Invasion of the Body Snatchers

By John Greenwald

Companies searching for talent create a boom for headhunters

Bruce Dahltorp, a 46-year-old financial consultant, was relaxing in his Geneva, Ill., home one Friday evening, when the executive recruiter phoned. Would Dahltorp consider a job as president of a Midwestern bank? the caller wanted to know. That unexpected opportunity was too good to refuse. Dahltorp could fulfill a long-standing desire to run a bank and also boost his six-figure pay by more than one-third. He soon took the job.

Dahltorp is among a growing number of managers being approached by executive-search firms. With the economy rebounding, companies are hunting hard for proven talent, and creating a boom for the 1,500 or so firms that are in the business of finding it. "The recruitment spree is further evidence that the recovery is moving faster than most businesses anticipated," says Lester Korn, chairman of Los Angeles-based Korn/Ferry International, the world's largest executive recruiter. "Last year was our best since 1977, and 1984 should be even better."

Hiring companies pay headhunters up to one-third of an executive's salary, and so profits for recruiters are also high. Search firms earned some $1.2 billion in fees last year, or about 20% more than in 1982. Their total earnings could climb to $1.5 billion in 1984. Says Robert Slater, managing director of U.S. operations for New York City-based Spencer Stuart & Associates: "This is the most significant increase in business that I can recall."

The talent hunt is most frantic at the top. The demand for executives making $200,000 or more surged 86% last year, according to the Association of Executive Search Consultants. The trade group also found a 37% jump in assignments to find managers for slots paying from $100,000 to $200,000. Last month a Korn/Ferry survey of 750 major employers across the U.S. showed an estimated 50% first-quarter increase in the hiring of executives earning more than $75,000.

Companies making consumer products from computers to packaged foods are the most active in the talent hunt. The buoyant spending tide lifted consumer firms' demand for executives by 33% last year. The financial-services field, meanwhile, recorded a 23% gain. Commercial bankers have been in especially short supply. A 32-year-old banker might already be making $60,000, says David Healey, president of Balch & Watson, a search firm in suburban Minneapolis. "Those individuals can sit at their desks and get calls virtually every day from executive recruiters."

As the competition grows, companies are finding that they must offer increasingly tempting bait to lure top personnel. Executive pay packages climbed some 7% last year, well ahead of the 3.8% inflation rate, and they are expected to climb as much as 10% this year. Companies in growing industries frequently must offer up to 50% more than an executive's current pay in order to win him. Like star athletes, some job hoppers are receiving onetime bonuses to sign with new companies. These often range from $25,000 to $100,000.

Wage considerations alone, however, may not be enough. Says Norman Keider, managing director of the Chicago office of Arthur Young & Co.'s recruitment service: "For an executive with a job already paying $100,000 and above, salary can be fifth, sixth or even seventh on the priority list. To recruit these executives you have got to show them a job with a challenge." Korn/Ferry did just that when it approached Peter Ueberroth, who had been running his own travel agency chain, about becoming president of the Los Angeles Olympic Organizing Committee for this year's Summer Games. Ueberroth, who will move on to become commissioner of baseball in October, took a salary cut to accept the $115,000-a-year Olympics job. Says Korn/Ferry President Richard Ferry: "The challenge of putting on a private Olympics for the first time was the selling tool."

A ticklish difficulty for search firms is families in which both the husband and the wife have careers. "This can be a substantial problem for some employers," says John Sibbald, who runs his own firm in Chicago. "Some clients go out of their way to identify opportunities for the recruit's spouse."

Executive searchers are finding that a growing number of managers today simply do not want the stress and grueling hours that come with top positions. "Senior jobs are more demanding now," says Carl Menk, chairman of Canny, Bowen in New York City. "The risks are higher, and mistakes can be catastrophic. There really are an increasing number of people who don't want to bother."

Other sought-after prospects may refuse to relocate. Henry Higdon, western regional managing director for Russell Reynolds Associates, recalls several recruits who balked at moving from the Midwest to California even though the job would have paid $360,000 in the first year. "And they would have been in San Francisco," says Higdon, "which is not exactly the pits."

Unlike top executives, those at mid-level are not now frequent targets for headhunters. Demand for middle managers, who typically earn from $40,000 to $60,000, dropped 21 % last year as companies continued to pare their white-collar work forces. Today major employers like General Motors are finding little need to rehire the mid-level workers who were laid off during the recession. "A lot of companies have learned how to run effectively without some of the fat," says Dale Schueffner, manager of executive-recruiting services for the Minneapolis office of Peat, Marwick, Mitchell & Co.

Despite the salary increases or challenges, many people when first approached by a headhunter turn down the proposal. Says Richard Ferry: "Often the reaction is, 'Why should I look at it? I've got everything going for me now. Why should I change direction?' " Recruiters reply that managers should at least listen. They can always say no, and in any case, an unexpected job offer is flattering to an executive ego.

--By John Greenwald.

Reported by Don Winbush/Chicago and Adam Zagorin/New York

With reporting by Don Winbush/Chicago and Adam Zagorin/New York