Entrepreneurs try a variety of Recruiting Tactics

Big Fish, Smaller Ponds

To hook executives of large companies, entrepreneurs try a variety of recruiting tactics

By SUZANNE BARLYN
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.

REELING THEM IN

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 reports@wsj.com.

If You Want to Stand Out, Join the Crowd

Trade-Group Activity Is a Good Way to Land On Recruiters' Radars

By SARAH E. NEEDLEMAN
August 14, 2007

To find candidates for a senior finance job that opened up last month, executive recruiter Ed Kaye scanned the roster of a relevant industry association and quickly homed in on a longtime member. He placed a cold call, and the recipient, a manager at a similar company, agreed to interview for the position and was eventually hired.

Mr. Kaye, a senior partner at recruiting firm GSP International in Woodbridge, N.J., isn't alone in searching associations' membership directories to identify talent. The strategy is the most common way recruiters find potential candidates who aren't actively looking for a new job, according to a recent survey of 450 members of the Society for Human Resource Management.

"It never hurts to be involved in associations," says Nancy Grossman, a recruiter for Capital H Group, a human-capital consulting firm based in Chicago. "You become more visible to recruiters and it shows you are committed to staying on the cutting edge of your field."

Recruiters and company hiring managers say they also often seek out potential hires at the meetings, conferences and other events that professional groups host. "Trade shows are great fishing expeditions for recruiters," says Barry Shulman, a principal at San Francisco-based recruiting firm Shulman Associates Executive Search Inc.

To increase your odds of landing on a recruiter's radar, participate in association events instead of just attending them, advises Todd Weinman, a regional director at recruiting firm Lander International LLC. "If you're somebody who comes to chapter meetings and always asks outstanding questions, a recruiter will definitely take notice," he says.

John Cronin, a managing director at Capital Finance Recruiters Inc. in Leonia, N.J., recommends nurturing relationships with the recruiters you meet and being patient. He recently placed a candidate he met 10 years ago at an association meeting into an information-technology-audit position at a large East Coast health-care company. "We always kept in touch and finally it worked out," he says.

Another way to boost your exposure to recruiters is to get involved in a professional group's management team or local chapter, says Wendy Alfus-Rothman, an executive career coach in New York. Run for a board seat, volunteer to be on a committee or offer to speak at a seminar, she suggests. You're likely to get to work closely with the organization's leaders, as well as gain opportunities to showcase your skills, she says.

Ray Manganelli, a vice president and senior managing director at Tunnell Consulting, learned about his current job through his work as a board member of the Association of Management Consulting Firms. The group accepts companies as members, not individuals, and Dr. Manganelli represented his employer at the time. During his tenure, he and Tunnell's representatives got to know one another, and in 2003 the company created a position for him. Dr. Manganelli now serves as the AMCF's board program chairman on behalf of Tunnell, which is based in King of Prussia, Pa.

Many associations post job ads on their Web sites, and some limit access to the ads to members. Corporate hiring managers and recruiters say they like to advertise on these sites, sometimes exclusively, to target trade-group members. "All the good candidates seem to belong to a particular association and the ones who aren't as skilled usually don't," says Bob Hatcher, president of Executive Network Inc., a search firm near Chicago that specializes in the food industry. He estimates that 40% of the candidates he places into jobs are identified through trade groups.

Job seekers say belonging to a professional association also allows them to easily connect with others in their field, which often results in job referrals and provides useful insights. While most groups charge an annual fee, it is typically far less than the cost of a career coach, who typically charges between $100 and $250 an hour, according to Frank Fox, president of the Professional Association of Résumé Writers & Career Coaches in St. Petersburg, Fla. Still, there may be other costs involved in attending annual meetings and conferences, including travel.

Networking with fellow members is unlike schmoozing with professionals in nonindustry-specific settings, says Debbie Lew, a senior manager at accounting firm Ernst & Young LLP in Los Angeles. "Members will spend a little extra time with you because there's that connection," she explains.

Ms. Lew says she learned about her current position in 2004 after conversations with several fellow members of the Information Systems Audit and Control Association. After she had tapped their knowledge about the accounting firm, several of them volunteered to give her a referral.

Within a week, Ms. Lew says, she received a call from a practice leader at Ernst & Young asking her to interview for a manager position she hadn't seen advertised. Several ISACA members were among those evaluating her candidacy, she says, and they acknowledged recognizing her from the group's events. Before leaving the interview, she had a job offer in hand, she adds.

Ms. Lew says she pays ISACA an annual membership fee of $120, plus $25 a year in dues for the organization's Los Angeles chapter. "It's definitely a great deal," she says, adding that she also receives discounts on the group's educational events and certification exams and other benefits.

The cost of joining associations varies greatly and often depends on the type of membership. For example, the Public Relations Society of America charges between $60 and $225 a year for national membership, plus as much as $80 annually to join one of its local chapters. The American Institute of Architects charges fees ranging from $338 to $819.

Write to Sarah E. Needleman at sarah.needleman@wsj.com