The Matchmaker

An anatomy of start-up Career Central, a matchmaker for companies and business school graduates. Includes CEO Jeffrey Hyman's business plan, financial strategy and prospects for success.

Tweet

Anatomy of a start-up

Can a powerful database replace the 'black art' of personnel recruiting?

Jeffrey Hyman was not happy. It was 1995, he was soon to receive his M.B.A. from Northwestern University's Kellogg School of Management, and he craved employment at a young high-tech company. Problem was, on-campus recruiting featured the usual fare of manufacturing and consulting Goliaths. "Four hundred companies came to campus," Hyman recalls, "and I didn't want to work for any of them."

After several months of cold calls, costly flights to the Bay Area, and missed classes, Hyman finally landed a job at software maker Intuit--"by pure luck," he says. But the process had been an ordeal. Once at Intuit, moreover, Hyman discovered there was a flip side to the same problem: Intuit didn't have the resources to mount a serious presence on business-school campuses. That made hiring top-notch M.B.A.'s difficult.

The problem gnawed at him: How could M.B.A.'s and the companies that needed to hire them be brought together? "This is an enormously inefficient market," Hyman remembers thinking. "The recruiting industry has not changed for 100 years. Technology has not been applied."

And who better than he, mused Hyman, to apply it?

The market
In one sense, Hyman's timing could scarcely have been better. The amount of money spent on headhunters in North America has been growing at an annual clip of 17%, jumping from $3.5 billion in 1993 to $6.5 billion in 1997 (and vastly outpacing employment growth), according to Kennedy Information LLC, publisher of Executive Recruiter News. With businesses struggling to find skilled workers--and increasingly recognizing the real cost of a bad hire--recruiters have become valued problem solvers.

Yet the industry continues to be highly atomized. Of the 4,330 executive-search firms in North America, Kennedy reports, fewer than 15% generate revenues of more than $2 million. The 10 largest search firms (including market leaders Korn/Ferry International, SpencerStuart, and Heidrick & Struggles) constitute barely 11% of the market. Plus, to hear Hyman tell it, a headhunter in 1998 carries on in much the same way a headhunter in 1948 did--which in the most basic sense is true. Head-hunting still tends to involve a Rolodex, a phone, and the task of jawboning someone into working for someone else.

Highest on the industry's food chain are the retained-search firms, which typically charge one-third of a position's first-year salary. Theirs is a full-service menu: background checking, wooing of candidates, and consultative screening for that elusive "right fit" are all included in the prix fixe. The average retained recruiter performs 16 searches a year.

Next come the contingency-search firms. In contrast to their more exalted brethren, who focus on positions that pay upwards of $100,000 a year, contingency recruiters feast mainly on the below-$100,000 crowd. They charge a commission of 20% to 30% but, as their name suggests, receive zippo if none of the candidates they serve up get the nod.

The next level on the executive-recruiting food chain is a long way down (and not even included in the $6.5-billion assessment of the search industry): newspaper classifieds. Employers pour another $6 billion down this funnel every year--enough to mean the difference between red and black ink for many newspapers. This approach to recruiting is far cheaper than using headhunters, of course, but it's also far more scattershot. While employers end up with a thick stack of rÉsumÉs to pick through, relatively few candidates are likely to meet their specifications.

 1 | 2 | 3 | 4 | 5 | 6  NEXT 

Read more:

Sign-up for our Technology Newsletter

Email Address: