Monday, August 20, 2007

Entrepreneurs try a variety of Recruiting Tactics

Big Fish, Smaller Ponds
To hook executives of large companies, entrepreneurs try a variety of recruiting tactics
August 20, 2007

LinkedIn Corp. had just moved to its Mountain View, Calif., offices last May when Patrick Crane visited to interview for the job of the company's head of marketing. Workmen were swinging hammers, and cardboard was scattered across the floors. But Mr. Crane, then a marketing executive at Yahoo Inc. in nearby Sunnyvale, was intrigued by the idea of leaving a corporate giant to help build an industry leader.

"The place was a mess, and that was part of the charm. There was a sense that everyone's sleeves were rolled up, and that was extremely attractive," says Mr. Crane, 34, who got the job at the four-year-old online networking service for business professionals.

Mr. Crane is among a crop of executives at large corporations who are being lured to significantly smaller companies. Executives who make this move may sacrifice salary, support staff, perks and prestige. But the small-business chiefs recruiting them are finding that other motivators can attract big-company talent, such as greater responsibility, a more collegial corporate culture, the absence of bureaucracy and the chance to help build a business and cash in if a young company eventually goes public. And in many cases they're using personal salesmanship to seal the deal.

LinkedIn CEO Dan Nye says he tries to appeal to executives' desire to make more of a mark than they might at a big company. "I point out, 'You have 20 to 25 years left in your career. Are you going to be the person who didn't take any risk and just lived a conservative, quiet life? But if you take this risk, even if it doesn't work out, you're going to feel great that you tried.' "

Offering Options

Tom Szaky, the 25-year-old CEO and co-founder of TerraCycle Inc., a maker of organic plant food, has hired several large-company veterans at fractions of their previous salaries. He finds it easiest to attract older executives looking for a second career, who might have even taken a retirement package from their previous employer -- "people who don't really need the job but want to get back in the game." But he also recently hired a midcareer executive away from Philips Electronics NV to be vice president of sales.

Mr. Szaky leans heavily on his vision of TerraCycle as an environmentally friendly company with a social conscience in his recruiting, but he also sweetens the deal with stock options that anticipate the four-year-old company going public, something he says it may do in five years.

Alan Johnson, a compensation consultant based in New York, says many executives moving to smaller companies hope that stock options ultimately will allow them to recoup at least five times what they sacrifice in salary. But, of course, it's a gamble -- one that depends on both the company's fortunes and the general direction of the stock market.

The Challenge: How can small businesses lure executive talent away from big companies?
The Tactics: Most small companies can't compete with bigger rivals on compensation alone. But other motivators can help attract managers, including greater responsibility, a more collegial corporate culture, the absence of bureaucracy, and the chance to build a business and cash in if it eventually goes public.
The Clincher: The passion that a small-business CEO shows for his or her business can be a crucial factor in persuading a big-company executive to move to a smaller company.

Some small-company CEOs eventually conclude that they need to lure talent with big money. Derek Mercer is CEO of Vurv Technology in Jacksonville, Fla., a 290-employee human-resources technology company. He first decided to offer candidates greater compensation in 2001, when he wanted to promote the company's software and services to larger businesses with potential accounts over $1 million. "I have to compete with the big companies" for accounts of that size, he says. And to do that, he felt he had to be more competitive with them on compensation. "Paying significant salaries was a big step for me."

Raising the Scale

Mr. Mercer first added a vice president of sales for a salary of more than $200,000 and a bonus plan of up to 50% based on achievement, plus stock options. Subsequent funding from venture-capital firms made the higher compensation more affordable.

Today, Mr. Mercer offers a vice president of sales at least $250,000 in base salary, a bonus plan of as much as 150% of salary, and stock options. Before the company raised its sights, the same position would have come with only $65,000 in salary, a bonus of up to $65,000, and one-third as many stock options.

Last year, the increased compensation was key as Mr. Mercer recruited Michael Gibson from Dell Inc. to become Vurv's senior vice president of global sales and business development. Mr. Gibson, 45, hadn't considered leaving Dell until a recruiter approached him about Vurv. He was intrigued partly by the company's clients, which include Goldman Sachs Group Inc. and Coca-Cola Co. But he wouldn't have taken the job at a much lower salary, he says, unless the company gave him a significant equity stake, something Vurv wasn't offering.

Money, though, is only part of the incentive for executives to move to smaller companies. "It's not always about the dollars -- it's about what you do and the environment you're in," says Holly Nelson, vice president of finance and controller of Eos Airlines in Purchase, N.Y. The airline, founded four years ago, flies 757s between New York and London, each outfitted for only 48 passengers. It pays competitive salaries, but Ms. Nelson still earns about 10% less than she did as senior vice president, controller and chief accounting officer for JetBlue Airways Corp.

Ms. Nelson, 50, who joined JetBlue in 2001, was attracted by the opportunity to help build another airline. "There's something special about [it.] You make a much bigger difference on the ground floor," says Ms. Nelson. Jack Williams, Eos's CEO, says that in recruiting Ms. Nelson, he was able to "articulate a solid vision of where Eos could go from the space we're in and convince her that there's a real opportunity to build out a lifestyle brand."

Eric Smith, 41, who left his position as a sales director for Philips Electronics in 2005 to become vice president of sales for TerraCycle, started with the new company at 20% of his previous salary. The stock options he received from TerraCycle helped cushion the blow, but the company's eco-friendly mission and social agenda also drew him. TerraCycle packages its organic plant food in used plastic bottles, some of which are gathered in collection drives at schools, and it established its headquarters in the depressed inner-city area of Trenton, N.J., creating some jobs for residents.

"The key is having [executive candidates] believe in the dream of what you want to accomplish," says Mr. Szaky, the CEO.

Executives who move to smaller companies also often find that they can make a greater impact on the business in a shorter time than they could at their old jobs. There's far less bureaucracy at a small business, so decision making tends to be smoother and projects generally move quickly.

"It's easier to get what you're trying to move into action," says Samantha Hanson, 40, vice president of human resources for Vurv, who previously was a human-resources director for Best Buy Co. She developed a company compensation strategy within just 90 days of arriving at Vurv, a task that often gets bogged down by the need for board input and approval at large public companies.

Many executives also are able to move up the chain of command by moving to a smaller company, like Mr. Crane, the new head of marketing at LinkedIn. "Going from being a leader to being the leader has huge appeal," he says.

Contagious Enthusiasm

Mr. Crane also says he was swayed by the passion that Mr. Nye, the LinkedIn CEO, expressed for his company's work -- an attribute that many large-company executives cite as a reason for moving to a smaller business.

"One thing I found with Dan and other members of his staff was a contagious enthusiasm, a belief in a very singular mission," says Mr. Crane.

TerraCycle's Mr. Szaky has had a similar effect on interviewees. "I don't know what word I can use to finger what he is," says Mr. Smith, the company's new vice president of sales. "But there's an aura almost when you meet the guy. He makes you believe" in the company's mission.

A culture that keeps employees similarly enthusiastic can be another key in luring top talent. Vurv's Mr. Mercer believes that the three former big-company executives who joined his company last year were swayed in part by their visits to its offices. The open floor plan, with glass walls surrounding the few offices, promotes teamwork, he says. Shouts are regularly heard from the recreation room, where employees play foosball and build camaraderie, he says.

Even small touches like the free meals LinkedIn provides daily for its employees can help make an impression. The food enhances employees' sense of value to LinkedIn and provides opportunities for outsiders, including job candidates as well as potential investors from Silicon Valley, to share informal meals at the company, says Mr. Nye.

He describes food as one small expense that quietly attracts interest by promoting the company from the inside out. "When we create an environment that is casual and respectful -- at relatively small costs -- we attract, retain and motivate exceptional people," he says.

--Ms. Barlyn is a writer in Washington Crossing, Pa. She can be reached at

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