Austin’s CEO Summit Focuses on Retaining Tech Talent


By SUSAN LAHEY
Special Contributor to Silicon Hills News

The Austin Technology Council CEO Summit heated up toward the end of its first afternoon Thursday when John Price, CEO of Vast, led a panel on compensation packages for tech employees.
Price asserted that Austin lives in a bubble in which “culture” competes successfully against higher salaries. But the bubble, he said, is going to burst as the city’s tech companies import more talent from places like Silicon Valley.
Price spoke at the second annual CEO Summit at the Hilton Hotel. The Austin Technology Council sponsored the two-day event in which more than 150 CEOs and other top level technology executives meet to discuss the outlook for Central Texas’ technology industry and how to recruit and retain technology talent.
Price, a veteran of Trilogy Enterprises, which touted its culture but lost many employees to startup fever, said the compensation of his company was based on money and ownership, not on “fun” or “culture.”
Panelists, who included Bill Arend, General Manager of Oracle Corp., Kip McClanahan, a partner in Silverton Partners venture capital firm, Matt Chasen, CEO of uShip, Kevin Reinis, CEO of Flocasts and Rod Favaron, CEO of Spredfast, all argued that, while it was important to keep superstars on at a high financial cost, many people in Austin stayed with companies because they liked the culture.
Speaking of that notion and his experience in Silicon Valley, Price said “At Facebook, none of these principles apply. Engineers are going to go with what they perceive as the best opportunity. These are smart people. They can do the math. They’re thinking ‘I believe I have talent. The only thing I have is time.’ Austin lives in a logical bubble that is going to pop. We have to show these people that they’re working for a company that has real traction.”
Kip McClanahan retorted with “I think you’re crazy.”
“What I’ve heard a couple of times across this panel is that we do what we can do to retain top talent given the tools that we have. If the companies in town can do that with liquid equity they do. They use the tools they have.”
Matt Chasen talked about an employee offered a 50 percent increase in salary from a Dallas company. The employee walked into his office and said ‘I just want you to know I got this offer but I’m not taking it because I love working herewith these guys.’ To which Favaron quipped, “I know your tech crew, they’ve got their own culture. It has nothing to do with you.”
Later on a panelist pointed out that Price’s tech staff, too, had a culture in which the engineers had bonded and that that played a factor in his turnover rate, whether he liked it or not.
The panel agreed that there was a difference between compensation for “rank and file” engineers and the superstars. And that companies needed to do what they could to maintain the company’s top performers. But the
exciting part of the debate seemed a black-and-white argument over whether Austin’s groovy, easy-going, “fun” startup culture was enough to attract the talent needed to supply the city’s thousands of tech companies.
Other panels in the afternoon included the Top Three Things Every Tech Leader Should Know with Trevor Schulze, Vice President of IT at AMD, Lance Obermeyer, CTO of Digby and Kevin Meek, Partner of Baker Botts LLP.
Among their conclusions:
CEOs should seriously weigh the advantages and disadvantages of creating “Native” apps. Obermeyer pointed out that few companies have programmers with the IOS skills to create a good app and hiring it done by an agency is extremely expensive. Using HTML apps when possible is a more financially feasible option.
Companies should know if they’re using open source software, even if some exists somewhere in their code, because trying to get financing or complete a merger based on a company that uses software it doesn’t own can seriously tangle negotiations.
Companies need to be extremely careful about letting employees bring in their own iPhones and iPads because of intellectual property issues. In five minutes an employee can upload and put in a storage center, such as drop box, information and programs that cost a company millions to create.
Other speakers included Mike Rollins, president of the Greater Austin Chamber of Commerce who talked about the city’s initiatives to give Austin access to more talent, including a connection with LinkedIn that would let jobseekers know what they were looking for was available in Austin.
Graham Weston, Chairman of Rackspace, talked about his trip to Israel, spurred by the book Startup Nation: The Story of Israel’s Economic Miracle by Dan Senor and Saul Singer.
In the past, he said, America was the country that did the R&D and farmed manufacture out to other countries.
Now, he said, he’s talked to companies who farmed R&D out to Israel. America, he said is being disrupted. And the number one preventative to disruption is entrepreneurship.
“Do you know what America’s greatest invention so far is?” he asked participants. “The American dream. ..America is the place where the future came first. Texas has to be the place where the future comes first. We need to invite entrepreneurship into our communities, our companies. We have to open ourselves to disruptive answers, no matter how they affect our competitive landscape…or our bottom line.”
Finally, he said, we have to stop just having cities and create regions. An Austin, San Antonio region, for example.
Friday, the summit will continue, examining the question “Why Companies Leave Texas.”

Comments

  1. Given Kip McClanahan retorted with “I think you’re crazy.” I thought I should write a few words on why after 30 years in tech I feel that there is a fundamental shift occuring and the old models of compensation are going to be seriously challenged in this new environment. Starting a company has never been easier, its actually building a company that is the hard part. Getting started today now only requires a good idea and some seed capital that is all too available from the numerous incubator, angel networks etc.. I believe the real shortage is going to come down to the design and engineering talent that it takes to grow from the good idea phase to a company with real traction. In the past, compensation has always been heavily weighted towards founders particularly in equity. I believe without dramatically collapsing those percentages and shifting much more of the upside to the next 20 to 30 high caliber designer/engineers, a startup will have a much more difficult time attracting the talent that is required to win a championship. Once your company has traction, I see a similar issue/leveling needed in terms of salary. The old model that the CEO/VPs take home the lion share of the payroll are gone as well. Given the option pool will be much smaller at this stage, cash is king and the performers you need to win should be attracted and retained with above market salaries. You have traction at this phase, you are raising money or are already profitable. Raise more, pay more and you will have no problem hiring the best talent in the market. My point on culture is simply this, If you don’t have traction, if you don’t have early employees loaded up with options and staying way ahead of market on salary, you are using culture as an excuse to pay less, raise less, and personally be less diluted. I think the thousand millionaires that left amazing cultures like google and other killer SF companies to join Facebook (famously brutal culture) are very happy they did. In the words of Charlie Sheen, Culture is winning rings all to true here.

    • Laura Lorek says:

      Hi John,
      I’d like t run this as a Op-Ed on the site, is that OK? I think you’ll reach a wider audience and it’s an important topic.

      Laura

  2. I hope that the readers who might not know Kip and John personally understand that they are good friends and no disrespect was intended on either side. John is always good at bringing out a spirited debate. Please consider my comments in the same good natured tone.

    I’ve seen plenty of examples where someone has taken a lower salary to get a better job. Compensation is one of the least important factors in motivating engineers and other knowledge workers. They have their pick of a bunch of interesting things to work on. The pay range is between “good” and “great” – the bottom of the range is still “good” so they can afford to be picky.

    Exactly the kind of people who choose to be in Austin instead of Silicon Valley are the same kind of people who will choose a job with a $75,000 salary over one with an $85,000 salary because they like the people they work with, the product they work on, and the lifestyle that goes with it.

    If you pay someone a lot of money to do a job they don’t like, they won’t do a good job no matter how much you pay them. http://www.youtube.com/watch?v=u6XAPnuFjJc

    There must be something behind John’s point though, because Austin was recently ranked by Dice.com as having the #1 largest salary increase for technology workers. http://media.dice.com/report/2012-2011-dice-salary-survey/

    Austin is booming. Talent is moving here. Will salaries go up? Most definitely. Will it be as bad as Silicon Valley? I really doubt it. There are valid points to both sides of the argument and the true answer probably lies somewhere in the middle.

    • lalorek says:

      Hi Josh, I saw your post on AustinStartup.com. If you’d like to post it here also, I’d love to run it. Or if you want me to post your comments as a guest post, I’d be happy to do that.

  3. I think compensation is, for most people, something that has a threshold value. If you’re above the threshold at two possible employers (current and future), then other considerations take over – work-life balance, culture, the kind of work you’re tackling, upside potential (stock vs. salary), etc.

    When salary is too far out of whack or too low, then compensation takes over as a primary concern. Of course, different types of jobs tend to have different profiles for how compensation sensitive they are.

    Also, one thing I’ve observed a lot of, in Austin and in other high-tech markets, is employers saying that “they can’t find anyone”… but when I ask what kind of experience they are looking for – invariably it is very high levels of experience and demonstrated skills. Then I ask what they’re looking to pay, and the numbers just don’t line up. When you’re looking for that top tier in experience and skill, you have to pay for it. I like to ask if they’ve tried offering 20% more for the same role – or 50% more if they’re wildly under-paying. Of course the answer is no, they haven’t tried. And that may not be the right answer – the other approach is to lower your experience/skills expectations and sign yourself up for the work of ramping up less experienced or less skilled talent.

    We prefer to be efficient with our recruiting time – we try to screen for people that will value what we have to offer, including lifestyle and salary – rather than set up an intersection of salary and skills and experience that will never happen. We also look outside of Austin to bring talent into our company, as well as locally. Based on what I know of equity allocations in Austin, however, I’d expect those are going to have to go up in the future. People are starting to care about equity again, and the market is going to respond to that when competing for talent.

    • I love the spirited debate coming from two of my highest paid recruits into TU from Stanford and CMU!

      • Someone should have warned us about the John Price reality distortion field!
        You probably didn’t expect that Josh and I would end up being such advocates for Austin, but here we are, these many years later… I’ve probably thanked you many times for getting me down here, but I’ll say it again – I’m really grateful you brought me down to Austin, and for all the help you’ve provided to my career along the way.

Trackbacks

  1. […] The Austin Technology Council CEO Summit heated up toward the end of its first afternoon Thursday when John Price CEO of Vast led a panel on compensation …www.siliconhillsnews.com/…/austins-ceo-summit-focuses-on-r… […]

Speak Your Mind

*