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Article by Mohan Babu


Recruitment business in for a shakedown

Following the résumé scandal of Veritas CFO, headhunting business has come under greater scrutiny in corporate America. MOHAN BABU writes that in a slowing economy both employers and candidates have become cautious of headhunters

An interesting scandal rocked the high-tech community in the US recently. Just when all thought that the dust was settling in on the Enron and WorldCom accounting fraud, news of Veritas CFO’s résumé scandal rocketed the market. Amid a revelation that Kenneth E Lonchar lied about his education—stating on his official résumé that he had a master’s degree in business administration (MBA) from Stanford University—the company forced him to resign. Reacting to this news, Ellwood Oakley, an associate professor specialising in ethics for the Robinson College of Business at Georgia State University said, “Wall Street’s backlash to Veritas’ bombshell will likely to add a new concern to the credibility issues facing corporate America.” He went on to add, “A lot of companies are going to be sending out internal e-mails during the next few days asking for executives to re-inspect their résumés for accuracy. There really is no excuse for this kind of thing.” This scandal is bringing renewed focus on the whole profession of headhunting.

In the industry, a “headhunter” is formally known as an executive recruiter. Typically, a headhunter earns his or her living by recruiting top-notch candidates for hard-to-fill corporate positions. The basic premise of executive recruiting is that really good candidates are happy in their current jobs and are not likely to read (or respond to) want ads in newspapers or on the Internet. Ideally, executive recruiters, begin each recruiting assignment by carefully gathering the specific requirements for the job to be filled. They then attempt to locate the ideal candidate using their network of contacts in business and industry. Contrary to popular myth, executive recruiters are not employment agencies but free agents who receive a fee from the client (not the candidate), at the completion of the hiring process, typically 60-90 days after the candidate begins work. This is called a “contingent fee”. In the US, the National Association of Executive Recruiters (NAER) is a premier industry group for professionals in this industry.

To many IT professionals and HR managers, headhunters are a “necessarily evil”, a conduit to connect suitable candidates to companies. Of course, the only other popular recruiting route for companies is employee referrals. Advertisements in newspapers and job portals do work but by far cost the companies more in terms of time and cost. There was a time, not long ago when a recruiter’s job was one of the simplest and most lucrative ones. All s/he had to do was to maintain a small “database” and pull up Cobol, Java or C++ candidates from the list and pass it on to HR people at IT companies looking for candidates. Recruiters are responsible for the initial vetting of suitable candidates in a market saturated with qualified individuals. In a slowing economy, the recruiting industry is receiving an added scrutiny not only from employers but candidates too who wish to be represented by “credible” middlemen.

Interestingly, Indians in the US, after their failed foray into the consulting and body-shopping businesses have taken to headhunting. Even a cursory search on Dice or Monster for US based technical jobs is sure to bring up dozens of Indian names like Raj, Singh, Kumar, etc. Many consultants and IT professionals also moonlight as “middlemen” placing their friends and colleagues into positions they become aware of. Of course the slowing economy means that such moonlighters are giving way to value added recruiters.

With projects increasingly being outsourced to India, companies there are probably starting to look for talented individuals with the right skills who can hit the ground running. In a more competitive market, Indian headhunters whose popular refrain is “We will add you to our database” are in for a rude shakedown. Some of these recruiting agents masquerading as corporate headhunters are nothing more than a scam running from their garages and basements in suburbs of Bangalore, Hyderabad, Delhi and other high-tech hubs. Use of Internet websites and e-mails helps them remain relatively anonymous. Some claim to have MBA’s from prestigious institutes including IIM and contacts at “top multinational” companies. With the lack of formal recruiting and headhunting associations in India, the fly-by-night operators seem to have a free reign. The flip side is that since most of the big recruitment push is coming from Indian companies and not international players, it will be hard for the bad apples to survive in the long run. If the hiring manager in a large company like Wipro asks for résumé of people with J2EE, middleware technologies and HTML/XML, it will be harder for middlemen to “fake it” by sending résumés of dud candidates without the right credentials.

Needless to say, genuine executive recruiters who provide a value added service to their corporate clients will continue to survive and even thrive. They are the ones who will be able to advice the Veritas’ of India if the candidates really have the MBAs and MCAs that they claim to have, saving much grief and embarrassment at a later date.




About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    For FAQ, Trivia and Information on Life in America, visit the Ask-A-Desi section

    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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