In-house recruiting is increasingly perceived to be the biggest threat to the executive search industry, aided and abetted by the unstoppable rise in social media and networking platforms. At best, this trend is set to erode margins, at worst it could put some firms out of business altogether. So how can the executive search industry react to these market forces?
Aligning talent with strategy
HR has often been accused of lacking strategic input at board level and has sought assistance from leadership advisory partners to counteract that view. Ironically, many Group HR Directors are now bringing the search for talent in house, to the detriment of their confidantes. The executive search industry needs to adapt to these market forces, not fight them. Business is business and, when long standing relationships grind to a halt, we must not take it personally. We have to earn our place at the table and reinvent ourselves to remain compelling.
There is little doubt that the executive search industry has to up its game. The type of firm that is purely reactive in fulfilling client briefs will struggle. The strongest breed of firm will develop a more proactive and holistic leadership advisory service that is anchored to corporate strategy. Talent management cannot be effective when practised in a vacuum, without market context. Clients are now demanding alignment, talent management that mirrors corporate strategy.
Market intelligence and consultancy
Research led, this heightened level of service should feature forensic market intelligence that probes the talent agenda of a client’s competition or peer group. It should extend from organisational design and compensation models to pipelining and succession planning, culture and diversity, marketing strategy and brand perception. Executive search firms must be equipped not only to analyse talent constructs, but to understand how they contribute to business success.
Some leadership advisory firms have already moved away from a transactional approach and are adding value as long-term partners with a broader perspective. The key will be to help clients do what they can’t do themselves, whether through lack of expertise or resource, and to keep developing strategic advisory services that push the envelope. Even clients with relatively sophisticated in-house recruitment functions may only feel comfortable doing executive search up to the point of finalising a candidate long list. Beyond that, many will still appreciate external expertise on a range of issues such as benchmarking, coaching, attraction & retention and talent pool development.
The candidate is king
We are moving into an increasingly candidate driven market and the highest calibre candidates, far from being a commodity, are rare. The millennial genre may be rising through the business ranks, bringing starkly different stylistic and attitudinal characteristics, but competition for the best talent remains constant.
Enduring, mentor relationships are therefore vital in persuading high flyers to leave their current roles and take up new positions. Such bonds do not form overnight. They can only be achieved by search firms investing time and energy in candidate management. Search firms that genuinely focus on candidate management will be more likely to land those few special candidates who make a difference, the ones their clients covet.
Lateral thinking and acute assessment
To compete with in-house recruitment, executive search firms need to bring a new dimension. On-line tools can only go so far in finding talent, as the best talent is often hidden. Executive search firms will have the upper hand in accessing a client’s direct competitors and a more intuitive approach to searching in less obvious places, digging deep into other sectors - often with parallel functional disciplines - and bringing to the table the best athletes, the rising stars, the unexpected discoveries that can make a radical difference to a client’s company.
Finding top candidates is just the start. Executive search firms will need to be pioneers in assessing constantly evolving executive genres. The current trend is to select on future promise, rather than past performance, which takes a blend of science and art, psychology and psychiatry. The best firms will develop their own proprietary methods, adopting the strengths of respected psychometric tools (such as Hogan and Topgrading) and combining them with feedback from their own client base, cross industry and cross geography.
Take the lead on diversity
Diversity is the subject of endless discussion in the press, yet many companies still miss the point. It is about matching a variety of skills, mind-sets and life experiences to a company’s customers, suppliers, employees and shareholders and reaping value from those symbiotic connections. Companies that are genuinely ‘with the program’ will inevitably overtake those that simply tick boxes.
It is incumbent upon the executive search industry to educate clients on the value of diversity - beyond artificial board quotas – and to impress upon them the true business benefit. Companies are weakened when they limit their sphere of knowledge and inspiration to their own kind. Wild card candidates often challenge the groupthink consensus of lookalike boards and make them sharper, more exploratory and better decision makers. Challenging accepted norms leads to reinvention, new ways of doing things that keep a company relevant.
Partnerships built on trust
Some CHROs may have concerns around the values, principles and ethics of the executive search industry. They want deep rooted partnerships built on mutual trust, not fly-by-night vendor relationships, and will continue to demand more from their search partners.
They expect search firms to add value way beyond the placement transaction, shaping the environment for new hires to maximise successful outcomes. Active involvement in the on-boarding process is vital to promote positive assimilation and search partners should play an ongoing role in after care, ensuring that the successful candidate’s performance matches expectations. In a competitive, candidate driven market, it is attraction, assimilation and retention that are going to be top of any client’s list of priorities. Clients will demand ongoing advice and commitment from their search partners.
Digitisation is here to stay
As HR functions become more sophisticated, it is technology that is empowering them to perform search work themselves. The challenge for the executive search industry is to step up the pace and digitise parts of the service offering. HR functions will want to cherry pick specific services that will complement their in-house capability. External search firms will need to be open minded about how to earn their money. They will need to be transparent and accountable. They will need to offer more for less. Income will keep shifting away from commissions to retainer fees and even subscription fees for knowledge-based services.
The rise of interim management
The market for C-suite executives is constantly evolving. New roles keep emerging, such as the Chief Customer Officer or the Chief Data Officer, and the balance of supply and demand continually fluctuates. A more significant trend is for companies to want to engage senior level executives with proven track records on a short-term basis. More and more employers are taking advantage of interims to lead restructuring programs or critical transformation projects, to respond rapidly to unexpected changes or sudden opportunities, to fill gaps in knowledge or simply to keep momentum while sourcing permanent hires. The top end of the market now attracts senior corporate talent, accomplished executives who choose to pursue interim careers to demonstrate their strategic and turnaround prowess.
While specialist executive search firms exist to provide this service, the executive search industry should claim this territory as its own. It is not the same as the contractor recruitment market. Interims provide senior managerial and strategic expertise, as well as end to end project management, from initial feasibility study through to final delivery and implementation. Given the critical importance of most interim roles, search firms should apply the same rigor as they do to permanent C-suite briefs, including in-depth candidate evaluation and assessment of culture fit. If traditional executive search firms do not move into interim management, specialist interim management firms will move into executive search.
Dawn of a new era
So, who will prevail in this brave new world, the large multinational or the boutique firm? The answer lies in the attitude and agility of the firm rather than its size, but smaller firms have the advantage in terms of nimbleness to react to market forces. Unencumbered by large physical networks and Chinese walls, boutique firms will continue this inexorable rise and blaze the digital trail. Companies that have set up in-house talent functions are focused on economy, efficiency and customisable expertise – the boutiques provide all three.
The business world is changing and the business of recruiting leaders must change too. Boards and HR Directors want committed, collaborative partners who are not shy on innovation. The executive search firms that survive will be those that embrace the digital world, really work for their money, offer added value and deliver competitive advantage. The ones that thrive will be those that serve as a 360 degree talent consultancy, firms that make it their business to be game changers and to keep their clients one step ahead of the curve.