Recruiters And Hr Pros Manage Challenges Of Shifting Economy

One year ago, venture firm Accel Partners made on average four investments per month in young companies, each tranche setting in motion a frenzy of phone calls, networking and general recruitment activity. This year, since February, the firm has made one. "We're using search firms, but we're also filling more positions on our own," says Teri McFadden, senior recruiting partner at the Palo Alto, CA-based firm. "The pace of recruiting has slowed dramatically." What's the hiring outlook for the rest of 2001? "It's still anyone's guess," she says.

Roger Jackson, senior vice president, human resources at automotive parts supplier Lear Corp., echos Ms. McFadden's uncertainty. "This is a strange period," he says. Late last year through mid-February 2001, the Southfield, MI-headquartered company laid off 2000 salaried employees globally. This spring, hiring began again, but "very selectively," says Mr. Jackson. "It is tough to predict or project our manufacturing volumes," he says. "This is not a typical down cycle."

Across the country, human resource professionals and hiring managers like Mr. Jackson and Ms. McFadden are keeping vigil on the activity of an uncertain U.S. economy. Some companies are laying off staff in droves, but others are hiring. Sometimes one organization is simultaneously handing out pink slips to some employees and offering signing bonuses to others (see related story, "Is the War for Talent Over?") "What's driving human resource people crazy is that the indicators have not led up to what they thought would happen," says search consultant John Doyle of Ray & Berndtson. "They are not sure whether to staff up or to prune."

To be sure, employment levels nationwide have slipped in recent months as evidenced by the steadily rising unemployment rate. From 3.9 percent last October, unemployment has risen to 4.5 percent in April 2001. April's payrolls decline was the steepest since 259,000 jobs were lost in February 1991.

But hiring levels are holding steady this year over last at some companies. Last year, Cincinnati, OH-based Provident Bank hired 1,275 people (55 percent hourly, 45 percent salaried). "We don't anticipate a slowdown at all this year," says Terry Henley, senior vice president, human resources. The bank holding company, whose predominant activity is commercial lending, hires commercial lenders, credit analysts and mortgage lenders. SAS Institute, a Cary, North Carolina software development company, is "not in a layoff mode," says Alisa Bright, manager, human resources. "We're not going to hire more than the 800-plus employees we brought on last year, but we¹ll be pretty steady." In addition to hiring software developers, SAS Institute is emphasizing new hires in sales to maintain its strong annual revenue growth.

Without question, demand for technical talent continues, though some recruiters note a shift in skills needed. "For us, a year ago it was java developers," says Accel Partners' Ms. McFadden. "Now I cannot find enough chip designers." Good engineering candidates, says Lear Corp.'s Mr. Jackson, "are always in short supply."

The upside to today's slowdown is a surge in opportunities for strategic poaching. "Clients are scared to death that the competition is gaining ground on them," says Mr. Doyle, the Ray & Berndtson recruiter, whose clients include sales and marketing units of institutional money management firms. "I'd say 80 percent of companies have declared a temporary cease fire in the war for talent. The other 20 percent are viewing this as an opportunity to get talent at reasonable prices. But it takes a lot of intestinal fortitude to go ahead and make the hires now."

To preclude poaching Mr. Jackson of Lear Corp. is consolidating relationships with key employees now – ensuring they're paid competitively, or developing a career plan – to reduce incentive for them to leave. Still, notes Ted Muendel, chairman of executive search firm Stanton Chase International, "A strategic hire now is a risk decision because when the economy rebounds retention will be the issue."

Is the War for Talent Over?

Unemployment is rising and the U.S. economy is slowing. Layoff announcements dominate newspaper headlines. Is the War for Talent over?

No. Though "clearly the War for Talent is fiercest when the economy is strong, the battle for the best talent persists despite the economy's ebbs and flows," says Beth Axelrod, a partner at consulting firm McKinsey & Co., leader of the firm's 2000 War for Talent research initiative and co-author of the book by the same title.

Here's why. Although the unemployment rate is rising, three current fundamental forces will continue to fuel a war for managerial talent throughout the next decade. These include:

• Shift from the industrial age to the information age. Hard assets, like machines or soft-goods, are no longer the main source of value to corporations. Instead, intangibles, like brands or services or know-how to develop software, all of which are created by people, are increasingly important. Companies are now reliant on individuals who can operate in this knowledge economy. The differential impact that a top performer can have over an average performer is substantial.
• Strong demand for top performers. McKinsey's research shows that only 20 percent of respondents agree they have enough talented leaders to pursue most opportunities. This, combined with the fact that the supply of 25 to 44 year old managers will decline over the next decade, suggest that the demands for high performers will remain strong.
• Growing mobility of the workforce. "People today are much more comfortable in switching jobs," says Ms. Axelrod. Thanks to the Internet, cell phones and other methods of communication, job opportunities are easier to find. Additionally, the stigma associated with frequent employment changes is diminishing. "A large number of managers are actually passive job seekers," she says.

The upshot? "Companies that are thinking the war for talent is over run the risk of being blindsided by their competitors who will shrewdly improve their talent pools now," says Ms. Axelrod.

Spencer Stuart Elects Daniel CEO; K/F, A.T. Kearney Searches Continue

The May 10 election of David Daniel as chief executive officer of Spencer Stuart brought to a close one of three CEO successions under way at major U.S. firms. Korn/Ferry International's search for a replacement for current chief Win Priem (see Executive Search Review, March 2001) is expected to wind up in June, according to sources. At A.T. Kearney Executive Search, the process is gaining steam.

Mr. Daniel, most recently managing director, Americas, succeeds Joseph E. Griesedieck as leader of 45-year-old Spencer Stuart. Regarded by colleagues as a good business developer and a strong leader, Mr. Daniel comes from a family of consultants: his father is Ron Daniel, the former head of consulting firm a HREF="http://www.mckinsey.co.uk">McKinsey & Co. Prior to becoming a recruiter in 1994, he was president/CEO of Simint USA, the American licensee for Armani Jeans. The firm's partners elected Mr. Daniel, according to terms of Spencer Stuart's constitution, at the annual partners' meeting.

In contrast to that tradition-steeped succession, A.T. Kearney's process is completely new to the search practice. Dietmar Ostermann, who replaced Fred Steingraber as chief executive of the management consulting firm on December 1, 2000, will ultimately choose the new leader. To determine the slate of candidates, however, Mr. Ostermann has appointed a succession planning committee to organize an internal nomination and voting process.

Officers in A.T. Kearney search in late April and early May nominated candidates from within and from outside the company as potential CEOs. Next step: the planning committee, led by management consultant Justin Zubrod, is requesting personal profiles and vision statements from all nominees. Sources say that recruiters Stephen Fisher, now interim president of search; Gene Shen, head of the financial institutions group; and Mark McMahon, managing director, industrial practice, are among internal nominees.

In addition to the question of who will run A.T. Kearney Executive Search, however, is the larger issue of what the relationship between management consulting and executive search will be. In revenues, the $65 million search unit is puny compared to the billion-dollar consulting group. Search, according to ex-Kearney employees from both search and consulting, has historically been viewed as second-class to management consulting in both importance and quality. Talk of exploiting potential synergies between the two units has circulated, but success in the marketplace has been limited. Rumors that search is for sale circulate regularly.

Will that change? "There's been very much a re-affirmation that executive search is part of the family," says Mr. Zubrod. "It is geared to finding a leader that can keep executive search a strong contributor to what A.T. Kearney is trying to do for clients."

Paul Ray Jr.: A Leader Who Keeps On Growing

Though he's never been a practicing attorney, the impact of three years as a law student at the University of Texas, Austin, on Paul R. Ray Jr. are evident nonetheless. Elected president of the student body and a member of the student education board, his involvement in campus politics in the late 1960s provided a foundation for the path that's led to his current position: CEO of Fort Worth, TX based Ray & Berndtson. Current and former colleagues describe Mr. Ray's leadership style as "participatory" and "democratic." "Paul is consensus-driven," says partner Kathy Maloney, who also sits on the firm's board of directors. "He likes to hear from everyone."

Putting ideas – other people's and his own – into practice is his passion. Post law school, he joined consumer products giant RJReynolds as a marketing assistant. Nine years later, promoted to director of marketing, he was ready to move on, and sought counsel from his father. Paul Ray Sr., the founder and head of an eponymously named search firm then owned by a conglomerate called American Appraisal Associates, broached the idea of recruiting. "The problem-solving aspect of search was right with my interests," says Paul Ray Jr., who signed on in 1978. Several years later, father, son and a group of consultants reacquired the $4 million outfit, in a leveraged buy-out. He took the helm from his father in 1985, becoming president and CEO.

From its Fort Worth headquarters then, the firm has grown to 46 offices worldwide (eight in the U.S.) and 210 partners (49 in the U.S.). International expansion got off to a slow start after a partnership formed with Brussels-based Carre Orban in the late 1980s soured. A year after that ended in 1993, overseas growth went more smoothly when Paul R. Ray merged with The Berndtson Group, a 16-office outfit. In the past 12 months, the firm has completed two additional mergers with Odgers International and The Berwick Group, both in the United Kingdom. Stateside revenues in 2000 were $40 million, up 18 percent over 1999; worldwide, sales were $175 million, up 24 percent over the prior year.

As a leader, Mr. Ray has been bold in testing new ideas. Some operational decisions, such as a 1996 firm-wide reengineering, undertaken to improve operations, profits, processes and client satisfaction, have been controversial. "Strategically, it was a painful change process," says partner Bob Tate. "But Paul stuck to his vision." Mr. Ray acknowledges the difficulties created by reorganizing, but maintains that much of the firm's improvements from 1997 to 2000, including a higher percent of revenue from targeted clients, a decrease in average cycle time, from 174 days to 128 days, and a 19 percent increase in average billings per partner are positive results of the initiative.

"Paul is willing to take risks and do the things he thinks are right," says Steve Strelsin, past CEO of consulting firm Sibson & Co. and a current member of Ray & Berndtson's board. "He learns and he grows."

Christian & Timbers' Schmidt: Leadership University Is A Learning Experience

One of Christian & Timbers' earliest hires, William (Kip) Schmidt, III joined the Cleveland-headquartered firm in 1991 from competitor Russell Reynolds Associates, where he was an executive recruiter for six years in that firm's Cleveland office. As Christian & Timbers' fourteenth employee, Mr. Schmidt immediately assumed various internal responsibilities on an ad hoc basis, in addition to conducting executive searches. Early last year, many of those tasks were formalized in a newly created role, vice president of human assets, and given to Mr. Schmidt. His duties include hiring and training new consultants, as well as handling compensation and performance evaluations. In this interview with Hunt-Scanlon's chief market strategist Brian Lee, Mr. Schmidt discusses his firm's recent launch of Leadership University, the firm's online e-learning initiative.

ESR: What is Leadership University?

Schmidt: Its a web-based training system that documents the collective knowledge and skills of many individuals throughout the company. Everyone in the firm can access the system because it is online, hosted by an application service provider, available 24 hours a day from any location.

ESR: Why did the firm decide to pursue e-learning?

Schmidt: Historically, we tend to hire people with limited knowledge of search and then develop them internally over the course of three to six years into search consultants – about one-third of our managing partners fit this profile. Supporting a business model-based on homegrown talent requires considering how to develop individuals on a consistent and timely basis. We see e-learning as an opportunity to develop employees faster; having access to a resource such as Leadership University can help them to fill in the gaps in their knowledge. They will become more productive and our clients will be better served. Numerous human resource studies have shown that fair pay and competitive benefits are important needs to employees, but career growth, learning and development rank much higher on everybody's priority list.

ESR: Prior to e-learning, what sort of training opportunities were available to associates at the firm?

Schmidt: For the past seven years, we've held formal training sessions during our bi-annual, firm-wide, day-and-a half meetings in Cleveland. We also provided lots of informal and on-the-job training throughout all of our offices.

ESR: How did the firm implement Leadership University?

Schmidt: Last April we agreed to pursue an e-learning initiative. One major ground rule going in was to make Leadership University available to everybody in the organization, regardless of work experience or job responsibility. We then formed a task force from all parts of the organization to ensure we were developing a program that worked across the board. It then took us three months to identify, evaluate and recommend outside firms that could help us put an initiative in place. We ended up selecting as our consultant, Intellinex, the e-learning venture of Ernst & Young, and we worked with them from early August until we officially launched Leadership University on January 18th.

ESR: What's the benefit of hiring an outside consultant like Intellinex?

Schmidt: The principal benefit they provide is the infrastructure to run an online university. One critical piece of infrastructure for an online initiative, for example, is a learning management system that tracks who has taken a course and the grade he or she has received. Employees currently taking a course require a "bookmark," something that indicates where to pick up from the last session they completed. Also, Intellinex, provided the structure and expertise to develop and implement e-learning courses specific to our business.

ESR: How many courses are currently available to employees?

Schmidt: There are roughly 100 generic, off-the-shelf courses and eight custom courses. Examples of generic courses include business writing, time management, coping with stress, analyzing financial statements and essential project management tools. The custom courses are very specific to executive search and so require more time to create internally. Eventually, we'll have about 25 of these, on topics ranging from developing and writing position profiles, conducting thorough reference checks, to developing business and managing clients.

ESR: How do you develop custom content? What are the advantages of having custom content?

Schmidt: We conducted several design sessions in which team members decided what each custom course would cover. We then asked subject matter experts throughout the firm‹consultants who are particularly strong at writing position specifications, for instance, or recruiters who excel at developing new business‹to provide their knowledge. The custom content is really a repository for institutional knowledge; it is a reference tool that employees use to refresh and improve their skills.

ESR: What was the most difficult aspect of the implementation process?

Schmidt: Keeping the initiative in front of people's minds through an effective launch. We had to get it in front of everybody, make it easy to use, communicate when it went live and how it was accessed. For example, we put an icon on everyone's PC desktop that allows users to access Leadership University in one click. We realize our employees have more work than they can handle on a daily basis, so we have to compete for their time and attention.

ESR: What has been the response rate so far?

Schmidt: In the first two months, we had 136 students, 210 courses started and 121 courses completed.

ESR: What are some of the other long-term benefits of e-learning?

Schmidt: E-learning improves everyone's access to knowledge since the same information can be accessed from any location. It also enables us to deliver a consistent training message that everyone can learn at his own pace. Studies have suggested e-learning is better than traditional methods in terms of retention rate since the course is self-paced and the material is presented in a format more appealing than text books. Results of other studies suggest it is more cost-effective over the long haul because attendees don¹t incur expenses like course fees, travel or lodging.

ESR: How much does an initiative like this cost?

Schmidt: It's not inexpensive. The major driver is developing custom content, which can cost from $25,000 to $30,000 per hour.

ESR: How do employees select courses or subject matter appropriate for their levels?

Schmidt: Every employee has a learning map that is a guide for his or her training needs. For example, within our associate ranks, we actually have defined some minimum course requirements that everyone must complete in order to be considered for promotion.

TMPWorldwide Reports Q1 Revenues Of $362.8 Million

TMP Worldwide reported total commissions and fees of $362.8 million for the period ended March 31, 2001, a 28 percent increase from $284.2 million from the first quarter a year ago. Adjusted net income was $20.4 million, up 49 percent from $13.6 million for the same period in 2000. First quarter diluted adjusted earnings per share were 18 cents for the first quarter, a 38 percent increase over last year's first quarter diluted adjusted earnings per share of 13 cents. Executive Search commissions and fees were $31.5 million, down 19 percent from the first quarter 2000 when commissions and fees were $25.7 million.

Spherion's Q1 Revenues Decline, Losses Rise

Spherion Corporation reported first quarter revenues of $854.6 million for the first quarter ended March 30, 2001, a decline of 10.8 percent from the same period one year ago and 4.9 percent less than the previous quarter. Losses for the quarter were $23,902,000 or 34 cents per diluted share, compared to earnings of $24,708,000 million or 37 cents per share for the year ago period. Professional services, which includes retained recruiting firm The StratfordGroup (but excludes Michael Page International), reported revenues of $155.3 million, a decline of 7.5 percent from the year-ago period and 4.1 percent less than the fourth quarter.

Heidrick & Struggles Q1 Revenues, Earnings Increase

Executive search firm Heidrick & Struggles International reported first quarter revenues of $139.3 million for the quarter ending March 31, a six percent increase over the $131.9 million reported for the same period one year earlier. Net income was $5.7 million, a 62 percent increase from last year's $3.5 million first quarter income. Diluted earnings per share were 28 cents, up 56 percent from 18 cents per share in 2000 first quarter. Worldwide revenues for executive search were $134 million, up four percent from $128.7 million in the 2000 first quarter. Revenue in North America – the firm's largest region – was $70.1 million, a decrease of six percent from $74.8 million in the first quarter of a year ago. The company attributed the decline to lower revenues from the financial services sector, one of Heidrick's largest industry practices. Latin American revenues were $4.3 million, a two percent decrease from $4.4 million in the first quarter of 2000. Revenue in Europe was $51.7 million, a 25 percent increase over $41.4 million reported for the same period a year ago. And in Asia Pacific, revenue was $7.9 million, a decrease of three percent from $8.1 million in the first quarter of 2000. First quarter revenues at LeadersOnline were $5.2 million, up 63 percent over the $3.2 million reported in 2000 first quarter. Operating losses were $1.7 million, or five cents per share, versus an operating loss of $4.2 million, or 14 cents per share, in the 2000 first quarter.

Sanford Rose Opens In Hong Kong, Seoul

Akron, OH-based search firm Sanford Rose Associates has opened offices in Hong Kong and Seoul to focus to searches for local and multinational companies. The firm operates in Singapore and India and is expanding into seven Asian locations, including Shanghai, Taipei and Tokyo.

Heidrick & Struggles Recruits Ex-Webvan CEO To Tality

George Shaheen, the former chief executive of online grocer Webvan, Inc. and earlier the chief of Andersen Consulting, has been recruited to the board of Tality Corporation by executive search firm Heidrick & Struggles International. A subsidiary of Cadence Design Systems, Tality is a provider of engineering services for the design of complex electronic systems and integrated circuits.

Christian & Timbers Places Hart As CEO of Excite@Home

Jeffrey Christian, head of retained executive search firm Christian & Timbers, has recruited Patti Hart as chief executive officer of Excite@Home. Excite@Home offers consumers residential broadband services and businesses high-speed commercial services. Ms. Hart was until a few months ago chairman, president and chief executive officer of Telocity.

Spencer Stuart Recruits Johnston To Albertson's

Executive search firm Spencer Stuart has placed Lawrence Johnston as chairman and chief executive officer of Albertson's, one of the nation's largest food and drug retailers. Most recently president and chief executive officer of GE's Appliances Division, Mr. Johnston succeeds Gary Michael who plans to retire in June.

Halbrecht Lieberman Assoc. Places Aetna CIO

Stamford, CT-based executive search firm Halbrecht Lieberman Associates has placed Dr. Wei-Tih Cheng as senior vice president and chief information officer of Aetna. Aetna is a provider of managed care benefits, dental, pharmacy, vision, and group insurance coverage. Dr. Cheng comes from Memorial Sloan-Kettering, where he was chief information officer.

Freeman DiMarco Places CEO At Integral Media Services

New York City-based executive search firm Freeman DiMarco Associates has placed Liam Brown as president and chief executive officer of Integral Media Services. Mr. Brown was president, COO and co-founder of Conscium.

Russell Reynolds Associates Places Covisint CEO

New York City-based search firm Russell Reynolds Associates placed Kevin English, former CEO and chairman of TheStreet.com, as chief executive officer of Covisint, LLC. Covisint provides the automobile industry with a global Internet exchange for automakers and suppliers. After his role at TheStreet.com, Mr. English was the managing director and CEO of e-commerce at Credit Suisse First Boston.

Spencer Stuart Recruits Semel As Yahoo! CEO

Spencer Stuart search consultant Jim Citrin has placed Terry Semel as chairman and chief executive officer of Yahoo!. Mr. Semel, a 24-year veteran of Warner Bros., who served as co-chairman and co-CEO from 1994 until 1999, was most recently the founder of Windsor Media. Before joining Warner Bros., in 1978, Mr. Semel was president of Walt Disney's Theatrical Distribution division.

Korn/Ferry International To Find Aetna CFO

Retained executive search firm Korn/Ferry International has picked up the assignment to find a chief financial officer at insurer Aetna. The successful candidate will replace current CFO Alan Webber, who recently announced his resignation.

William Willis Worldwide Places Corning Executive

William Willis, president and managing director of Greenwich, CT-based boutique search firm William Willis Worldwide, has placed Meni Styliadou as managing director of European telecommunications policy at Corning. Ms. Styliadou, who will be based in Brussels, comes from the European Bank for Reconstruction and Development where as counsel, she was responsible for regulatory policy in the telecommunications, media and informatics sector. She begins her new job at Corning at the end of May.

Cook Associates Recruits Sanders To KAMAX

Don Utroska, vice president of Chicago-based executive search firm Cook Associates has recruited Greg Sanders as president and chief executive officer of KAMAX. Mr. Sanders comes from RING Screw Works, where he served as chief operating officer. KAMAX is a manufacturer of fasteners for the automotive industry.

Christenson Hutchison McDowell Places Novartis VP

Consultant Paul Sartori of Chatham, NJ-based Christenson Hutchison McDowell LLC has recruited Gary Cupit as vice president business development and licensing at Novartis Pharmaceuticals Corp. Mr. Cupit was previously director of business development at Knoll Pharmaceuticals.

An Economist's Model Lends Credence To Intuition

Search consultants have long known, intuitively, that their collective work is a leading indicator of the health of U.S. business. But now, economist John Urbanchuk of AUS Consulting, working with the Association of Executive Search Consultants, has developed a model that provides a framework for analyzing the relationship between executive search and the economy's growth. Specifically, says Mr. Urbanchuk, data gathered thus far delivers strong statistical evidence that executive search activity in the U.S. does indeed lead the economy by about six months. Data crunched from the first quarter of 2001 showed an increase in executive searches of six percent over the fourth quarter of last year, signaling a possible rebound in the economy. Good news!

Here's how the model works. Mr. Urbanchuk took raw data going back to 1995 from AESC member firms on the number of assignments for jobs paying $200,000 or more annually. He categorized these jobs by industry, then weighted them according to their importance to the economy. (For instance, in the third quarter of 1999, 21 percent of searches were in manufacturing, but manufacturing is only 17 percent of total gross domestic product. Weighting the searches prevents skewed results.) The weighted searches created an index number, which was related to a specific point in time, or a base year. Mr. Urbanchuk chose 1996, the same year the government uses as its base year for the real economy. An analysis of the statistical relationship between real gross domestic product and the index of search activity showed a high correlation between search activity and the GDP, with a two quarter lag. The most recent numbers, says Mr. Urbanchuk, suggest that the U.S. economy will continue to grow throughout 2001.