GUEST COMMENT: Financial services executive search firms must evolve or die. Executive Search 3.0 is coming
The executive search process hasn’t changed that much since the first reported case of ‘headhunting’ took place in the 1800’s. Back then, US railroad companies competed to hire teams of workers. In their dash to build quickly they aggressively poached from competitors. In its most basic form Executive Search as we now know it remains very similar. An organisation has a specific need and talent is scarce, maybe the market is unknown to the client and/or the assignment particularly sensitive. This is when the practitioners of the dark arts of search are called in...
Executive Search 1.0 was all about ‘chaps’ (they were always men) knowing other chaps, old school chums, the Club Table and well thumbed black books. Executive Search 1.0 was an opaque process in a sedate corporate environment. For the mainly second rate practitioners they were uncompetitive, unchallenging and profitable times.
But whilst the world changed, Executive Search 2.0 differed very little from the original. To coin a phrase, “same ordure - different wrapper.”
Just as the financial markets attracted newer, brasher and more aggressive participants so too did the world of Executive Search. Like the Square Mile, Executive Search 2.0 had a younger face, was less clubbable and had a greater sense of urgency. As recruitment became a career and not a semi-retired state, the old school types were squeezed and super boutiques full of aggressive young men and woman came into being.
At the same time the methodology of Executive Search was employed at lower levels in the markets. No longer did the headhunter solely stalk the C-Suite. As those lower down the corporate food chain attracted higher packages, the Executive Search industry shifted downwards in pursuit of a wider range of (relatively) attractive fees in what became known as ‘The War For Talent.’ Yet despite these changes the industry’s MO remained pretty much the same.
And then along came Lehman, a rash of redundancies and after a brief recruitment ‘dead cat bounce’ a spiral of decline. What was a candidate short market became a candidate swamp. Banks recruited direct because they could. Candidates approached potential employers directly because they didn’t want to wait on notoriously lazy recruiters. They also knew that the banks would rather hire direct and save fees (in fact some candidates felt they would be at an advantage making direct approaches as banks just didn’t bother looking at CV’s from recruiters!)
So the uneasy often fractious co-dependent relationship which existed between candidate, recruiter and bank finally broke. The candidates enjoyed dealing direct and the banks enjoyed telling recruiters to shove it!
Now, as the Executive Search industry struggles to generate income and activity, has the time come for a reassessment of how it operates and its overall value proposition? When Executive Search shifted into lower level markets during the early 90’s, we also saw the bottom end of the recruitment market change dramatically. As demand rose and PSL’s proliferated, agencies operating at these lower levels succeeded by automating their processes. Newer and faster technologies commoditised this end of the market.
Is this how Executive Search 3.0 will look? For some time the larger global Search firms have offered additional services outside plain vanilla recruitment. In addition, the larger more savvy boutiques began selling a high quality in-depth research offering. My sense is that we are long overdue a game-changer.
The very top of the market won’t change and will always be rarefied. However, in the mid to upper market change can and should take place. This should combine technology with reach. It should combine high touch expertise and relationship skills with simplified fee structures offering clients a greater sense of value.
As the world gets smaller and global talent more mobile, clients will expect access to international talent pools. They will want to know every relevant candidate has been diligently assessed. With the days of opaque and elongated processes over, they will want quality information quickly coupled with better fuller communication. Technology, stronger ongoing research and embedded processes and procedures will drive this change. Inevitably fees will be driven down. In this segment of the market flat fees will become the norm.
As Executive Search 3.0 becomes more efficient, the internal cost per transaction will reduce. In turn, as recruiters become more execution focussed, compensation structures will change with Consultants being paid less.
In overall terms this is a win-win for clients, candidates and the industry. Clients will get a more efficient and consistent value for money service whilst the whole candidate experience can only be better and more professional. Finally the industry itself will benefit. Margins will improve, businesses will become more efficient and ultimately the end users will be happier with the overall service offering, value-add and cost.
There are already rumours of a newly revitalised US search firm preparing a re-launch with a game changing approach. If such a firm comes to market with this type of offering it will revolutionise the industry as clients demand other suppliers follow suit.
And if the client wants, the client gets
Perhaps the time is upon us...
You’ve been warned!
The author is a recruitment entrepreneur with significant experience in building, buying and selling businesses across a range of markets.