Interview with Mike Arrigo, CEO and President, LeadersOnline

LeadersOnline, a new online recruiting service from Heidrick & Struggles launched recently. LeadersOnline will focus on bringing together clients and mid-level managerial candidates in enterprise level IT environment. Below is an interview with Mike Arrigo, CEO and president of LeadersOnline, as he discusses its unique vision. The following interview was conducted by Galina Nemirovsky on April 2, 1999. ERE: Heidrick & Struggles has been very successful as a leading executive recruiting firm – why the move to the Internet? MIKE ARRIGO: Relationship with our clients. We think that most of our clients, particularly in IT, need this mid-level type of high-tech position filled and in the past we have referred those opportunities away because Heidrick & Struggles focuses exclusively on executive search. With LeadersOnline we can offer additional services to our clients. ERE: Again, the expertise of Heidrick & Struggles is with executive level individuals, now the focus will be on IT professionals and “emerging leaders.” Why the change? MA: Well, this business is a new business and that’s why it’s different. It’s not changing anything about our core executive search strategy. But we do think emerging leaders is an exciting opportunity b/c it also feeds into our executive search business. When we placed a particular CEO at a large public company, we had known him for 20 years through his career; we like long-term relationships and this helps us with that. ERE: How are you leveraging the existing strengths of Heidrick & Struggles for LeadersOnline? MA: Well, the whole strategy I had at a meta-level for this was to bring the best of the Heidrick & Struggles’ recruiting process together w/ the best of the internet and I think that’s what we’ve done. ERE: If you had to name one solid combination of what the best of the internet is with what the best of what the best of Heidrick & Struggles is, what would that be? MA: The relationship building of Heidrick & Struggles and its ability to get quality candidates combined with the communications efficiency of the Internet. ERE: There are many online recruiters; what makes your vision so unique? MA: Other online recruiters focus exclusively on the sourcing part of the business; “how many candidates can I get to my website?” Our strategy is three components. Sourcing, tracking, and assessment. The sourcing piece is obvious-you want to bring people to your website. Less obvious is sourcing in a focused way; we focus exclusively on IT. Finally, we only go after the constituencies we think fit for our clients. The tracking piece, or workflow as some people call it, is a rough approximation of what Heidrick & Struggles does when it’s staying in touch w/ candidates and clients about the status of given searches and the status of candidates. The assessment piece is what makes us the most unique b/c we do background checks on all of our candidates before the finalists are presented online. The way we do that is we confirm their education, their employment history, and we get references from past managers and peers. That’s probably one of the most obvious pieces when you’re not doing online recruiting. To us it seems like a very important piece and rather than just having people on the phone, we’ve integrated technology that helps us do that and we have a partner: Avert, which is publicly traded company, which helps us do all the pre-employment screening. ERE: How did you determine which features you would place on the web site? MA: We talked a lot to, first of all, our own internal recruiters. Then I looked at several technologies. We considered partnering with some other companies and decided that we could build a better approach and then we talked to a lot of candidates. We did focus groups and testing. ERE: How is the web site being promoted to candidates? MA: Print, electronic, and telephonically. We do talk to candidates on the phone; I think having a high touch element to electronic recruiting is important. The electronic promotion we do is very targeted at the constituencies we want to bring to the web site. We use electronic mail and electronic banners, but not in the mass consumer way; and we do have a print advertising campaign, which we will be launching to build brand awareness. ERE: If I were an emerging IT leader, why would I register with LeadersOnline? MA: Well, you’d register with it probably for the five reasons that are right on the website. Those are the things we found were most important to the candidate population: confidentiality; control of your information; access to unique opportunities; feedback, and focus on IT. That sounds common, but when you look behind each of those pieces, there’s a lot behind confidentiality. Confidentiality is actually privacy policies; it’s a security system that encrypts data and it’s a process that makes sure the candidates don’t release their information before they want to pursue something; much like a good executive search firm would. In terms of the control of the information: they decide whom they want to pursue, and they want to reject. The opportunities are special b/c we’ve contracted with some of the best clients that Heidrick & Struggles has for this service. The backing of Heidrick & Struggles gives us a lot of credibility. We talk a lot about the references on the site. ERE: You mentioned that one of the reasons that make LeadersOnline successful, is the “focus on IT.” Do you really think that is unique to online recruitment? MA: I don’t think that other firms have really, really focused on IT, and put a stake in the ground and said, “this is who we are.” The reason that that’s important is, if you bring a million people to your website and have them spend their time there, the probability that you could place even a small percentage of those people into positions is low. So, you’re going to have the bulk of those people grousing about the bad experience they had online and you’d get a million people if you had a mass market approach, potentially. I personally would rather have a list of the ten thousand best ERP programmers who know PeopleSoft or SAP; I’d be a lot more profitable. Those people then know that it’s a community where they’re going to find things that fit and they’re going to have a lot less bad experiences. For every bad experience on the web, six friends know about it. So, the negative spin on a lot of these non-focused sites, I think, is a big distracter. ERE: What direction do you see LeadersOnline taking in the next year? MA: We’re going to really focus on those three components: sourcing, tracking, and assessment and really optimize that system. I think we could meet our financial goals w/ IT clients very nicely. We will be announcing some partners shortly. ERE: What challenges do you foresee in the immediate future? MA: I think our biggest opportunity for success is coming up w/ our own differentiated culture but integrating w/ the Heidrick culture b/c there’s huge opportunity to leverage the presence and relationships of Heidrick. So, we’re bringing in our own team who could work with the Heidrick partners to bring in new clients. ERE: Who do you see as the primary competitors for LeadersOnline? MA: I think the primary competitors are the contract recruiters and the boutique recruiters who do IT search. I don’t think it’s the other online boards b/c most of the other online boards don’t have a lot of credibility delivering quality service. The relationship most of the local boutique recruiters have, sometimes well deserved, is that they could deliver service and hopefully, quality, but they can’t scale up. I mean, if they need five people, they’re probably great, but if you’re an Oracle or a Cysco, and you need thousands of people, and worldwide presence, we can deliver those things, whereas other can’t. ERE: So you don’t look at any of the online search firms as a competitor at all? MA: Well, I acknowledge that they are perceived competitors b/c we’re in the online space, and people are going to say, “Well, gosh, this search firm is backing that online venture, well they must be a competitor for Heidrick & Struggles and LeadersOnline.” And we’ll have to educate the market about why we’re different. But when I think that when people look at their most credible sourcing mechanisms, or search mechanisms, they’ll look at us versus the methods they’re using now. And those people are not using those online recruiting boards today to fill all those critical needs. What they’re doing is they’re experimenting and they haven’t made the real strategic commitment. In fact, we followed some of our perceived competitors in the door, after they’ve gone out the back door unsuccessfully. ERE: Do you have satisfied clients that testify to the value of your service? Do you have any success stories to share? MA: Yes. We delayed our launch; we probably could have launched this last year, with a lot of hype and fireworks and no substance?a lot of sizzle and no stake. But I just didn’t want to do that. So we did wait until we had a customer reference or two. We have Washington Mutual who has agreed to be a reference. ERE: If you had to name three top features, besides the three that you’ve been mentioning, as to why someone will chose LeadersOnline over what you consider your competitors, what would those features be? MA: They wouldn’t be technology features. It would be high touch, service, and quality. ERE: What obstacles did you have to overcome in launching the site? MA: Well, I had some internal education to do. There were some visionaries in Heidrick & Struggles who backed this and convinced me that the firm would commit. I had to do some education to get people to understand that we could do this without hurting the Heidrick & Struggles brand name; that in fact, it would help. And that we could differentiate it from Heidrick & Struggles’ existing service. We’re focusing on the $75K-$150K whereas Heidrick typically focuses on $150K and above as an executive position. That was one obstacle. The other one of course was finding the right team and articulating a vision to that team that we felt could really work. We had to test that vision every step of the way w/ clients and candidates. ERE: In regard to the first obstacle that you mentioned, do you think that’s going to be an ongoing obstacle, or do you think that’s something that’s finished? MA: I think it’s finished. The problem that I’ve had this week is that we’ve gone very broad w/ our message after keeping it quiet inside the firm even. And we’re focused, as I mentioned, on the IT area. We’ve got people from the healthcare and financial services and other areas who would very much like to use our services. So, that’s a good thing. I think when we got started, the internet as a recruiting vehicle was less understood than it is today. ERE: Do you think that you would go in the direction of healthcare or finance if LeadersOnline is successful? MA: Yes, that’s a natural b/c Heidrick & Struggles’ strength in healthcare and financial services is very strong. But we’re going to build a beachhead here with more and more reference accounts first. We really want to do this right and not scatter ourselves too thin. ERE: What is the one thing that you want people to walk away with/remember? MA: This is going to be the best return on their investment for IT recruiting.

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