Andersen Offers Employees E-Commerce Investment Equity

In an unprecedented effort to attract and hold on to key employees, Andersen Consulting has announced that it will invest $200 million (US$) in e-commerce related companies on behalf of its employees and add an additional $100 million each year.

“The electronic economy is too new and fast changing for consultants to offer advice from the sidelines,” said CEO Joe Forehand. “We must be right in the thick of the industries we serve, learning from our own experiences for the benefit of our clients. So, we are pursuing new types of business arrangements such as investments into start-ups, creation of business-to-business exchanges and launching of joint ventures.”


Andersen said that the wealth created by these annual investments will be distributed to employees as “eUnits,” a proprietary form of compensation. AC Ventures, the firm’s venture capital unit, will begin the new incentive program by allocating $100 million of its existing investment portfolio to benefit Andersen Consulting’s top-performing and long-term employees.

AC Ventures was formed in December to invest privately in new e-commerce companies. The unit expects to invest up to $1 billion globally over the next five years. In addition, the company announced the creation of 17 “Dot-Com Launch Centers” to act as production studios to help start-ups and spin-offs get a firm hold in the e-commerce world.

“We are building this so that those who build their careers with Andersen Consulting will be able to share in the wealth created by the firm,” said Vernon Ellis, Andersen’s international chairman.

Battle for Top Talent

It may be that part of Andersen’s strategy has more to do with simply retaining its top performers in an employee-driven economy that boasts national unemployment rates in the low single digits.

“There is an extraordinary war for talent,” said Ellis. “We see it most sharply in Silicon Valley but also in Stockholm. We want to be able to give our employees the same opportunities.”

Ellis also said that Andersen realizes the importance of offering partnerships sooner in employees’ tenure with the company, particularly to those who might be tempted to join e-commerce companies. In fact, Andersen currently predicts that this plan could lead to as many as 1,300 new partnerships, doubling its current level.

If all goes as planned, young Andersen employees could realize a promotion to partner an average of four years earlier than the age such a promotion generally occurs. As a perk, some employees will also be handed $20,000 stakes in Internet start-ups.

Andersen is not the only firm moving in this direction. Some industry observers say that recent moves by PricewaterhouseCoopers were similarly motivated. The professional services group announced it would spin off its consultancy group to allow consultants to take stakes in start-ups that they work on without breaching auditing regulations.

An Emerging E-Recruitment Industry

Meanwhile, sensing the increasing difficulty in finding qualified personnel for the electronic commerce and technology ventures, online recruitment firms are getting creative.

According to Forrester Research, firms will increasingly use the Internet to staff the Internet, as well as to find qualified employees for their offline ventures.

By 2005, Forrester predicts that $4 billion will be spent to advertise jobs online, while revenues from online assessment and training will top $2 billion. The market research firm predicts that human resource applications will generate $1 billion in revenue. It adds that corporate recruiters plan to increase Internet spending by 52 percent in the next four years, while cutting spending on traditional media advertising and recruitment agencies by 31 percent.

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