HOW TO SELECT A COMPANY

Vo Phong ([email protected]) and Tran Thong ([email protected])
Copyright VACETS 1994.

When people look for a job, they tend to focus on the type of work and salary without paying much attention on the long term financial health and livelihood of the company. This happens with many new college grads who have little experience with the industrial world. A few people end up accepting a job, relocate to a new city, and find out that the company is going under in the next couple of days or weeks.

A job is the most profitable investment. Since it is an investment, we are faced with many investment choices such as risk and stability. We either choose an established company such as Apple, IBM, or AT&T, which may provide stability, or startups (especially biotech ones) which are not quite stable but promise rewards in the long run. In making choices, we should understand there is no such thing as stability or lifetime employment nowadays. However, we should never tell ourselves that the worst thing that can happen is to look for another job. In general, the goal is to maximize rewards and stability while minimizing risks.

1. Track news in your industry.

Not only you should keep abreast of the technology to stay marketable, but you should also pay attention to business news, especially those in your industry.

2. Track companies in your industry.

Keep a list of the companies you would consider working for. Daily newspapers or magazines such as Fortune or BusinessWeek usually publish quarterly or yearly financial results of major companies. They do categorize companies into different sectors such as Banking, Electronics, Computer Software, Computer services... You would be surprised to find out about companies which are doing extremely well but you've never heard of their names.

For the professional with an investment portfolio, ask your stock broker about the financial health of these companies.

Another source of information is the public library. You can find financial summaries of thousands of companies, also categorized into industrial sectors. Narrow down the list to only those companies that fit your criteria such as revenue, income, number of employees, sites, etc... This saves you time later on about finding a company to hop to. Also use the CD-ROM index searches available at most (progressive) libraries. You may be able to get extensive printouts of interesting financial and business analyses.

Some of the business magazines have bingo cards to request annual reports of companies. Use these to get free annual reports. Or you can just send a letter to the company asking for the annual report. Indicate that you are considering either investing or working for them, the former statement may give you a little bit more priority.

3. Track their business.

Track their stocks (if they are public) as if you have invested in them. A drop in the stock price may not indicate that a company is in trouble, but if the stock price is going down hill over a prolonged period of time, it is an indicator of trouble. Have a macro-view. The position you've interviewed for may sound great, the job is challenging, the working environment and culture is excellent, but how about the company as a whole. Financial information is available in Barrons, Investor's Daily, Wall Street Journal, etc...

4. Understand their vision.

If you are tempted to apply for a job at a company that is currently doing well, pay attention to its products and technologies. When interviewing, ask a lot about the products and judge whether you believe the company's direction is correct. For example, Apple is doing well now, but I can't see its future very clearly; but I could see where Microsoft is going. (VP Note: this is just my personal opinion; I hope I don't offend anyone. I actually like Apple better than Microsoft. TT Note: I like Apple but use Microsoft because of the price of the PC platforms!).

Ask about its distribution channel and who its customers are. Those who interview you may not know the answer, so ask to speak to someone who knows before accepting an offer (your interest in this will be interpreted positively by the interviewer as an interest in the overall business of the company... the macro view) What you are looking here is a weak link in a distribution channel. If the company is too reliant on a few distributors, and you have information that one of them is in trouble, then this is not good. Also if the company has only a few customers and the economic health's of these customers are not good, then watch out. Again, in this case look at both the trees AND the forest. A big customer may be in bad shape, but the particular division of this customer may be doing very well! Conversely, a big customer is doing great, but the particular division that buys from the company is unprofitable and is up for sale!

5. Understand their management philosophy.

Before jumping job or applying for the first job, go to the library and do some research. Read the MT #5, Pre-interview preparation. Don't skip business or management information. Call/write the company you want to apply to, to ask for an annual report (see #2 above). You will get its financial statement and its mission statement. The financial statement can give you an idea about the company's cash flow and how the company allocates its budget. If you are in R&D, and the expenses for R&D has been going down in the last three years, think twice. You may need to track which sector of the company has been impacted though. Because expenses overall is going down, does not mean that they are downsizing the particular piece of the company you are interested in. If the company has been spending money on, say, tangible assets such as equipment or office buildings, its management may anticipate future growth. The mission statement may tell you about the company's management philosophy. Usually, it ranks the priority of the stakeholders the company serves. Remember that all CEOs work for stockholders. If 'employee' is mentioned after 'stockholder' in the mission statement, you can expect the company to lay workers off forcefully when it is not doing well, even for a short term. Research on the company's layoff patterns in the past also. Look at the trend in employee's size. Most mission statements are nowadays very similar. Even the bastion of lifetime employment, IBM is laying off people. So, it is probably more important to focus on the small department/division that you will be joining.

After you have done all these analyses, you may decide this is not a good company. What to do?

If you have another choice, take the better one. Now, in the case you don't have any choice. Should you take the job or should you wait? The answer is really up to you. But there may be a few other factors to consider. If a move is required, and this is a large metropolitan area with a number of companies that offer the same type of job that you are considering, then this is a mitigating factor. Even though the company is not stable, there are other job opportunities in that area so you won't have to move for the next job! I guess this is the attraction of places like the Bay area, southern California, Boston, the DC beltway, Paris, ....

Also if the new job will teach you a new skill, it may be worth a try if you believe that the company is OK over the next year. You will be more marketable after this job. Decision, decision!!!

In conclusion, let me tell you this true story. A manager friend of mine, was faced with the decision to join the new professional management team of a well known software startup back in the mid 80's. He went through his analyses and came to the conclusion that he is unlikely to last very long (< 1 year) there, mostly due to culture clash between the founder, now Chairman, and the professional President that was just brought in and to whom he will be reporting, and with whom he has worked before (networking in action here!). And to this day, he believes his conclusion is correct. Any way, he turned down the opportunity to join that company. However he has always regretted making that decision. The company needed a team of seasoned managers to go public. They did go public later that year, and the professional management team was kicked out in less than one year. However, all of them made $M from the public offering and their severance package! The morale of the story, analyze but luck counts too!


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