Stepping up the search
Although the global financial crisis will affect the executive search industry’s fortunes in 2009 and beyond, the underlying trends of globalization and the talent shortage will persist – which bodes well for the long-term future of the industry, as the Association of
Executive Search Consultants explains
Global from the Start
Executive search has been an international
business from its inception. The 1950s and
1960s saw the rapid development of the
US multinational corporation and as those
giants expanded they needed managers for
their operations overseas. Search consultants
often set about finding local executives
for overseas openings, which was the
approach taken by Spencer Stuart, who flew
to Caracas for his very first assignment.
Search firms soon followed the example of
their clients and established their own foreign
offices. Search caught on earliest in the
UK, where low language and cultural barriers
made the UK a logical choice for many US
companies’ European operations. London’s
position as an international financial center
also enhanced the UK’s attractiveness.
From those beginnings, search spread to other European countries, with firms’ offices often springing up along US corporate expansion routes, especially in Brussels due to its role as the headquarters of the European Union in the 1990s and 2000s. But as Anthony Saxton, who had established Saxton Bampfylde in London in the early 1980s, points out, search was not solely a US export. “Alongside the US firms, wellregarded home-grown firms developed here and on the continent, such as Whitehead Mann, GKR, Berndtson International, Carre Orban, and Switzerland-based Egon Zehnder.” The latter firm was founded in 1964 by a Spencer Stuart alumnus of the same name.
In the past 10 years, globalization has transformed the world economy, management practices, and the availability and distribution of executive talent. With major demographic shifts looming in the western economies as the baby boomers retire, and surging demand from emerging markets, the “War for Talent” predicted by McKinsey & Company 10 years ago has clearly arrived. This helps explain the nearly 120% increase in global demand for executive search services from 2004 to 2008.
As the talent pool has shrunk, search consultants have needed to research a broader range of sources on a multicountry basis. Today’s search assignments may easily be commissioned in London by an Indian company seeking executives with international responsibilities to be based in Paris, Shanghai, or New York. Client organizations have become increasingly flexible about terms and conditions of hire and will often consider location-neutral appointments.
As demand for executive search has increased, so has the worldwide distribution of that demand. Thus the industry market shares of the regions have changed in favor of the Asia/Pacific and Latin American regions, at the marginal expense of North America and Europe.
To respond to this dramatic rise in demand from the emerging markets, many search firms and networks have opened new offices in China, India, Russia, and smaller markets, including Poland, Turkey, Romania, the Ukraine, and the United Arab Emirates. As a result, today there is far greater representation of retained executive search in countries around the world than ever before.
Although fallout from the global financial crisis will affect industry fortunes in 2009 and possibly beyond, the underlying trends of globalization and the talent shortage will persist, which bodes well for the long-term future of the industry.
The Rise of the Specialist
Specialists can play an important role in executive search. Among the first firms to recognize this was Korn/Ferry International, which founded its first specialty practice in real estate in 1971. Other firms followed at varying speeds with Heidrick & Struggles holding off until the 1980s.
Today, large firms house entire practices dedicated to specific industries or functions, or both. Many integrated firms and networks have industry and functional teams that cross geographic boundaries; some boutique firms focus on a single industry or function; but generalist firms are still found in many parts of the world. Functions served by specialist practices range from finance and accounting, to sales and marketing, to HR and IT. Industry specialization extends to, among others, financial services, high technology, consumer products, higher education, healthcare, life sciences, and retail. Many firms have practices dedicated to CEO and board searches.
Presenting a diverse slate of qualified candidates is the goal of every
search, and some firms have designated diversity practices which
may team with industry or functional experts on searches. In addition
some boutique firms, such as Carrington and Carrington, The
Desir Group and The Prout Group, focus on diversity searches.
While virtually all search consultants recognize the value of specialization,
some seasoned practitioners see it as more limiting for
novice consultants than working as a generalist. Anthony Saxton
stated: “I’ve found great satisfaction working in diverse fields. I’ve
also found great success in areas where I had little experience,
perhaps because I had few preconceptions about where the best
people might be.”
Stable but Changing Industry Structure
Executive search always has been, and remains, an extremely meritbased business, with low barriers to entry and highly-entrepreneurial values. Perhaps the most significant change in the industry has been its global growth in terms of firms’ operations and the scope of many searches. Today’s clients typically want search firms which have global reach when it’s called for, and the industry has responded accordingly.
The largest firms have offices in virtually every major business center, including key cities in developing markets. Many small to mid-size firms have joined with their counterparts throughout the world to provide global reach by means of networks or federations under a common brand name. In these organizations, participating firms maintain their individual ownership but do business under one international banner, and share clients, resources, and specializations across geographic markets. Firms using this very successful model include Ray & Berndtson, TRANSEARCH International, The Amrop Hever Group, Signium International, Penrhyn International and Stanton Chase.
The challenge of search has always been to meet the needs of clients. Judith von Seldeneck, CEO of Diversified Search Ray & Berndtson, notes that: “Many clients are extremely savvy about search. Some, particularly larger companies, have their own contracts that stipulate fees, expenses, and conditions, and some have preferred provider programs. Some companies even have internal search functions.”
Be that as it may, it can be extremely difficult for an internal recruiter to provide the objectivity, flexibility, resources, reach and motivation that an executive search firm brings to an engagement. Internal “talent management” programs have been only partially successful in meeting succession needs, especially at senior levels. The volatility, competitiveness and unpredictability of the supply of senior executive talent suggest that there will always be a need for retained executive search consulting.
For more information, visit: www. aesc.org
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