The lure of Internet start-up companies is thinning the ranks of banking companies' on-line operations, according to search firm executives.
"Dot-com" companies-on-line retail businesses or those otherwise closely linked with the Internet-are attracting workers with technical expertise because of handsome compensation and the thrill of working at a small start-up.
"Banks are finding out that they were the free public education for people who are now going to these up-and-coming companies," said Robert S. Rollo, managing partner of Los Angeles-based executive search firm Rollo & Associates. "Until the market really plunges, people are going to get lured away by stock and options at the little dot-coms."
Many large banks see a bright future in Internet banking. Wells Fargo & Co. has been rapidly expanding its on-line customer base. Just last week, First Union Corp. chairman and chief executive officer Edward E. Crutchfield said the Charlotte, N.C., banking company is planning to push its branch customers to switch to its on-line banking service.
But banks could have a hard time matching the compensation that employees get from small Internet companies. Founded with venture capital money and privately held, these firms often reward employees with ownership of some sort, either through stock or options.
Because of the sky-high valuations of Internet stocks, when these firms go public, employees' shares tend to rise to astronomical values.
For example, eToys Inc., an on-line toy store, offered its stock on May 20 at $20 per share. At the close of the market that day, it had rocketed to $76.56, an increase of more than 380%. An employee with 500 shares of eToys would have made a cool $38,280 in one day.
There is more to it than just the money, experts said. The excitement and risk of helping to get a small firm off the ground is usually viewed as more stimulating than working for a large banking company. "Banks are still pegged as snail-like when it comes to the pace of Internet development," said John C. Wilson, managing director of financial services at Korn/Ferry International.
This makes banks an obvious target for small start-ups looking for Internet savvy, he said.
"Banks are a very attractive sector to look for talent, mainly because of their size and bureaucracy," Mr. Wilson said.
In addition, bank employees often have expertise that is in high demand, especially in the area of Web payments and bill presentment.
"Our firm is involved with many start-ups, and when they ask for referrals, we recommend people at large banks," said Gary R. Kraft, managing director at E*Offering, an Internet-based investment bank. "It's not casual reading to understand the distinction between Fed Wire and automated clearing house and value-added networks."
Mr. Rollo, whose firm is doing chief executive searches for three dot- com companies, said the drain on banks would halt when the stock market finally grounds the high-flying Internet stocks.
"When Armageddon hits, the big boys with big balance sheets are going to look attractive again," Mr. Rollo said. "But for the time being, it is very hard to keep anyone on."