In Depth September 3, 2009, 5:00PM EST

The Companies Headhunters Avoid

Recruiters are in surprising agreement as to which companies they avoid when looking for executive talent

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When Revlon (REV) hired Jack Stahl as CEO in 2002, the board thought he'd be a boss who could turn the cosmetics giant around. In his 22 years at Coca-Cola (KO), where he rose to president, the telegenic executive had become a darling of Wall Street for his financial savvy and operational discipline.

Stahl stumbled, however, when he left Coke. While he managed to pare down Revlon's heavy debt load, he lost millions on failed campaigns for new products, most notably an "age-defying" makeup line called Vital Radiance. Industry consultants say he relied too heavily on finance types who made basic marketing errors: The line was overpriced, curiously didn't incorporate the vaunted Revlon name, and used no-name models in its campaign. After four years of losses during which the stock lost roughly two-thirds of its value, Stahl left in 2006. "He didn't know what he didn't know," says Suzanne Grayson, a consultant who worked for Revlon in the 1960s and '70s. "He brought in statisticians instead of marketers, and the decisions they made were atrocious." Stahl and Revlon didn't respond to requests for comment.

The Revlon case may reveal less about Stahl, though, than it does about the culture of Coca-Cola. Stahl's stumbles didn't surprise the fraternity of executive recruiters who handicap which companies provide the most fertile ground for talent. Stahl is just one in a line of former Coke executives who floundered elsewhere, including John K. Sheppard, former CEO at beverage company Cott, and Brent Willis, whose tenure as marketing chief at Kmart lasted all of four months.

BusinessWeek reached out to more than two dozen top headhunters and more than a dozen management consultants. The question: Which companies do they largely avoid recruiting from? Some of the most cited are known to be in turmoil—players such as Goodyear (GT), Motorola (MOT), and Sears (SHLD). (A Goodyear spokesman says it has "absolutely no issue" in retaining talent, while Sears says it has averaged 325 candidates for each headquarters job even though it has "significantly" cut back on using headhunters. Motorola declined to comment. BusinessWeek tried to reach everyone cited in this article.)

Recruiters also singled out companies that are widely viewed as successful. Consider Coca-Cola. The conclusion among headhunters is that the very attributes that make Coke a great company—an iconic brand and an unmatched global distribution system—also make it too easy for young managers to rise without having to develop the entrepreneurial skills necessary to compete in other arenas. "Coke is a great company with great brands," says Joe D. Goodwin, an executive recruiter based in Atlanta. But Goodwin says he can't recall any Coke alumnus who successfully ran a major company elsewhere. "People tend to get caught up in the Coke bureaucracy and get dead-ended in their careers," he says. "My advice is that unless someone intends to make a career of Coke, don't stay too long." Granted, working at Coke can make you comfortable—the stock has yielded a 24.8% total return over the past five years, vs. a 2.4% return for the Standard & Poor's 500-stock index—but recruiters say it may not make you management material anywhere else. A spokesman says alumni have gone on to successful stints at places like Home Depot (HD) and Clorox (CLX), though the goal is to keep them at Coke.

For all of the vaunted "academy companies" such as General Electric (GE), IBM, (IBM) and Hewlett-Packard (HPQ), revered for honing executive talent that thrives elsewhere, a significant number of companies are seen as weak in that realm. They may do well financially, but they can't seem to cultivate leaders others want to poach. Whether it's their quirkiness, poor leadership development, or political culture, these players have become the corporate equivalents of the Hotel California: You can check in and enjoy your stay, but the risk is that you can't leave. Three of the companies named as problematic by recruiters—General Mills (GIS), AT&T (T), and Intel (INTC)—made this year's ranking of best places to start a career.