SALARY SURVEY 2007 - STRENGTH DESPITE SETBACKS

Mergers, acquisitions, and layoffs are prompting job movement, but demand for medical device professionals remains so strong that most of those affected are quickly landing on their feet.

The medical device market has seen some curveballs this past year, from declining sales of some products to a higher-than-usual rate of mergers and acquisitions (M&As). Despite all that, demand for qualified professionals remains high, and in many cases, firms are struggling to find the right people to put in key positions. Thus, medical device professionals continue to enjoy strong compensation and high job satisfaction, as the results of MD&DI’s annual salary survey bear out.

This is also borne out by comments from executive recruiters that specialize in the medical device industry. They are seeing starting salaries and bonuses rise despite factors that might indicate a trend the other way. The reason, they say, is that there are so few qualified professionals who are looking for a new job, especially if it requires relocation. Demand for talent in the industry is as robust as ever. This is a good time to be part of the medical device industry.

Only 7% of respondents to MD&DI’s salary survey said that they are actively looking for a new job, and only 25% said they are considering looking. That means that about two-thirds of respondents have no interest in seeking a new position. (Readex Research polled 399 medical device and in vitro diagnostics professionals for MD&DI in the summer and fall of 2007.)

Shifts

A large chunk of the device industry has been affected by M&As. A whopping 41% of respondents said that their firm has been involved in a merger or acquisition in the past 12 months. One would think that this has created some softness in the job market, but for the most part, that has not been the case.

The spate of M&As has thrown some qualified people into the market, but they are getting snapped up quickly. The M&A fallout has created a glut in certain positions, such as manufacturing and sales and marketing. But in other areas, it has had virtually no influence. In professions such as engineering and research and development, people are being snapped up as quickly as they are laid off, especially if they are open to relocation.

Shortages

Shortages are happening in some professions, because there are simply not enough qualified people to fill the positions being opened up via new companies, expansions, or retirees from the baby-boomer generation.

There is a shortage of clinical people, there is a shortage of regulatory people, and there is a shortage of product development people with 3–8 years of experience. There are people out there, but the ­number of ‘A players’ seems to have gotten smaller. The regulatory and clinical professionals want to stay where they are until the PMA [premarket approval] they are working on goes through. The product development specialists are waiting to see what the next revenue pipeline will be in the device market now that the drug-eluting stent market has declined.

We are seeing a lot of demand for senior leadership, including CEOs. We are seeing strong demand for medical directors and quality people, which is not surprising given the flurry of FDA-483s and warning letters given out recently. And we are seeing a lot more demand for marketing people with a consumer-patient connection. Our clients are paying more attention to patient preferences and attitudes. That’s a shift.

We haven’t seen a manufacturing or operations search for a while. It’s generally in a down cycle when you see a focus on manufacturing and supply-chain people. [The process is believed] to tighten up profitability when sales are constrained. When they are not constrained, you see more of a focus on the people that get products into the market. This suggests we are still in an updraft.

One reason there is often a shortage of qualified candidates is that people with a scientific background don’t usually target the medical device industry as a place for their talents. People don’t necessarily see the value of the medical device industry, and so a lot of those interested in the life sciences gravitate toward pharmaceuticals. When they decide on what tracks to take in school, they are not preparing themselves for the device industry at this point.

Start-Ups

The glut of new positions and new companies means that in some cases, start-up firms aren’t drawing the kind of talent that they used to.

There has been some pushback on the start-up market. The conditions for start-ups are no longer optimal. Fewer of them are being acquired at a home-run rate. Many people [at larger companies] are no longer interested in going for a lump of gold at the end of a successful exit. They are now saying, ‘if I stay where I am for the next 5–10 years, the options, preferred stock, bonuses, and other compensation will be close to the same amount of money.’ One reason is that venture capitalists are asking for more, and the original people at start-ups are getting severely diluted. You are seeing some companies go to D rounds now, whereas they used to be acquired after the ­B round. Economically, it doesn’t make as much sense.

Also, for those who want such opportunities, the amount of capital available for medical device start-ups is at an all-time high. Indeed, top candidates might be able to pick and choose which start-up they want to go with. In those cases, it might make sense to go with a company backed by a venture capital firm that has had experience with device start-ups.

This is not to say that start-ups will hire just anyone.

The start-up companies I work with like mechanical engineers with hands-on skills. If a candidate has a machine-shop background, they especially like it. These days, you have got to have some sort of 3-D modeling skills, Solidworks being the most popular. If you don’t have those skills, these companies won’t hire you. That’s how big of a deal it is. Luckily, most people coming out of school now have these skills.

As far as leadership positions at start-ups go, firms aren’t looking for just anyone. Clients say they want someone who has led an early-stage company successfully and would like to do it again. Lightning can strike twice.

Specialists

If you are looking for a new job, you are particularly at an advantage if you are a regulatory or clinical professional.

Regulatory, clinical, and reimbursement people are most in demand this year. They are being offered more money and relocation packages. A lot of these professionals are game-changers. If you have bad clinicals or bad regulatory strategy, that can ruin an organization.

Complicating the demand is that firms are looking for regulatory people with the full gamut of experience, which is rare. Most people flow back and forth between regulatory and other divisions. Someone who grew up in the [regulatory] profession is a very highly coveted individual. And I see positions demanding that popping up everywhere. Starting salaries for top regulatory professionals have jumped 10–15% in the past year. For the right individual, there seems to be tremendous flexibility and opportunity in terms of compensation packages. But not many fit that description.

Accentuating the demand is that regulatory and clinical people seem least likely to relocate for career opportunities. People with positions in sales and marketing tend to have high career ambitions. They are motivated by advancement opportunities and are willing to move their families for them. Clinical professionals are less inclined to chase those opportunities. They will make a change, but they are less likely to move. That makes those searches harder to conduct.

Regulatory people at the vice president level can expect to start at $200,000 a year, and he has seen offers as high as $275,000. The same is true for top research and development personnel. Similarly accelerating are the salaries of CFOs, where $325,000–$375,000 is common. It used to be that only CEOs would get that kind of money. Less than a decade ago, it was rare for vice presidents in the industry to make more than $200,000 a year.

Oddly, since the M&A activity has put more qualified candidates in play, one would think starting-salary offers would go down, but the opposite is happening. You bring [a device company] five candidates, and invariably, they fall in love with one and they want that one no matter what, even if the others are just as qualified in every respect. That tends to drive the salaries up and make the negotiation process difficult.

Security

One possible silver lining for employers looking to hire is that 13% of survey respondents feel less secure in their jobs than they did last year. That could translate into people soon looking for new opportunities.

It would not be surprising if some of those 13% were from Boston Scientific, which announced that it will eliminate about 2300 jobs by the end of the year. Yet, as with the M&A fallout, recruiters don’t expect the layoffs to have a huge effect on the job market.

Unfortunately, the effect will likely be on the hourly people, not the marketing, engineering, regulatory, and clinical people. I don’t see much impact on the highly skilled and educated workforce. Those who are [skilled] will be redeployed to new technologies or offered early retirement. You won’t see ‘A players’ cut, though you may see some leave before Boston Scientific’s changes affect them.