In today's market, a job seeker with a degree in computer science or electrical engineering seems to be holding a golden employment ticket. Not only is the nation's unemployment rate at its lowest level since 1973-4.9 percent nationwide-but this is one of the best job markets in years for technical professionals.Although a computer-science degree usually means you'll have little problem finding a job, you may have difficulties weighing multiple job offers and determining which company is best for you. Even though you're in the driver's seat, you are nevertheless driving down a new road with unfamiliar curves that wind among stock options, 401K plans, signing bonuses, and other employment benefits.
Although your starting salary is a large piece of the pie, be sure to examine other parts of the benefits package. A lower salary can sometimes be more than offset by a more powerful benefits package. Other factors to consider include company size, work environment, unique employee perks (casual dress code or tuition reimbursement), company philosophy, new products/services, market share, and company growth potential.
The Market
One in every ten technical jobs is open in the United States. According to Kathleen Stanton, a computer science advisor in career placement at the University of California, Berkeley, "Our students are drowning in entry-level career opportunities. Computer science and electrical engineering students are receiving four to six job offers and are fending off the recruiters as early as their freshman year. I've been a technical advisor for 20 years, and these are exceptional times. Business is becoming more and more technical every day. Corporate America identifies this new generation as being critical to long-term growth and overall company success."
Job seekers with technical degrees are benefiting from an extraordinary combination of supply and demand in a number of ways. The high demand is boosting starting salaries, even for those with no experience. "The median salary for computer science graduates in entry-level positions is $47,000," reports Lance Choy, assistant director of career placement at Stanford University.
"Signing-on bonuses have also become more common. Students are being offered by some employers a signing bonus ranging from $2000 to $5000 if they immediately accept a job offer. And the aggressive big employers do not wait anymore for the on-campus job fair. The trend now is to personally contact CS and EE majors by obtaining a student list in advance. Other large employers are offering their employees a finder's award for as much as $5000 for a college grad referral. The end result is that most technology students get their first choice company due to the overwhelming market demand, which is projected to continue strong into the year 2000," Choy added.
Where do You Want to Work?
Traditionally, college graduates were often forced to move to where the best jobs were located. Today, good jobs are plentiful from California's Silicon Valley to Boston's 128 Technology Belt, and many places in the middle. A good way to narrow your list of companies is to think about where you want to live. A chosen career path should be in synch with personal preferences, lifestyle ideals, and long-term goals.
Big versus Small Companies
What's your preference? A large corporation or a young, fast-paced company? While big companies may offer job security and juicier benefit packages, small companies might be a better option if you want to get experience at a rapid pace.
A small company's quest to go public creates the opportunity for big financial rewards in the form of stocks, and unparalleled on-the-job experience. You can quickly come to play an instrumental role in the establishment of the new company, and potentially, in defining a new market.
Working for a startup can be more profitable than working for a larger, more established company due to more lucrative stock options. Many fledgling technology companies on the verge of going public offer stock-option packages in exchange for lower base salaries. If you have no mortgage payments or parenting commitments, a hefty stock package is indeed something to consider. The speed at which stock options can turn into riches is a strong force that entices many talented workers to opt for promising, young companies.
Rewards do not come without risk. A large stock option is usually offset by a starvation salary because the cash-poor company cannot afford to pay top salaries. The stock offerings are a creative way for emerging companies to hire skilled professionals that they cannot afford. Employees forego the security of a steady income in hopes of future riches when their stock options vest and the founders take the company public. But monetary gains are not guaranteed due to the fact that not all companies make it to Wall Street, as evident in Table 1. There is no lottery payoff for the company that never reaches the trading stages.
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| Table 1: IPO aftermarket performance |
How Stock Options Work
It used to be that stock options were only for top management-but not anymore. Granting stock options has become more mainstream and deals exist today at many levels of the workforce, including for college grads. Employees are rarely granted stock; but they are given stock options. In its simplest form, a company gives an employee the right to buy a certain number of shares at a fixed price (while that employee remains with the company). The fixed price is typically the fair market value of the stock at the time you accept the job offer.
A vesting period is often attached to the stock option, usually between two and five years. After the vesting period, the employee can buy the shares at the option price, sell them at the stock market price, and take home the profit. If the price has stayed the same or gone down, the stock option is worthless.
For example, after graduation Madeline Smith accepted an entry-level position with a Silicon Valley company in 1993. Her stock option package was for 1000 shares at $12 per share with a four-year vesting period. Today, the current stock market value is $19 per share. Thus, if Madeline were to exercise her option to buy at the set price of $12 per share, her profit would be $7000 ($19,000 less $12,000).
College grads have increasing opportunities to work for a business whose goal is to achieve success by creating a "startup" company and selling its private stock by way of an IPO. New employees are offered what companies call "founder's stock," or equity, for those who get in on the ground floor before the company makes its IPO of stock.
At startups, the stock price is significantly discounted and the shares granted are more plentiful since the company is not yet publicly traded. However, there is no guarantee that the company will go public. The younger a company, the bigger the stock deal for technical professionals willing to roll up their sleeves, work long hours, and help take the company to Wall Street.
Because of the high risk of startups, stock options at larger, steadily growing companies may actually be more lucrative than a newly founded, ten-employee company. For example, if Microsoft had offered you a job in July 1996, with 1000 stock options at the then market price of $60 per share, in July 1997, with its market price at $120 per share, those options would be worth about $60,000. There is simply no magic formula for determining the future value of stock options, so make sure you research the company carefully.
Ask Smart Questions
It's critical that you obtain important company background to determine the potential growth and market value before accepting a job offer. Put yourself in the same shoes as a potential investor when seeking pertinent background information about a startup company. Here are some questions you might ask a potential employer:
What is the source of your company's funding, private or venture capital? If the company recently completed a round of venture capital funding, its future is less precarious than that of a poorly funded company struggling to pay their weekly bills. Venture-backed companies also tell you that someone "on the outside" believes in the company's growth potential.
Has anyone on your senior management team ever been involved in an IPO before? Look at management's track record. You need to be convinced that the management team has the ability to take the company public.
In what stage of development is your product? Beta? What is the targeted date to introduce and launch the product? Estimate when the company will begin generating sales. The sooner, the better. Incoming revenue is an important benchmark that shows that the company is on its way to becoming self sufficient. This translates into a lower risk level because the company is borrowing less and is more stable.
What patents do you own? How do you plan to position and aggressively market the product? A patent reduces the chances of competition stealing the startup company's product or service. Be sure to learn what is compelling about the company's product or service that puts it ahead of the competition.
Is there a possibility that your company will be purchased by another firm interested in procuring your technology prior to the IPO? If that were to happen, what would happen to my job and stock package? If the startup is purchased by another company before the IPO, your stock should be immediately vested. The good news is that the vesting period is accelerated and the buyer of the company typically pays more per share than the general public would pay at that time. The bad news is that your job might be at risk due to the duplication of staffing often associated with most mergers and acquisitions.
Weighing Multiple Job Offers
"When reviewing job offers, it is important not to be swayed by big names," says Marc Duro, a technical recruiter at Claris Corporation. "Examine carefully what the actual job responsibilities will entail. Think through what type of recognition you will gain by having held the position."
It is not uncommon for today's technical talent to change jobs every few years. Try to envision how your first job might look on your résumé if you decided to move on. "You need to seriously evaluate how a position will impact your short-term marketability. Consider where you would be if you were to leave the company as early as two years from your starting date. Gone are the days of working for a big IBM-type company for 20 years. So it's important that you think about how the position will influence your next job search," says Duro.
When trying to assess the total monetary value of a job offer, take the time to do your math and add up the following: salary, signing bonus, estimated quarterly and annual cash bonuses, profit-sharing bonuses (typically 10-15 percent of your annual salary), and stock options (multiply number of shares by estimated stock value in the future).
If a company is offering you a large stock option, then be prepared to commit for four years-when your options are fully vested. Some companies grant additional stock options based on performance. If you prefer your bonuses in stock options, then ask for it. Also learn about the frequency and method a company uses for calculating bonuses.
Read the details of a company's 401K plan. Does your potential new employer match any of your 401K contributions? If yes, then these contributions should be added to your total income for the year. Other benefits to closely review include: healthcare and dental insurance coverage, disability insurance, length of vacation, sick leave policies, and tuition reimbursement. It's a big financial perk if a company will pay tuition fees for your graduate degree. Make a detailed list of what companies are offering you; it will make your comparisons easier.
Equally important as monetary offerings are your feelings about a company. Do you agree with the company's philosophy? Do you think you'll be happy working there? Is the work environment the best match for you? A company may pay you exceptionally well but have unrealistic performance expectations that can create an uncomfortably high level of pressure for you. Inquire about the expected work hours. Is overtime an expected daily and weekend event?
Consider taking a future coworker to lunch as a way to gain first-hand information about your potential employer. Ask specifics about the company, such as, "Do you think the company has vision and solid leadership to succeed?" "Is it a fun place to work?" and "What do and don't you like about the company?"
Other things for you to think about include: Do you believe you will work well with your immediate supervisor? Does he or she promote an innovative work environment, or will it be a dictatorship? What is my career path?
Look ahead to where you are going. And just because you're out of college doesn't mean you should stop doing your homework. The more meticulous you are in the comparisons of different companies, the better you'll understand what's really being offered to you. The Internet is one of your best research tools to gain up-to-date information on recent revenue figures, news announcements, and more.
Shoot for the Moon
Once you've been made an offer, it is time to start the negotiation process. When it comes to most high-tech jobs, you'll be in demand so don't be shy about asking for what is important to you, and be certain that the company you select will be a wise investment of your valuable time.
DDJ