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Internet company valuations have sent mutual fund returns soaring over the past year. But those rocket-like stock prices have also created another phenomenon that fund companies are not so happy about - technology worker defections to those same Internet firms.

Consider, for instance, the situation in which Legg Mason of Baltimore, Md. finds itself. The tradition-rich investment firm and regional brokerage has had to watch as some of its technology staff have walked away from good jobs there for positions at start-ups and Internet firms.

Now, Legg Mason's technology groups are scrambling to reposition themselves to attract and retain technology talent. It has not been easy, said Joyce Ulrich, first vice president of applications development for Legg Mason.

"In the past, I only lost people to other financial services companies," said Ulrich. "Now I lose people [to companies] outside the industry. Now I'm seeing competition from the dot-coms."

The change has only come in the past year, Ulrich said. The damage has been minimal, but it is indicative of a troubling trend, she said.

Steven K. Miyao, a senior vice president with kasina of New York, a management consulting firm that does work with mutual fund firms, said that many technology workers at mutual fund firms have been lured away to pure technology companies recently with stock incentives and the opportunity for a different work environment. In response, fund companies have had to operate their technology groups differently than the rest of the company.

"What mutual fund companies have done is transition their e-commerce departments to be a bit more vibrant," Miyao said. "Then they're able to attract the fastest thinking, younger people who are working on their e-business activities."

Between 1997 and 1998, Ulrich, in charge of a group of 25 technology and Web developers at Legg Mason, had a high retention rate and only five people left her group. But in 1999 alone, four people left for either dot-coms or start-up companies.

There are four technology groups at Legg Mason with a total of 100 Web and technology developers, Ulrich said. People are leaving for many reasons and some of those reasons are understandable for those who want to take on the risk that goes along with them, she said.

"Everybody thinks the only exciting work is at the dot-com companies," Ulrich said. "The No. 1 thing that they offer is stock options. There is an enormous upside potential."

Recognizing that technology and start-up company stock options are a huge attraction, Ulrich has changed the way she recruits workers and interviews people.

Legg Mason has a stable corporate culture compared to an Internet start-up, which can be a risky venture with exhausting hours, Ulrich tells job candidates.

"We have the same great technologies here at Legg Mason," she says. "We use a lot of the cutting edge Microsoft products, all the tools that people salivate over. [But] we do have a different corporate culture. You don't have to worry about Legg Mason disappearing in a poof tomorrow."

Ulrich has also had to change her methods for finding qualified candidates, and she has had to be a little bit more diligent about finding the right fit.

In the past, Legg Mason would only find job candidates through recruiters, employee referrals and local colleges. Now, it uses technology career websites such as and it posts its jobs on its own website, Recently, Ulrich attended a technology fair in Baltimore, where she interviewed 120 people in two days.

Legg Mason also makes sure that it is paying competitively by participating in technology salary surveys, and it holds salary reviews for its technology employees every six months instead of once a year as it does for all its other employees, Ulrich said.

"[The technology job market] has forced us to be a lot more creative," she said.