If you're seeking an executive-level job, it could be a long, cruel winter. The slumping economy has slashed management hiring this year at many companies, and the outlook for next year isn't much better. That's the message from David Lord, president of Executive Search Information Services, a consulting firm that has helped some of the nation's leading corporations develop their management recruiting programs.
Ten days after terrorist attacks destroyed New York's World Trade Center and parts of the Pentagon, Lord called up 16 executive recruiting directors at such companies as AOL Time Warner, AT&T, Merck, Goldman Sachs, and PeopleSoft to talk about recent events and the impact they're having on hiring. He shared what he learned with BusinessWeek Online reporter Jennifer Gill at a recent executive recruiting conference in New York. Here are edited excerpts of their conversation:
Q: What are corporate recruiters telling you about hiring at their companies right now?
A: Executive recruiting has been down all year. I work with about 50 major corporations, and I would say that on average, they are down by half this year in executive-level recruiting. Several of my clients say [hiring is down] as much as 75%.
There are some incidental positions that get searched for, whether business is good or bad. But positions that are related to growth have generally gone away. Companies have reacted very quickly and dramatically to the change in the economy.
Q: Have the terrorist attacks on September 11 affected executive hiring?
A: We're beginning to see some impact on the process. Whether companies had planned to do more recruiting or not, they're now looking at candidates being perhaps more reluctant to move to New York. Candidates are also a little more reluctant to take on jobs that require a lot of travel, until they see how things settle down.
At least one of my clients says that because top candidates are suddenly more reluctant to move, more cash incentive is necessary. We had already seen, of course, a trend away from stock options and toward cash over the past year as the market went down. But this is on top of that -- some higher sign-on bonuses in order to get people to make a change right now.
I think that probably most of the impact is short-term. Eventually, maybe in a couple of months, people will be traveling more comfortably and more regularly. But there could also be a bit of a long-term impact on how people think about their careers, where they want to live, where their priorities are.
Q: If companies are hiring at all, which positions are they looking to fill?
A: In some companies it's sales. They've got to drive revenues, and so they're still hiring regional and specialized salespeople. [They're also hiring for] functional roles that never go away, [such as] finance, rather than what we were used to seeing, which was a general pattern of recruiting for management talent -- marketing talent, business-development talent -- where a company would be growing and looking for a number of individuals [with management skills].
Q: Several of the companies that you work with -- Fidelity Investments, AOL Time Warner, and others -- have sophisticated in-house executive-recruiting departments. How often do they use outside search firms to fill positions?
A: When a company has a vacancy at the executive level, it asks [itself]: Can we fill this position internally, or are we going outside? In a growth market, [a company might think] that it can get an edge on the competition by going outside and getting a person even better than someone it has inside. The current state of affairs, particularly with layoffs going on, causes a company to say: "Maybe we should compromise
and provide this opportunity to an employee who has been here -- even if that person doesn't have everything that the external candidate might."
So first of all, companies are going outside a bit less. The second issue is, when they go outside, do they have the capabilities of recruiting those people directly or not? Many leading companies over the past several years have developed strong recruiting departments -- including hiring people out of the executive-search business to run these programs. In many cases, as the companies have downsized, those internal recruiting departments have been downsized. As you can imagine, they're probably among the easiest targets for cutting.
When things pick up, will companies quickly rebuild their internal recruiting teams? Or will they rely on search firms for some period of time? That could be a good thing for the search industry in terms of getting more work. But I don't think that the trend toward building an internal recruiting capability will go away.
One of the important things that has happened over the past several months is that people who've been worried about their jobs have gone onto electronic [job sites], posted their resumes, and responded to opportunities. This is fueling the ability of companies to recruit directly. As the electronic services have become richer with names, the hiring companies are perhaps less motivated to use a search firm to fill those jobs.
Q: But one of the arguments I've heard is that executive-level candidates aren't going online to find jobs.
A: Search firms have said that for a long time. But increasingly, executive-level candidates are online. At least 4 of the 16 companies that I talked to last week said they're doing a noticeable and important number of their executive-level positions through electronic services such as Monster, HotJobs, 6Figure Jobs, and industry-specific sites.
Q: What's your outlook for next year for executive hiring?
A: It's going to come back very slowly. There will be a few companies that are growing and can make an investment in talent. They're going to hire because there are some great buys on talent now. Look at all the dot-com CEOs who are very sharp people with valuable business experience -- even if it was unsuccessful -- that's ready to be applied to the next new enterprise. But companies will proceed carefully because they may have been overaggressive in hiring in the past year or two. They've been stung, and they're going to go easy.