A High-Tech Labor Crunch Hinders Firms

When it comes to building high-tech companies, Southern California firms can find most of the necessary ingredients.

Creativity abounds in the region known for spawning Mickey Mouse and the Mars rover. Entrepreneurs stand ready to play the risky game of turning ideas into companies. Even venture capital is more readily available for start-ups.

Still, one key ingredient is missing: workers.

Southland universities can’t turn out engineers and software designers fast enough to keep up with demand. The labor pool for workers who can perform quality-assurance tests and answer tech support phones is nearly tapped. And there’s a lack of experienced managers who can lead the ever-growing number of start-ups.

“Because the Internet has exploded, there’s all these new companies, and everybody’s looking for top marketing and development people,” said Louise Wannier, chairman and chief executive of Enfish Technology, a Pasadena software maker. “But because these businesses have never existed before, there aren’t that many people who have experience in this area.”

What does it take to attract employees?

USWeb/CKS’ Los Angeles office offers subsidized gym memberships and massages to would-be employees. Troika Networks is handing out $1,000 bounties to employees who successfully recruit friends to the Westlake Village company. Software Technologies in Monrovia raffled off a BMW Z3 roadster to encourage employees to help fill 200 positions.

The high-tech labor crunch isn’t unique to Southern California, nor are local companies limited to recruiting from the area. In Silicon Valley, for instance, the job market is so competitive that workers often spend less than a year at a company before accepting a better offer at another firm.

But the Southland is taking a bigger hit than most other regions because the number of start-up firms is multiplying and because existing small and medium-sized companies are growing fast. Even hiring workers from other states hasn’t solved the problem.

Unfortunately, the labor shortage here “is just going to get worse,” said Bill Manassero, executive director of the Software Council of Southern California. “Almost everyone I’ve talked to has a shortage. I really consider this a crisis.”

Few would have imagined the current shortage in the early 1990s, when downsizing in aerospace contributed to large high-tech unemployment in the Southland.

“A couple of years ago, there were plenty of people and not enough jobs,” said Camber Hill, a recruiter with Partners/MSI, a Torrance firm that does high-tech recruiting. “Now it’s the opposite.”

Local tech firms are experiencing several kinds of labor shortages, and each has its own causes.

The dearth of software developers is related to the complexity of programming languages, which has forced programmers to specialize, said Richard Koffler, chief executive of Koffler Ventures, a Pacific Palisades consulting firm.

But that’s only part of the problem. Local companies say the region’s high schools and community colleges aren’t turning out graduates with adequate training.

At EarthLink Network in Pasadena, fewer than one in every 25 job applicants is qualified to fill tech support jobs, Chief Executive Garry Betty said. “We get job applicants who can’t read,” says EarthLink founder and Chairman Sky Dayton.

Tech Coast companies are scrambling to find experienced managers who can serve as chief financial officers, chief operating officers and the like. The pool of people with both managerial and high-tech experience is limited because the industry here is relatively young.

And although there may be an abundance of experienced managers from other industries, few are willing to join high-tech firms that pay lower salaries but make up the difference with stock options.

For many local companies, the net result of the worker shortage is slower growth and other problems.

At Troika Networks, the labor crunch has put the company’s short-handed staff “under more stress than you’d like,” said Brenda Christensen, who was recently hired as vice president for marketing after a nine-month search.

Young companies are hit particularly hard, said Marvin Butler, chief executive of KidsnetConnect, a 3-year-old educational software firm in L.A. “There are a lot of big companies out there that can pay people outrageous amounts of money,” he said. “The ones that are left over aren’t necessarily qualified.”

It is taking months for Global Domaine Solutions, a Hermosa Beach Internet start-up, to fill its executive lineup, said co-founders Kevin DiCerbo and Marc Holtenhoff. In the meantime, the gaps prevent the pair from raising the venture capital needed to grow--or to hire an executive search firm.

When possible, employers have responded to the labor crunch by paying higher salaries. Many Southland firms are sending work overseas, the Software Council’s Manassero said. Some are farming work out to high school and college students, who are often as qualified as full-time professionals to design Web pages and perform other tasks.

Companies that can afford to are relying on executive search firms. Hill, the recruiter from Partners/MSI, said business has tripled in the last year, and the standard commission has risen from 15% to 30% of an employee’s salary.

Other firms are urging their employees to recruit friends and colleagues. Software Technologies routinely pays $3,000 for each successful referral. But when that wasn’t enough, executives threw in a chance to win the BMW.

The contest produced 25 successful referrals in a three-month period--20 times the usual referral rate, said human resources executive Paul Celuch.

The shortage has forced recruiters at Enfish to cast a wider net. “We end up getting a better mix of skills, and we’re not so inbred,” Wannier said.

Candle Corp. has gone so far as to train high school students at Foshay Learning Center in Central Los Angeles to work at the Santa Monica firm, which helps companies integrate their computer networks. About five former interns have joined the company full time since graduating from high school, company spokesman Philip Little said.

Some schools are trying to boost the number of tech-savvy graduates. UCLA is in the second year of a UC-wide effort to boost the number of electrical engineering, computer science and information sciences graduates 40% by 2005. At that point, the L.A. campus would be turning out about 330 graduates each year, up from about 235 last June.

“The growth in the Internet and technology is going to continue for at least the next decade,” said Richard Muntz, chairman of UCLA’s computer science department, which he said is bursting at the seams trying to accommodate as many students as possible.

A high-tech job fair at Cal Poly Pomona in February attracted 75 firms, with 25 more relegated to the waiting list, said Manuel Perez, director of the school’s career center. Students graduating with a bachelor’s in electrical and computer engineering are landing jobs that pay $40,000 to $60,000 a year, he said. Cal Poly Pomona produces several hundred electrical and computer engineering graduates each year, and it is by far the engineering school’s most popular department, Perez said. The university recently broke ground on a new engineering building to help accommodate more students, he said.

Santa Monica and Glendale community colleges are offering programs to train people in digital arts so they can work in jobs ranging from computer animation to Web site design. The Los Angeles Unified School District has the same goal in mind for the New Media Academies it has in several high schools.

Local tech leaders praise these efforts but say much more must be done. A few people are hopeful that the local labor supply will catch up with demand.

Jake Winebaum, chairman of Walt Disney’s Buena Vista Internet Group in North Hollywood, expects many start-ups to start running out of cash and go out of business. That will actually be good for the local economy, he said, because it will put “tons of great, great job candidates on the market.”