A recent poll of executive recruiters conducted by ExecuNet showed that they expect search assignments for business development and sales leaders will be top-of-mind from a job function perspective in the first quarter of 2009.

Demand for engineering and operations management executives with expertise in quality controls, supply chain and logistics also ranked high on the list of corporate talent management priorities. The Recruiter Confidence Poll shows the top functional areas that executive recruiters expect to drive hiring in the first quarter of 2009:

• Business development (16.2%)
• Sales (13.9%)
• Engineering (10.7%)
• Operations management - including quality, supply chain, logistics (10.6%)
• Finance (9.7%)
• Marketing (8.3%)
• General management (8.0%)
• Research and development (6.8%)
• Consulting (6.6%)
• MIS/IT (6.4%)
• Human resources (1.7%)
• Other (1.3%)

Our experience at M Squared Consulting is that full-time hiring trends tend to mirror demand for interim and consulting professionals. A quick census of the M Squared Talent Network offers reassurance that we can meet client demand for this expertise.

It is a fairly common management insight that most mergers and acquisitions (M&A) are ultimately judged to be failures. Some of the biggest flameouts have been widely covered by the business press (AOL/Time Warner, HP/Compaq, Daimler Benz/Chrysler to name a few).

But given this realization, why do so many companies still embark down this risky road? Is any M&A worth the risk?

Most M&A discussions begin with legitimate business objectives and the genuine belief that the new “whole” will be greater than the “sum of the parts” and result in a market advantage for the new entity.

Sometimes companies opportunistically want to buy market share, or defensively take out a competitor, or buy IP/technology. Other times it’s done to create greater operating efficiencies through more volume or a larger footprint. Occasionally M&A is an outright attempt to buy the human capital that a company needs but can’t hire on the open market.

In other words, companies do M&A for many strategic reasons. In theory, shareholder value should always increase as a result. For maximizing shareholder value is the primary purpose of management. If not, then the merger is deemed a failure.

Why do they fail?

Mergers and acquisitions are inherently risky. There are many causes of failure, here are a few of the most common reasons:

• Flawed corporate strategy for either or both companies
• One company hides the truth; the other buys a sales pitch
• Inadequate integration strategy
• No cultural fit between the two companies and their employees
• Talent “leakage” - the loss of key employees (typically occurs right after their retention agreements expire)
• Acquiring company’s management team is inexperienced at M&A
• Flawed assumptions about the synergy to be gained or cost savings to be realized
• Ineffective corporate governance
• Failed integration of people, products, processes between the two entities
• Failed integration of back-office technology
• Two desperate failing companies merge to form one big desperate failing company
• The CEO of one or both companies paints a compelling “vision” and then proceeds to sell their board, shareholders, employees, and public a bill of goods

Improving the odds

Most mergers or acquisitions fail to realize their potential. So how can companies improve the odds of M&A success?

I think it all starts long before an opportunity is even on the table. The most successful companies at M&A are those who have a demonstrated track record of success in growing their own business. That is the first filter before embarking on M&A as a growth strategy.

Next, companies need to evaluate whether they’ve exhausted their organic growth opportunities, or whether it is more cost/time effective to go down the M&A path.

With those provisions satisfied, successful M&A requires a dedicated effort to discover opportunities and evaluate them both thoroughly and efficiently during the due diligence phase. Companies often engage investment bankers or other specialists for sourcing new M&A opportunities, and typically handle the due diligence in-house or with outside advisors.

Few companies have the executive and managerial resources to manage their on-going business while also undertaking M&A activity. As a result, M Squared Consulting is often called by clients to assist them in various phases of their M&A deals. The specific engagements take many forms, but generally the client is looking for a consultant:

• With prior M&A experience
• Who has specific company, industry, and/or functional expertise
• To help achieve a short timeline
• To avoid management distraction
• Who will provide an honest and unbiased assessment from a neutral 3rd party
• To help integrate the two entities and optimize the resulting operation

Smart executive teams (and the Boards they ultimately must answer to) can greatly reduce the risks involved with M&A by following a disciplined process and utilizing the skills and expertise of objective business consultants or other disinterested third parties throughout the process.

For millions of Americans approaching their planned retirement age the financial events of the past 6 months are delivering a clear message to slow down and be careful.

The significant declines in their assets are forcing a reality check. With nest eggs shrinking, housing prices still falling and anxieties about their financial future growing, the oldest members of the Baby Boomer generation (defined as those born between 1946 and 1964) are revisiting their plans to leave the workforce.

Most experts agree that we’ll see more people postpone their retirement dates.

As discouraging as that sounds, it’s exactly what many baby boomers need to hear, according to financial planners and researchers. Why? Most people underestimate how much money they will need for retirement. Given that they will need their retirement income to easily last two or three decades, or more, many Boomers end up leaving the work force with savings that are likely to expire long before they do.

Here’s a supporting data point to that conclusion: Less than one-quarter of workers age 55 and older (23% to be exact) have savings and investments totaling $250,000 or more, according to a study published in April 2008 by the Employee Benefit Research Institute in Washington. About 60% have less than $100,000.

The average retirement age in the U.S. is 63. Most investors don’t recognize the significant financial impact they can gain from working even just two or three additional years, financial advisers say. For example, according to research from T. Rowe Price, the Baltimore-based mutual-funds company, a 62-year-old with a $100,000 salary and a $500,000 nest egg will see his annual retirement income from investments and Social Security rise by 6% for every additional year he remains in the work force.

It stands to reason that working longer gives people more time to build up their retirement funds, can result in more benefits from Social Security, allows them to stay on corporate benefit plans (especially health care!) and reduces the amount of time people will have to depend on their savings. The arguments in favor of working longer are logical and hard to disagree with.

In addition to delaying retirement, Boomers are also considering other options:

• Some are electing to curtail their work and creating more flexible part-time working arrangements with their current employers. This not only allows for continued income, but often enables them to continue their coverage on company health care plans.
• Others are electing to become part of the contingent workforce. For most knowledge workers this means becoming an independent consultant and working on a project basis. Many people successfully approach their former employer to create a working arrangement like this. The benefits are obvious: they have the experience, they already know the company, its culture, and many of the people working there.

The Baby Boomers are the largest and most experienced generation in the workforce today. Because of their tenure they represent many of the executives and professionals. As they leave the full-time workforce it stands to reason that many will be able to leverage their knowledge and experience as project professionals.

The M Squared Consultant Network includes over 14,000 seasoned experts. Most of these are experienced professionals who have made the career and lifestyle choice to be independent consultants. Others, like the Boomers discussed above, are newly retired or in transition. Given the current workforce dynamics and employer desires for expert talent delivered on a flexible basis, we expert our Consultant Network, and the M Squared Consulting business, will continue to grow in the recessionary short-term and as we enter the inevitable recovery.

Last week I attended the BayBio IMPACT 2009 briefing in San Francisco along with a few team members from the Life Sciences practice at M Squared Consulting. We heard life sciences leaders present the BayBio strategic action plan for 2009. The full report, geared towards California state leaders, details proposals to increase treatments, therapies, and technologies in five categories:

• Workforce and education
• Tax policy
• Infrastructure
• Regulatory affairs
• Federal policies

While this specific presentation was presented by the Northern California based BayBio and intended for a California audience, I think this kind of industry-led thought leadership is vital and serves as a model for other regions (and industries) to emulate.

A little background…

The life sciences industry has a significant impact on the economy (and on healthcare). There are more than 8,500 life sciences companies in California, employing over 250,000 workers, with an annual payroll of more than $23 billion. In 2008 California life sciences companies brought 1,294 products to market. There are currently 210 treatments and cures in phase III in California’s pipeline and companies are expected to invest $50 billion in new facilities, equipment and employees. This year the National Institutes of Health (NIH) is expected in invest an additional $3.2 billion.

Maximizing this investment and leveraging this unprecedented opportunity requires a conscious effort by investors, industry, and California’s state leadership.

California State Senator Leland Yee was the first speaker. He observed that in the current budget crisis state legislators should be talking about how to grow the economy instead of how to carve out more taxes from the existing (or declining) revenue base. He noted that the life sciences industry has been very resilient during the recession and acts as a “stabilizer” for the California state economy. His goal is to make it easier to do business in California through better planning, educational investment, affordable housing, and tax incentives.

Pierre Cassigneul, the President and CEO of XDx, Inc. noted the deficiencies in the educational system. Businesses like his are required to use California Certified Lab Scientists (CLS) to perform their diagnostic tests. The lack of qualified workers is limiting their ability to grow. He also pointed out that California is ranked 48th out of 50 states in 8th grade science student achievement. To put this in perspective, the United States was recently ranked 11th by a group of Boston College researchers in a global assessment of 8th grade science and math achievement.

Hoyoung Huh, the President and CEO of BiPar Sciences shared some of his insights about the life sciences business. The first challenge for the industry is that it is not like any traditional business model. Unlike a 12-18 month technology lifecycle (idea-to-market), the life sciences industry requires 15 years and $1.2 billion to develop the average product. He worried that the current tax and policy climate, along with negative investor sentiment, will force many companies to consider other locations in pursuit of cost savings.

Conclusion

The life sciences industry faces a daunting array of regulatory and economic forces. In addition to a long and complex process to bring products to market, the life sciences industry is subject to the same economic and labor market challenges as other industries. It is not unique in its need for highly skilled and experienced professionals. A wide range of positions - from product discovery to production to marketing - require expertise that is increasingly difficult to find. At M Squared Consulting we work with our life science clients on a broad range of engagements. Our on-demand talent model helps them to engage the expertise they need to deliver results while controlling costs.

Given the current economic climate it will likely come as no great surprise that executives at small and mid-sized firms are paying a lot of attention to cost cutting. Faced with a no-growth outlook, many are refocusing their attention on driving out costs from their businesses wherever they can find them.

The survey was conducted by CFO Research Services in November. The results were based on responses from 129 senior finance executives from companies with revenues of from $10 million to $2 billion.

Cost control was considered something to spend more time on (61%), improving business processes (61%) and financial analysis (58%). Trailing the list were environmental impacts of business (12%), outsourcing (14%) and finance recruiting (15 percent).

When asked which financial skills they deemed most important, respondents answered:

• Financial analysis (58%)
• Planning and budgeting (54%)
• Communication (54%)
• IT expertise (40%)

At the bottom of the list during these hard times: Sarbanes Oxley compliance (11%), complying with new interactive data filing systems (13%), and keeping up with FASB and GAAP (22%).

When asked to rank the importance of liquidity management activities in light of recent changes in the financial markets, the executives overwhelmingly picked improving working capital processes and forecasting cash flow as their top priorities. Finance executives are turning away from complex financing schemes and getting back to basics - taking costs out, running lean and efficiently, optimizing working capital, and keeping closer tabs on financial performance.

Strategic companies are also evaluating whatever tools they have available to ensure their companies maintain the cash flow required to continue business operations. Many respondents said they are exploring more creative, “one-off” types of actions to reduce liabilities and free up cash. Some said they plan to sell off less-productive or short-term assets, while others are looking to alternative financing arrangements (such as refinancing and leasing) to increase liquidity and optimize cash flow.

As for future economic performance, most (35%) see continued slowdowns for the next six to 12 months with 26% expecting a slow down for only six more months. Interestingly, even in the face of this recession, a significant number of respondents said they are looking to grow market share, largely by targeting weakened competitors.

A recent survey, which yielded a list of the most dangerous places in the world for outsourcing, will have many U.S. executives examining the overall value proposition of outsourcing, and reevaluating their corporate strategies. The central issue is whether concerns like personnel safety and business continuity are more important than short-term cost savings.

The list was a result of a survey of 448 corporate development and outsourcing destination specialists, and was conducted by Black Book Research and Brown-Wilson Group. The survey ranked 50 of the largest established and emerging offshore locations-from the safest to most dangerous-based on threat of terrorism, crime, climate hazards, and other factors (locations in the U.S. and the U.K. were excluded).

The Most Dangerous 10
1. Jerusalem (Israel)
2. Mumbai (India)
3. Rio de Janeiro/Sao Paulo (Brazil)
4. Manila/Cebu/Makati (Philippines)
5. Delhi/ Noida/Gurgaon (India)
6. Kingston (Jamaica)
7. Kuala Lumpur (Malaysia)
8. Johannesburg (South Africa)
9. Bangkok (Thailand)
10. Bogota (Colombia)

The Safest 10
1. Singapore
2. Dublin (Ireland)
3. Santiago (Chile)
4. Krakow/Warsaw (Poland)
5. Toronto (Canada)
6. Prague/Brno (Czech Republic)
7. Budapest (Hungary)
8. Monterrey (Mexico)
9. Beijing (China)
10. Cairo (Egypt)

The recent terrorist attacks in Mumbai, along with the potential that the Obama Administration might propose policies which would penalize outsourcers with tax disincentives, have many U.S. executives rethinking their corporate offshore outsourcing strategies.

These developments could create challenges for several popular outsourcing locations, particularly in India. U.S. companies alone are expected to spend over $25 billion this year just on IT outsourcing contracts with vendors in India.

Ultimately, no amount of cost savings can be justified if personnel or business continuity are put in jeopardy. One likely outcome: the high risks involved with many of these offshore locations will influence companies to outsource to domestic vendors or in locations that are closer to home. Companies will also gravitate further towards utilizing the flexible workforce, which affords them on-demand expertise which can be deployed on a project or ongoing basis.

Like many successful Silicon Valley companies Google puts great emphasis on its human capital. During the recent Le Web Conference in Paris, Google’s Marissa Mayer offered some simple, yet insightful, advice on hiring top talent.

By way of background, Mayer is the Vice President of Search Product and User Experience at Google. She joined them in 1999 as their first female engineer and led the user interface and web server teams at that time. Her efforts have included designing and developing Google’s search interface, internationalizing the site to more than 100 languages, defining Google News, Gmail, and Orkut, and launching more than 100 features and products on the flagship Google.com.

During the event in France an attendee asked her how she built her team over the last decade. Her answer was brilliant in its simplicity: “I like to hire people who have two traits. They’re smart, and they get things done.”

She went on to talk about the joy of working with a team where every member was passionate about the project. But the key theme of intelligence and results came through. Smart people who aren’t closers tend to flail. In small or lean companies these types of people tend to stand out more, and thus don’t last very long. But in larger organizations they sometimes can find a place to hide where they then fester like a cancer. If a company the size of Google can avoid hiring them in the first place, it becomes a serious competitive advantage.

From my own experience, highly intelligent and results driven team members are like a force multiplier. Their ability to solve problems, innovate, and make decisions enables them to deliver many multiples of value over average or sub-par performers.

The philosophy of smart people delivering results perfectly encapsulates the M Squared Consulting business model and value proposition. Our Consultant Network of over 14,000 experts is a force multiplier for our clients. On a flexible basis we provide our clients with very smart people, who have proven expertise, and are committed to getting things done!

I’ve written often about the war for talent. There are many primary drivers to the upcoming talent shortage: the aging of the Baby Boomers, a smaller Generation X, and Generation Y simply not in the workforce long enough to gain the experience they need to immediately step into leadership or highly skilled roles.

One of the underlying causes to the projected shortage of knowledge workers is that we are simply not graduating enough engineers, scientists, and professionals in the U.S.

Many people think that the solution to our talent problem can be found in vast emerging markets like China or India.

Not so fast.

Wages are normalizing across global markets. Immigration is tricky. Setting up shop in foreign markets is not a trivial exercise, and as the recent terrorist attacks in Mumbai demonstrated, there are also significant safety concerns. Last, but certainly not least, there is also an issue about workforce quality.

The Chinese and Indian markets are vast and their populations are mind boggling when compared to the United States.

With just over 1.3 billion people (1,330,044,605 as of mid-2008), China is the world’s most populous country. With the global population at approximately 6.7 billion, China represents a full 20% of the world’s population. One in every five people on the planet is a resident of China.

China’s total fertility rate is 1.7, which means that, on average, each woman gives birth to 1.7 children throughout her life. (Note: The total fertility rate required to maintain a stable population is 2.1) Nonetheless, China’s population is expected to grow over the next few decades. This can be attributed to immigration and a decrease in infant mortality and a decrease in death rate as national healthcare improves. By the late 2010s, China’s population is expected to reach 1.4 billion. Around 2030, China’s population will peak and then slowly start dropping.

India, the world’s second most populous country is expected to surpass China in population in the next few decades. By 2040, India’s population is expected to be 1.52 billion. That same year, China’s will be 1.45 billion and India will become the world’s most populous country. As of 2005, India had a total fertility rate of 2.8, well above replacement value, so it is growing much more quickly than China.

Now back to the issue of workforce quality. China produces over 2.5 million college graduates, including 30,000 Ph.D.s and 650,000 engineers, every year. In 2005 India produced 200,000 engineering graduates (Note: This is about three times as many as the United States and two times as many as all of Europe). But the really astonishing statistic is that in 2005 India enrolled 450,000 students in four-year engineering courses, meaning that its output of engineers will more than double by 2009.

These are astonishing numbers, but it is clearly an issue of caveat emptor when it comes to hiring these graduates, for not all these degrees are equivalent to American or European degrees.

For example, graduates of the top Chinese schools are comparable with the best in the world. However, once you get a little further away the quality of education becomes highly questionable. Some experts estimate over two-thirds of the Chinese “engineers” are no better qualified than a “technician” in the U.S. This is a particular concern with private schools, most of which haven’t established their credentials but often partner with top state colleges to attract students. Even though there are rules from the Education Ministry that require these schools to issue diplomas under their own names (instead of the name of the better-known institution) violations are rampant.

Another issue is the educational philosophy. China’s system relies heavily on “memorization,” meaning that vital skills such as writing, creativity, public speaking, teamwork, and leadership are not taught well in most of China’s universities. A study by The Conference Board concluded that the “learning by rote” culture of the Chinese education system means its graduates often lack the practical experiences and softer skills required to be successful in the modern business world.

Despite these issues, the number of potential knowledge workers graduating from schools in emerging markets is simply too large for U.S. companies to ignore. The global war for talent is a complex issue and will require many creative approaches. There is no question that part of the solution will be leveraging talent from markets like China and India.