Qualified Executives Today’s Hot Commodity
When Mark Winkler decided last month that he wanted a new job, he made a couple of telephone calls. Within 48 hours, the 41-year-old executive had more than 700 e-mails from headhunters representing everything from “dot-com” start-ups to Fortune 100 corporations.
Some asked for a resume. Others invited him to interview, and one offered a job--sight unseen. Within two weeks, 15 job offers had been express-mailed to Winkler’s home.
By the third week, Winkler was at his new job as chief technology officer for Nethesive Inc., a Torrance-based Web software start-up, where, he said, “I’m still getting e-mails today. I can’t respond to them all.”
Amid the skirmishes in corporate America’s raging war for talent, the campaign for Winkler is not extraordinary.
The record nine-year economic expansion has led to an unprecedented thirst for executives. The recent meltdown in the dot-com sector is expected to accelerate the demand, as founders of start-ups are being replaced by more experienced businesspeople who can steer the firms through tougher times.
Talented senior executives are at such a premium that companies are coming to them. Six-figure jobs are going begging. Recruiters are turning down searches they believe would find no interest. And some candidates are even given the chance to name their title.
“We’ve never seen anything like this in the history of search,” said Bob Damon, who heads West Coast operations for SpencerStuart, a San Francisco-based executive search firm. “People are being deluged with opportunities.”
At the same time, a series of trends--a population dip in the prime executive age group, wealth-inspired early retirements and companies’ knee-jerk financial performance expectations--are draining the pool of people capable of leading corporations.
Corporate recruiters look more and more as though they work for the job candidates, lavishing attention, career counseling and gentle nudging on executives over months and years in hopes of one day having the chance to present them to client corporations.
“All these headhunters have almost turned into Hollywood agents. They have their superstar players, and they are only going to show them the best deals,” said Nethesive Chief Executive Karl Brensike, who dedicated his four-member sales staff to pitching the company to chief technology officer candidates for more than a month and had 60 recruiters in the hunt.
“It’s unbelievable how difficult it is to find people these days,” Brensike said.
Demand for executives hit an all-time high in 1999, growing 14% over the previous year, according to a survey by the New York-based Assn. of Executive Search Consultants Inc., or AESC, which represents 160 firms employing 3,000 recruiters.
Searches accelerated in the first three months of this year, growing 17% over the same period last year. Requests for chief executives were up 47% in the first three months of the year, and demand for chief operating officers rose almost 62%. Demand for executives overall rose 25% in the second quarter compared with the same period last year.
The dot-com failures were reflected in a second-quarter decline of 12.5% in searches in the sector compared with the first three months of the year, according to the AESC. Despite that drop-off, enough dot-coms sought new leadership during the second quarter that the demand was still 90% higher than the same period last year.
That demand is fueling the extraordinary increases in executive compensation. Though the average American worker’s pay rose 4.2% last year, CEOs of the nation’s 800 biggest companies took home $5.8 billion, 12.8% more than the year before, according to Forbes.
“Everybody’s become a negotiator, a mercenary, a soldier of fortune,” said Gary Kaplan, founder of a Pasadena-based search firm that bears his name. “Today the standard package doesn’t do the trick. You’ve got fair numbers of people who think that making the next move is going to be their grand wealth accumulation.”
Richard A. Spitz, managing director of Korn/Ferry International’s advanced technology search efforts, said he makes 300 to 400 telephone calls to fill each of the more than 30 executive searches he completes a year.
“I spend most of my time on the phone,” said Spitz, who works 12-hour days and flies once or twice a week to Silicon Valley in pursuit of candidates.
Recruiters are not the only ones racking up frequent-flier miles chasing executive candidates. Even corporate search committee members are traveling across the country to persuade talented executives to join them--a far cry from the days when candidates were summoned to corporate headquarters, put up in hotels and made to wait their turn to interview.
“The shelf life of the candidate these days is shorter. If you get somebody who’s world-class, you need to move quickly before things change,” said Michael J. Flagg, a partner with Heidrick & Struggles, an international executive search firm.
Damon, SpencerStuart’s U.S. vice chairman and managing director of West Coast operations, said recruiters have coined a term for the new pace. “We call it working on Internet time. If we drag our feet, chances are the candidate will take something else.”
It took a plucky recruiter to persuade Robert A. Eckert it was time to move. Eckert was happy at the helm of Philip Morris Cos.’ Kraft Foods, the Chicago-area company he had joined in 1977. Eckert, the executive credited with introducing Lunchables, was considered to be on the short list of successors to Philip Morris CEO Geoffrey C. Bible, who is set to retire in two years.
Because Eckert wasn’t in the habit of taking recruiters’ calls, one search-firm operative made his pitch to his acquaintances and former colleagues, eventually getting word through to his wife. That was when Eckert decided to listen. After a whirlwind courtship--meeting directors in airports, hotels and restaurants in Chicago and New York--Eckert agreed in May to move to Southern California to run El Segundo-based Mattel Inc.
“It was only a matter of weeks, not months,” Eckert recalled. “It’s the first job for which I’ve interviewed in 23 years. I spent 23 years at Kraft Foods. I’d had phone calls, but I didn’t spend a lot of time and energy talking to recruiters.”
After only 20 months as president of PepsiCo Inc.’s domestic beverage unit, Philip Marineau wasn’t looking for a new job either. And he wasn’t interested in another No. 2 position. But when San Francisco-based Levi Strauss & Co. sent one of the nation’s top executive recruiters calling, Marineau took notice. The 70-day courtship began with Levi Chairman Robert Haas meeting Marineau at New York’s Waldorf-Astoria hotel to talk about the chief operating officer position and ended with Haas agreeing to turn over his chief executive title.
“I said, ‘This is more about me than about you, but my goal is to be a CEO and run a company. I don’t want to be Prince Charles again,’ ” recalled Marineau, who took over the post a year ago.
Though corporations pay the search firms’ fees (usually a third of the executive’s first year’s pay), the Holy Grail for recruiters these days isn’t a paying client. It’s a qualified executive ready for a new adventure.
“It’s a candidate’s world,” said Flagg, adding that his firm turns down searches its recruiters believe won’t interest candidates. “Unfortunately, there are certain companies that just aren’t going to be as attractive in the marketplace.” The market, in this case, is executives.
Kaplan, a recruiter for 30 years, recalled only a few years ago when it was a buyer’s market for employers and his office was inundated by faxes and telephone calls from executives seeking new jobs.
“The good news is business has never been better in executive recruiting,” Kaplan said. “The bad news is I’ve never in my career seen a market like this where it is more difficult to bring searches to conclusion. We are earning every dime we charge.”
Kaplan said nothing compares with the current demand for talent.
“Never in my wildest dreams or nightmares did I ever imagine that I would have chief financial officer assignments that paid $300,000 a year, had bonus potential for another 50% and lucrative stock options--and have great difficulty in filling those positions,” he said.
The Bureau of Labor Statistics projects the number of jobs for top executives and general managers to increase by 2.4 million, or 16%, from 1998 to 2008, much of that growth coming in the “new economy.”
Churn in companies’ pursuit of profit also is creating demand. “The downside, if there is a downside, is there is less patience,” said Jim Boone, Korn/Ferry’s president for the Americas.
The number of major U.S.-based companies bringing in CEOs from the outside nearly doubled during the last decade, up from 11% in 1990 to 20% in 1999, according to a study by Watson Wyatt Worldwide, a Maryland-based consulting firm.
And tenure appears to be shortening from an average of 12 years for CEOs in their 60s to 2.6 years for CEOs under 49, according to a survey by Challenger, Gray & Christmas Inc., a Chicago-based outplacement firm.
Since he began tracking them Aug. 1, 1999, company chief John Challenger has tallied 1,022 U.S. companies that have changed CEOs, led by 118 in August and 103 last month--many of them dot-com founders moving out to make way for leaders with traditional business experience.
“Companies today are so unforgiving,” Challenger said. “Two, three bad quarters in a row that don’t meet analysts’ expectations--it’s very rare a CEO can last for long.”
Market results have become such a crucial factor in CEO searches that Heidrick & Struggles makes them a part of its client pitch. The firm tracks the market valuation of companies from the time it places top executives and then compares that to the performance of the overall market. “If you were the shareholders, what is it that you care about?” Flagg said.
Demand is only part of the picture. “There’s a real shortage of executive talent and people who can lead companies,” said Joseph Daniel McCool, editor of Executive Recruiter News.
Although quality is one issue, the shortage also is a function of sheer numbers.
“The demographics are against us,” Flagg said. “More and more people have decided that they’ve made enough money and they’ve had enough career enrichment that they are going to retire or semi-retire earlier, so you’re losing some of the absolute best CEO candidates. . . . They are taking their chips off the table earlier.”
At the same time, 35- to 44-year-olds, the people who typically get the keys to the executive washroom, will decline 15% by 2015, according to a U.S. census projection noted in “The War for Talent,” a recent report by New York City-based management consultants McKinsey & Co.
The report issued a “call to arms for corporate America” and offered little hope in the way of countervailing trends, noting that women were no longer surging into the work force, white-collar productivity gains had reached a plateau, and immigration had stabilized.
Barring a worldwide recession, Kaplan said he expects recruiters to be busy for many years. “We are only right now seeing the tip of the iceberg.”
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Who Wants to Be a Corporate Executive?
Demand for executives was at record levels during this year’s second quarter, up 25.1% compared with the same period last year.
Demand grew most in these sectors
Software / electronic, telecommunications media: 223.0%
Equipment (instruments) manufacturing: 114.3%
Utilities: 103.8%
Online media/ e-commerce/ new media: 90.4%
Food / tobacco manufacturing: 11.4%
Demand grew most for information execs
Chief information / chief knowledge officer: 148.5%
General counsel: 145.5%
Chief financial officer: 72.7%
Chief executive officer: 54.1%
Board of directors member: 42.4%
Change in demand, by pay levels
$500,000 to $999,000: 32.2%
$200,000 to $499,000: 16.3%
$146,000 to $199,999: (-38.6%)
$100,000 to 145,999 (-25.3%)
$60,000 to $99,000 (-57.1%)
Source: Assn. of Executive Search Consultants Inc. (The AESC compiles its quarterly demand report by sampling newly booked searches from client companies in 31 industries and 20 functional areas.)
