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 what does the future hold for executive search?
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 will feature forensic market intelligence that will probe the talent agenda of a client’s competition or peer group. It will extend from organisational design and compensation models to pipelining and succession planning, culture and diversity, marketing strategy and brand perception. Executive search firms will 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 onboarding, benchmarking, coaching, attraction & retention and talent pool development.
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.
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.
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. According to a recent Hunt Scanlon report, ‘it is the boutique firms that are truly redefining a field once dominated by a handful of large, generalist search firms - as a group they are growing at four to five times the rate of the Top 10’. 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.