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<td width="75%" valign="top"><p ALIGN="left"><font face="Arial" size="6"><b><strong>GROWTH
AND HIRING TRENDS IN THE POWER MARKETING INDUSTRY</strong></b></font><font face="Arial" size="4"><br>
</font><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine: 99/01</em>)</font></p>
<p><font face="Arial">Joe Baker, President and founder of Search Consultants
International, Inc. of Houston, Tx spoke to energy industry leaders about changes and
recent developments in hiring and recruiting in the Power Marketing Industry. Titled <strong>Growth
and Hiring Trends in the Power Marketing Industry: <i>Recruiting a New Breed of Power
Player</i></strong></font></p>
<b><p></b><font face="Arial">Baker discussed the impact of the June 1998 price spikes in
the Midwest on the personnel requirements of power marketers, utilities, and unregulated
subsidiaries of gas and power utilities. He pointed out that there have been a number of
phases through which the Power Marketing Industry has evolved over the past four years.
Each stage required increasingly sophisticated skills on the part of candidates as the
industry has become more complex.</font></p>
<p><font face="Arial">In the first stage, marketing and trading were fairly rudimentary,
risk exposure was minimal, and most companies looked for individuals with a solid
understanding of the physical movement of power<b>. </b></font></p>
<p><font face="Arial">In the second phase there was the development of a physical power
portfolio and growing competition from lower cost producers and other power marketers.
Companies experienced downward pressure on margins and uncertain profits when trading only
short-term products, and began to look to longer-term products.</font></p>
<p><font face="Arial">As the market grew more complex, there developed a need for a
substantially more sophisticated understanding of the market. Stricter controls, better
risk management, and a financial trading capability was needed. This resulted in an upturn
in demand for traders, marketers, and risk managers with experience in options, swaps and
other financial instruments.</font></p>
<p><font face="Arial">In June, 1998, the industry experienced severe volatility in energy
prices. This Midwest price spike brought home to management the actual exposures in this
young industry and forced them to reassess the skill sets of the people and the systems
needed to address the extreme volatility and exposures in the market. </font></p>
<p><font face="Arial">Baker�s firm, Search Consultants International, Inc., surveyed 60
industry leaders for their opinion on the effects of this volatility on hiring. They found
the following types of people in demand: </font></p>
<u><p></u><font face="Arial"><strong>Structrured Marketers</strong> - people who are
creative, have the ability to develop relationships, and can structure long term deals.</font></p>
<u><p></u><font face="Arial"><strong>Financial Traders</strong> - traders with a knack for
profitability and an understanding of financial trading products and risk management. </font></p>
<u><p></u><font face="Arial"><strong>Structurers</strong><u> </u>- possessing
sophisticated knowledge of risk management principles including formal modeling,
statistical analysis, options pricing, and deal hedging.</font></p>
<u><p></u><font face="Arial"><strong>Physical Traders</strong> - primarily those who
possess a solid understanding of the regional transmission systems, reflecting the current
situation regarding non-firm transmission</font></p>
<u><p></u><font face="Arial"><strong>Credit Specialists</strong> - most companies are
currently examining their credit policies and procedures, creating a demand for credit
specialists.</font></p>
<p><font face="Arial">Regarding actually attracting and hiring good candidates, Baker
pointed out that it is easier to identify a good candidate than it is to actually hire
one. Recruiting a top performer in a very competitive market requires a thorough process
and a solid understanding of what is needed so that the company can act when the right
candidate is identified. Working with a skilled recruiting company that knows the company
and the industry will help avoid the pitfalls of losing those individuals you need to
insure your success.</font></p>
<p><font face="Arial">The most important questions candidates ask are: <strong><i>What is
the company's commitment to the industry?</i></strong> In this time of uncertainty and
change you have to be ready to step up and answer that question. Candidates are very
concerned that their next move be to a company that is very certain of their industry
commitment. These candidates want to know your long-term strategy, and they want answers
to difficult questions. <strong><i>What is your competitive advantage in this market</i>? <i>Why
do you need to be in this market?</i> <i>What is your company�s position regarding the
acquisition of assets?</i> <i>Where do I (the candidate) fit into this picture?</i></strong></font></p>
<p><font face="Arial">Another key in attracting top people in the power industry is to be
clear about the position itself. An the industry grows more integrated across commodities
and the line blurs between structured marketing, origination, and trading, the company
must be prepared to lay out a vision of where it is headed, and what needs doing. Explain
to the candidate where the position fits in the organization and what the opportunities
for advancement are. Top candidates are looking for challenge, stability, and growth.</font></p>
<p><font face="Arial">Regarding money, Baker said that in his 18 + years of executive
recruiting, rarely has he found money to be the most important issue in attracting top
people. It is always <i>a<u> </u></i>factor, but it is rarely <i>the</i> deciding factor.
The better the match the less weight money carries. With mutual desire (candidate and
company), most things are negotiable. This assumes that the offer is competitive,
cognizant of their current compensation and in keeping with the responsibilities of the
job.</font></p>
<p><font face="Arial">Baker went on to say that in the Power Marketing Industry today, top
performers expect to be compensated well. Top performers are more often interested in the
bonus program. He added, �one cannot expect to attract profitable traders by paying
average compensation�.</font></p>
<p><font face="Arial">Baker then outlined three types of bonus plans in effect today:</font></p>
<blockquote>
<u><p></u><font face="Arial"><strong>Fixed percentage of the base salary</strong> (usually
from 0 - 40%) � this program provides little incentive for reaching substantial profit
goals.</font></p>
<u><p></u><font face="Arial"><strong>Increasing percentage of base salary for higher
thresholds of profitability,</strong> (uncapped). This is a solid bonus plan that
incentivizes the employee to take appropriate risks. </font></p>
<u><p></u><font face="Arial"><strong>A percentage of the individual's �net book</strong>
(i.e. profit after overhead). The most incentivized and most popular of the packages among
top traders.</font></p>
</blockquote>
<p><font face="Arial">The type of bonus plan varies from company to company depending on
whether they trade individually, as a national or regional team, etc. The thing to
remember is that you need a plan that attracts the best talent, motivates them to take
appropriate risks, and maintains the accountability of the individual so that the company
knows who is responsible for every transaction. </font></p>
<p><font face="Arial">In the end, there appears to be no single consensus regarding the
direction of the Power Market. There are so many issues in the agenda right now that it
would be foolish for anyone to claim foresight into what will be. We can be sure of only
one thing, Baker said, �regardless of the eventual direction of this market, the people
that companies hire, and the skills, talent, and dedication that they bring to the
marketplace, will determine the ultimate winners and losers.</font></p>
<hr>
<b><p><font face="Arial" size="2">S. Joseph Baker, CPC, is President of Search Consultants
International, Inc</b>. <i>one of the few staffing firms in the world to take a leadership
role in the emergence of the Power Marketing Industry. Search Consultants has grown as
deregulation has fueled change, and now serves every facet of today�s exciting power
market, placing top performers in power positions across the U.S. Traders. Marketers.
Engineers. Developers. Managers. Executives. The people that make things happen.</font></p>
<p><font face="Arial" size="2">Mr. Baker can be reached at 713-622-9188 ext 104, email at <a href="mailto:[email protected]">[email protected]</a> or visit their
website at <a href="http://www.searchconsultants.com">www.searchconsultants.com</a></font></p>
</i><p><font face="Arial" size="2">For the full article, visit the PMA Magazine Online at <a href="http://www.powermarketers.com/sjbaker.htm">http://www.powermarketers.com/sjbaker.htm</a></font></td>
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