Layoffs Allow Small Firms to Attract Big-Company Refugees

From Barrons | Feb 8, 2010

As major corporations lay off employees, small businesses are benefiting from an unexpected windfall: Displaced talent that is now knocking at the door.As major corporations lay off employees, small businesses are
benefiting from an unexpected windfall: Displaced talent that is now
knocking at the door.

In March, Jack Rabbit Collection LLC, a three-person handbag and
leather-accessories maker in Los Angeles, was able to snag a large
rival's design-development executive after that person was laid off.

Founder Mollie Culligan says the new hire, who has connections to
tanneries and vendors, has helped the label reduce per-unit costs 20%.

Plus, Ms. Culligan doesn't have to spend as much time mentoring and can instead concentrate on her design work.

"Before, I had to train people myself and really dump so much energy
into inexperienced people who didn't really add value," she says.

View Full Image

Siddhartha Abbazi

Jack
Rabbit Collection founder Mollie Culligan was able to snag a large
rival's design-development executive after that person was laid off.

Other
small companies say they're winning new business thanks to corporate
castoffs. Hollister Construction Co., a general building contractor in
Anaheim, Calif., recently hired a woman who had worked for a large
developer of ministorage units. The company has used her connections to
put itself in contention for four projects in the ministorage-unit area.

"People are more interested in us because they perceive that we have
the experience because of her background," says Holli Dorr, chief
executive of the 100-employee company.

The bleak job market is causing some laid-off professionals to look
at small businesses through a different lens. Suzanne Carella, 30 years
old, spent her entire career at large financial-services companies.
After being laid off by State Street Global Advisers in April, she cast
a wider net.

"I think in a better economy I would have worked my way around the
larger companies," Ms. Carella says. "When I got laid off I had to keep
my options open."

Ms. Carella now works for BTS Asset Management, a 40-person
investment firm in Lexington, Mass., where she enjoys the exposure to
top executives.

"I cross paths with the president of marketing and the big guys,"
she says. "At a larger company you might not even know their names."

Some job seekers who were laid off from larger corporations are
turning to small businesses for stability. In March, Neil Pederson in
Phoenix was laid off from DHL Worldwide Express Inc. after his
information-technology job was outsourced. His three most recent
positions with large companies resulted in the same scenario, says the
43-year-old.

He is now specifically seeking a position with a small business,
where he wants to use his experience with large-scale software packages
to customize applications.

"I think the current economy and the fact that large corporations
seem to be outsourcing everything have contributed to my decision," Mr.
Pederson says.

In New York City, there has been an effort to connect some of Wall
Street's laid-off professionals with growing start-ups. JumpStart NYC,
a 10-week program created by the New York City Economic Development
Organization and the State University of New York's Levin Institute,
paired former employees from firms such as Bear Stearns Cos., Lehman
Bros. and Goldman Sachs Group Inc. with small businesses looking for
help.

Tom Moebus, co-founder of the program, says the feedback from the small companies involved has been positive.

"People who have worked for many years in large, well-regarded firms know how to get things done," he says.

ClusterSeven Inc., an operational-risk, software-development company
with 20 employees in New York and London, participated in the JumpStart
program and recently hired an employee (who wasn't part of JumpStart)
from a big company.

Chief Executive Ralph Baxter says people who have worked for larger
operations often have a useful perspective, such as how spending
decisions are made.

But making the move from from corporate America to a start-up can present challenges, for bosses and employees alike.

Ms. Dorr of Hollister Construction says some candidates expect the
six-figure base pay they received at corporate jobs, which she can't
provide.

Small companies also generally don't have the resources to provide
the same health or retirement benefits that corporations do. "We're
able to survive the downturn by being very prudent in our decisions,"
she says. "There can be a disconnect in their expectations."

Ms. Carella's current salary is $10,000 less than she made at her
last job. The pay cut is worth it -- even though it has delayed her
plan to move out of her parents' house -- because she sees chances to
advance, she says.

And Mr. Pedersen admits that a lower salary will probably be the biggest change for him to make.

Adjusting to the business environment can also be difficult. "Not
all large-company people will adapt happily to a small-company
environment," says Mr. Baxter. Working for a smaller company equates to
limited resources and fewer formalities, and it often requires
executives to get their hands dirty.

There's also the issue of hiring people who are looking to ride out
the storm rather than immersing themselves in the company's success.
Ms. Dorr has encountered quite a few of these people during the
interview process.

"You can tell by their attitude," she says. "They always have one foot out the door because they're looking for another job."

Write to Dana Mattioli at dana.mattioli@wsj.com