Sifting for gold star candidates
By Sarah Murray

 For executive recruiters in the technology sector - and the companies and individuals with whom they work - life could hardly be more different from how it was only two-and-a-half years ago.

At the height of the internet bubble, headhunters - with more work than they could handle - barely needed to market their services and many were turning down new clients.

 Competition for suitable candidates was intense, but risk taking was rife as executives moved swiftly from start-up to start-up in search of the next potential winner.

 Today, with the sector in the doldrums, a wider global pool of candidates is on the market. But the recruiter's life is still far from easy.

 Those looking to hire are more exacting in their demands, and senior executives in employment are highly cautious, making it harder to persuade them to change jobs.

 Another big shift for many in the executive recruitment industry - particularly around Silicon Valley - is that the proportion of the business derived from search work for venture capitalists has shrunk from the days when, over a two-year period, the US venture capital industry ploughed $200bn into new companies.

 "There's been fairly dramatic change back into major accounts, and that's a different business," says Steve Strain, who runs Korn/Ferry's global technology headhunting division and heads its US arm.

 "When you work with venture capital, you build a relationship primarily with individual venture capitalists. When you work with companies, you have to build relationships with line managers and CEOs, as well as finance and human resources departments - so there's a much wider range of stakeholders," says Mr. Strain.

 The diminished venture capital funding pool, the dramatic collapse of the dotcom sector in 2001 and general retrenchment in the technology sector has created a bleak outlook for job hunters.

With an oversupply of candidates, some executives are facing reduced rates, salaries and benefits and less senior positions than they might have had in the past. The increased inflow of resumés to recruiters tells the story. Mr Strain says he is getting two to three times as many resumés as he did two-and-a-half years ago.

 Nevertheless, despite the increased pool of candidates, top executives are still hard to come by. Kate McClorey, a board director at Elan, a leading European specialist IT recruiter, cites a case typical of the new recruiting landscape.

 "We are currently looking to fill a senior post in the UK public sector - a position with a six-figure salary," she says. "The response has been huge, with over 2,000 responses. But the gems in there are still few and far between."

 For Simon Buirski, European managing partner in Heidrick and Struggles' IT practice, this bodes well for the continued role of the executive search business in the recruitment process. "The good news for a business like ours is that there's a finite supply of A-grade talent," says Mr Buirski.

 "And employers are generally taking more time and care over the senior appointments they're making because companies have made mistakes in the past."

 Recruiters also report that the age profile of successful candidates in the sector has risen as companies seek executives with experience of previous downturns.

 In addition, for positions such as CIO, CFO or head of corporate strategy, industry experience is becoming less important than the managerial skills of the candidate, resulting in an increased inflow of candidates from non-IT sectors such as consulting.

 "The other major area you see [this trend at work] is in sales and marketing," says Mr Strain. "Because if you're moving from one distribution system for your products to another, or you're going from an industrial customer base to a consumer customer base, then you're more interested in consumer people [than technology experts]."

 But while the continued role of the headhunter looks assured, executive search companies have their work cut out.

 Companies that, during the boom years, might have settled for a candidate who fulfilled, say, seven out of 10 of their search criteria are now looking for the full 10, particularly in a difficult market where companies rely on top quality talent to pull them through. And with less business around for executive recruiters, competition to win searches has increased and fees are under pressure.

 "The whole headhunting industry has had a terribly challenging time," says Ben Anderson, managing director of Renoir Partners, a UK-based company that recruits senior management teams for emerging technology companies.

 "Those with knowledge, contacts and international reach are surviving, but we're really having to work for our fees today," says Mr. Anderson.

 When it comes to the candidates, those considering moving from an existing position now want to know far more about the company that intends to hire them before they leave one position for another.

 "The candidates' philosophy to some degree [during the boom] was 'this job looks interesting, there's some risk but if it doesn't work out, there are plenty more jobs'," says Mr Strain.

 "Today the candidates do a lot more due diligence on the company because if they leave a job to go for a new one, and for some reason it doesn't work out, they know there's a reasonable probability they could be out [of work] for six months to a year."

"Two years ago, if I'd spoken to a CTO, their first question might have been 'what's my options package?'" says Paul Wright, a director of UK-based Rees Draper Wright.

 "Today, the first question is likely to be more focused around whether they've got a good business proposition, what the finances are like and how the company is performing."

 The due diligence being done by candidates is intense. Potential recruits now look at whether the company they are considering joining is developing a product that stands out from others and whether there are customers to buy it.

 If the organization is not yet making a profit, would-be recruits also want to know about its financial backers and whether these backers still have the funds and the willingness to support its development.

 Candidates are even talking to potential customers of companies that want to hire them. "Very rarely at a senior level are we not being asked by our candidates to talk to customers," says Mr Anderson.

 "It's normally at the final stages, when the candidate has, in principle, agreed to join a company."

 Even those without jobs may not necessarily leap at the first opening that comes their way particularly those who made a lot of money during the tech boom and may be biding their time, looking for a different career direction. And star individuals are hardly much cheaper than they were during the good times.

  "There's a perception [among boards] that they're going to sign somebody at a more attractive price than a year ago," says Mr Anderson. "That's not always the case, because you're going after high-level, A-quality candidates."

 However, the make up of compensation packages has changed as many companies' stock options remain underwater and candidates remain skeptical about the potential of an option package.

 "A while back, you had equal weighting across base, bonus and long-term compensation," says Ted Martin, founder of Chicago-based Martin Partners. "Now the weighting has shifted towards base and bonus because markets are so flat."

 Even if they want stock options, candidates in the US may not necessarily get them. If plans by the Financial Accounting Standards Board to make companies treat stock options as an expense go ahead, companies would be likely to restrict them to all but the most senior executives. This would mean that, if things pick up economically, companies might need to rethink their long-term compensation packages. And recent months have seen some pick up in hiring activity both in the Europe in the US, as companies that had been delaying staff hires have realized they can no longer afford to put off the decision.

 If things go well in the ongoing Iraq conflict, this trend could accelerate as pent-up demand for senior staff turns into concrete requests for searches. But with war under way, and with no sign of a resolution in sight, caution is likely to be the prevailing sentiment. Candidates will be reluctant to leave a secure position, and companies making ever-greater demands of the search companies they employ. Either way, recruiters will be working hard for their money.