Basic Skills Back In Demand.

Although California enjoyed a wonderful runup as the New Economy bloomed, it has endured a harsh year as the high-tech market -- especially the dot-coin sector -- fell sharply out of favor. With a slowing economy, failing companies with questionable business models and sinking stock prices, CFOs are wondering what's in store for the next few years.

As Silicon Valley-based executive recruiters, we have lived the New Economy ascent and meltdown. In a year's time, we've seen many dot-coms go under while survivors and older technology companies cut jobs. Gone are the go-go days when 29-year-olds with great ideas reigned supreme. Now, as the reality of a slowing economy sets in, a renewed focus on profits, as well as sound financial management, is again front-and-center for companies across all industries.

Despite the failure of so many high-tech companies, the market for top CFO talent remains strong. But the guidelines set by companies for finding and retaining top talent are changing. This reality, not limited to Silicon Valley, has implications for all of American industry.

Companies are again embracing the importance of seasoned management. We are seeing a shift in values from a growth-oriented, "sky's the limit" model to a recession-based, results-oriented business culture focused on bottom-line profitability as the most important CFO qualification.

"Two or three years ago, there were a lot of technology companies looking for CFOs, but if you didn't have IPO [initial public offering] or capital-raising experience, you couldn't get past the first conversation," says Dave Krause, CFO of ShipLogix, a start-up, Web-based transportation management service company that enables shippers and carriers to collaborate in real time.

Krause joined the company in 2000 at the height of dot-coin fever. Now, as the company attempts to secure a second round of financing that doesn't look promising, Krause has begun "testing the market" for available CFO positions, and is discovering that one key advantage he has is his previous background with large, well-established companies.

"I'm seeing a need for solid financial executives, particularly at the highest levels," says Krause, who responded to 12 CFO job postings and received positive responses from all but two. "In this new environment, companies need CFOs who can execute the company s strategy, get the company to a positive cash flow (if it isn't already) and ultimately, take it to, or help it maintain, profitability."

Reality is setting in as companies and venture firms are no longer throwing money at startups without regard for when the company will be cash-positive. Krause points out that in 1999, when ShipLogix went through its first round of funding, "not one venture capital firm asked when the company expected to turn a profit or be cash-positive." In fact, a year ago, many venture capital firms barely reviewed the business plans of the companies they were about to invest millions of dollars in.

All of this points to the growing emphasis on CFOs with strong operating skills, as opposed to fund-raising and transactional skills. As recruiters, we are getting more and more requests for CFOs who really understand business models, who know how to help a company achieve and maintain profits and boost the operational profitability of their businesses.

At the height of the frenzy, companies were interested in outwardly" focused financial executives, with a bent toward marketing. Today, we see an emphasis on "inward" focus, which stresses cost controls and expanding the revenue base.

Two years ago, what we heard for most CFO searches was "we want somebody who can take our company public," someone who could contribute to growth-oriented, pre-IPO business models, Now, companies are realizing that it is more important for CFOs to know how to downsize and squeeze dollars.

Silicon Valley Spillover?

With all the recent coverage of sick or dying dot-coms, there is a perceived glut of people. While it is true a host of layoffs have hit the tech sector, a lot of those released have been younger, more inexperienced people sucked in during the boom years. For the most part, the brightest and most seasoned executives, especially at top management levels, are still in high demand.

One result of the New Economy downturn is an attempt to determine the value of time spent at a failed company. Some of our clients have asked, "How do you value financial management experience at a dot-com that never made money?" Even though the rise and fall of the dot-coms has evoked a good deal of cynicism, the business community can learn a lot from their experience.

For one, many fledgling Internet companies went into uncharted territory and actually did pretty well, given the circumstances. Individuals who lived through the dot-com frenzy can be valuable to traditional brick-and-mortar companies, especially those now moving to the Web. CFOs from failed dot-coms have a greater appreciation for what's real in the e-commerce space and, most importantly, what isn't. You can be pretty sure you're not going to make that same mistake if you hire that person. In theory, that can deliver a tremendous cost savings.

The Talent War Wages On

For the past several years, recruiters have grown accustomed to the tightest job market in a generation. A candidate surge is certainly a switch. But despite the slowdown, positions remain abundant for experienced candidates with demonstrable skills, and seasoned talent is still scarce.

As talk of an economic slowdown intensifies, another problem that will impact the future of American competiveness goes largely unnoticed. America's leadership pool has never been shallowever, and it will only get worse. This presages a long-term talent shortage that could take the steam out of the economy for decades to come.

Even if business growth stagnated over the next decade (a disaster, for sure), the demographic seeds for an executive leadership shortage were planted long ago. America's cadre of seasoned executives is dwindling, and there may be no one coming to take their place.

The World War II leadership generation is retired and dying off, and the generation behind them, the Baby Boomers, are assuming responsibility for running corporate America. But their ranks are shrinking, and there just aren't going to be enough Gen-Xer's moving into the 38-to-48 age bracket from which leaders are selected to fill all the available positions. In short, we're facing a severe leadership crisis. It's already difficult to fill top-level jobs.

What can be done? First, corporations must recognize that recruiting and retaining talent may be the biggest operational challenge they'll face over the next 10 to 15 years. The days of searching on an "as-needed" basis from an overflowing well of talent are over. Now, companies must maintain a continuous search strategy, especially for executive-level positions. And when they discover ideal candidates, they must aggressively go after them.

Fortunately, companies are beginning to look beyond the traditional cadre of candidates, promoting women and minorities to executive positions and encouraging outside recruiters to seriously target these groups. This also means thinking globally in terms of managerial and leadership talent.

Finally, companies must change their approach to recruiting. Many view recruitment for low-level administrative and managerial positions as a never-ending process, but view senior-level recruitment as episodic. Today, we believe, companies must develop relationships with executive recruiters that are two-way, long-term and relational. Companies must catalog the experiences, skills, personality and leadership styles required in ideal executive candidates. From there, recruiters can hit the ground running when a position opens, rather than wasting time being brought up to speed.

The war for talent has perhaps only begun. Embracing new and innovative search strategies can help ease the crunch. As the country copes with an economic downturn, remaining competitive will require a proactive and progressive recruitment philosophy.

Mel Connet and Liz Bicknese are partners at Menlo Park, Calif.-based Connet & Company LLC (www.connetcompany.com), a global executive search firm focused on officer-level searches in the technology industry.