's probably not going to get better anytime soon, even if the economy should take a sudden southern turn, because the changes in workers' attitudes are likely to be permanent. Demographers project an even tighter hiring pool for the next few decades. "What can we expect to see in the future?" asks Kennedy. "The simple answer is more and more of what is already visible now, until much of the job market closely resembles the one in Silicon Valley today."

But the future isn't entirely bleak. Employee loyalty isn't dead, says Clancy, it's just been refocused. "Today in the software business you see development teams who sneer at any idea of company loyalty but whose members will get up from a sickbed to improve the product or meet their schedule," he says. Which means that to be successful, companies must focus on giving employees something to be devoted to. "Companies have to take a long-term view about investing in and creating an environment that attracts and keeps employees," says Kennedy. Some of that can be achieved by proffering perks like free lunches and weekly massages, "but the heart of it comes from the attitude employers have towards employees. That means listening to them, paying attention to their needs, treating them as long-term assets."

Peterson, for one, bristles at the notion that senior management should spend so much time making sure employees are happy. "I know it comes with the territory in trying to be a long-term caring company," he says, "but it's taking its toll on the nurturers. It's taking up all our time. Senior-level consultants and principals aren't spending their time doing what they should be doing." But that begs an all-too-important question: What exactly should senior management be doing? What we're looking at is a redefinition of what it means to be a CEO.

That's how Brett Price sees it. Price, CEO of Cheetah Technologies, a systems-integration business in Bradenton, Fla., says he's happy to do whatever it takes to make his company successful. And right now, that means focusing on long-term employee satisfaction. "Do I sometimes wish I could be doing other things? I don't look at it like that," says Price. "This is what I do. It's my job to put an organization in place that makes these people want to stay. The only thing I wish would change is the speed. You have to respond faster today. If something is wrong with the organization, and you don't fix it in a matter of months, they'll leave."

"There's such a demand that [my employees] often just go into business for themselves."