A recent article in Bloomberg Businessweek is creating quite a buzz around the human capital industry. The piece, “Executive Headhunters Squeezed by In-House Recruiters,” uses a patchwork of anecdotes and piecemeal data to make the case that retained search firms are facing new difficulties.
With all due respect to Bloomberg, the realities they outline are neither new, nor are they really difficulties in providing value added retained executive search services.
First, let’s briefly discuss the problems with their data, which the Association of Executive Search Consultants already questioned. Businessweek appears to have chosen arbitrary data points which happen to paint a picture that retained executive search firms are suffering. Sure, a 33 percent decline in industry revenue in 2009 looks ominous; if you omit that the decline was from an all-time high; and if you omit that revenue is already re-approaching that all-time high. (There was also a minor world-wide economic event in 2008 that Businessweek may recall.)
As the AESC states:
“Although in-house search is inevitably eating into the lower end of the market by taking work that previously might have gone to some executive search firms, nevertheless, the overall market for executive search services is holding firm. Once global economic conditions stabilize, we expect to see even greater demand in response to the worldwide talent shortage—a shortage being driven by underlying demographic shifts in the developed economies and huge potential demand for executive talent from the emerging markets.”
Or, in summary, “The impression given in the article that the retained executive search profession is in decline is not substantiated by the facts.”
Businessweek seems mostly concerned with the impact of in-housing on the short-term bottom lines of both hiring companies and retained search firms. To evaluate the merits of retained search services, and not just the costs, one would have to complete a true return on investment calculation, which includes critical factors such as the impact on bringing the best talent in the market to the organization in the shortest time period possible, while minimizing the time and energy of key existing client executives. In addition, the extent by which true executive recruiting is done in-house is not put into context. There has been and always will be organizations which maintain and build internal executive recruiting teams. However, most of these limited numbers of organizations also continue to use some level of external support.
If they had contacted us and asked the right questions - or had done the same with any of our brethren in the retained search industry - they would have heard a polite and convincing case for hiring an executive search firm and not diverting internal resources.
A key point of added value we bring to executive search over in-house recruiters is, simply, that we’re not in-house. We’re impartial and data-driven. We come to the hiring process with fresh eyes and perspective.
Secondly, this is what we do. This is all we do and we’re focused on it. We have in-depth research capabilities and access to a wealth of human capital across dozens of industries. We have a broader view of the marketplace and a wide reach. The Businessweek article says that Coca-Cola does 95 percent of their searches in-house. We’re willing to bet the other 5 percent are their high-level and/or most specific searches. They’re not going to try to find their own CEO for the same reason we don’t try to make our own Diet Coke - the result would leave a bad taste.
After all, when it comes to something vital, you want to hire an expert.
In a similar vein, the article also states that GE’s in-house executive search team was able to beat the retained search industry standard of 170 days to staff positions in 73 days. That’s impressive. That’s also about our average here at Morgan Samuels.
And conceptually, the article seems to argue against itself. It’s difficult to make the case that the services provided by firms like Morgan Samuels are superfluous in an article that outlines how major corporations are hiring away our very-talented professionals in an effort to improve their performance and bottom line. That is, after all, our specialty. It’s the whole idea. And imitation is the sincerest form of flattery.
Lastly, a firm such as Morgan Samuels that truly provides highly differentiated services within the retained search category is facing a robust market. There will always be a market for a firm that can be a strategic partner to clients, without being an insider, appropriately assesses leadership acumen and cultural fit, all the while scouring the marketplace for the best talent to meet our client’s key business objectives. All of this is done with an average cycle time of 76 days, a 34% diversity placement ratio, and an average candidate review before offer of four. Oh, and by the way, of the 4, 20% of our clients will try to hire two of the four. So value like this is hard to duplicate and, frankly, from an economic standpoint, why would you?