2006 – Headhunters threatened by regulation
Pressure is building within the
executive search industry to introduce quality
rankings for headhunting firms.
Headhunters, like most professional
service firms, rely extensively on client relationships
for repeat business. If a company has received
good service from a firm there seems no reason
why it should shop elsewhere.
But the growth of some search
firms during the late 1990s led to fears that
recruitment was becoming commoditised, particularly
in the mid-level finance and IT sectors where
some companies were buying accountants and programmers
by the batch-load and where some search firms
were tempted too often to take on more business
than they could reasonably service.
In those circumstances it was
inevitable that claims would emerge of deteriorating
service levels. Another problem is the dominance
of a handful of big firms in a business that numbers
thousands of operators, including some small,
specialist boutiques that rarely receive recognition
in the media but which may be operating at the
very highest levels of their chosen sectors.
Indeed some of the smaller firms
are run by highly experienced headhunters who
have broken away from the firms they helped to
established. The issue was highlighted in a recent
edition of Executive Recruiter News by Bob Brudno,
managing director of Savoy Partners, a Washington-based
search firm. Mr Brudno is an example of the established
veteran who built his reputation in a much larger
firm, Leon A. Farley Associates.
The publication of leading executive
firms, ranked by revenue, he argued, reinforces
the presumption that “biggest is best”.
“There is no question that
the largest search firms deserve thanks for helping
our industry gain its recognition as a well-established
and valued service. But in reality, quality and
size are not necessarily linked,” he wrote.
So how could an organisation
rank headhunting firms for the quality of their
service? To be effective a ranking would need
to be based on a survey of headhunters and their
clients. Would either be prepared to be candid
enough to provide any meaningful comparisons?
What kind of measures would be
useful? How do you measure recruitment success?
If I were a client I would want to know about
the average time to completion of an assignment.
I would want to see the completion rate and I
would want to know something about the quality
of candidates. This last point is a difficult
one to assess. Any recruiter can compile a shortlist
but the quality of those shortlists can vary enormously.
It doesn’t matter how quickly a position
is filled if the successful candidate turns out
to be a dud.
Perhaps search firms should be
expected to track the success of their placements
– as I’m sure many do – and
provide prospective clients with “success
in job” data.
One of the problems surrounding
existing placement rates is that not every firm
applies the same definition of a successful assignment.
Some will include cancelled assignments in their
calculations of successful “completions”.
Christian & Timbers, a US-based
firm that has recently opened offices in London
and Paris, has chosen to avoid the ambiguity over
completions by concentrating on placements that
it defines as filled positions, whether from outside
candidates or from internal appointments.
In another move aimed at increasing
transparency, its placement rate of 79 per cent
has been independently audited by a firm of accountants.
“This is an industry that is desperate to
avoid change but it is going to have to change
because the quality of the deliverable in some
firms has dropped significantly,” says Brian
Sullivan, chief executive.
He recalls one competitor firm
– one of the big five - that knew to the
penny the revenue rate of its consultants, but
which “did not know within 50 percentage
points what its placement rate was.”
Christian & Timbers has instigated
a number of measures designed to provide more
information on the search process. One is a progress
audit – a kind of quality check - 40 days
in to an assignment carried out by a consultant
who is not involved in the search. “If there
is a problem we will call the client and explain
how we’re going to fix it. This shows the
client that he has hired the firm rather than
an individual consultant,” says Mr Sullivan.
Finally the firm carries out a post-search client
satisfaction survey to help consultants improve
While he says he is pleased at
the firm’s placement rate, Mr Sullivan believes
it can be improved. “I think it can get
in to the low 80s,” he says. Will other
firms follow suit? For now, he says: “I
think that very few know their placement rate,
and if they do they’re sure as heck not
going to publish it.”
In another move away from traditional
practices dictating that the consultants who win
the business get the lions’ share of the
fee – still the practice in many big firms
- Christian & Timbers has begun paying the
people who execute the search a larger percentage
of the fee than used to be the case.
“It means that a personal
assistant will be reminding a partner to call
the client. Everyone is thinking about what is
important to the client. Search isn’t sold
with two feet, it’s sold with four. Clients
want to see there is more than one person involved,”
says Mr Sullivan.
The move is further evidence
to support an observation made a while back in
this column by Giles Crewdson, UK managing director
of Korn/Ferry who noted the way much of the industry
was re-shaping itself around a professional service
format where knowledge is shared around firms
and where client needs are met by team responses.
This does not mean that we shall
see the end just yet of the “eat what you
kill” policies of some firms where the biggest
hitters will often settle for nothing less than
the biggest share of the fee. Sometimes a shrewd
operator can secure a prized candidate single-handedly
where the best of teams would fail. It is the
nature of the beast.
Meanwhile Russell Reynolds Associates
has stressed the need for headhunters to remain
alert to industry change. In a study of converging
interests in the media and technology sectors
it found increasing demand for executives with
new skills grown outside the traditional sectors.
“We are in a period of
rapid evolution in convergence. Long-term business
models and their impact on people are uncertain,”
says Jane Dowding, managing director. She adds:
“Boards will need to have a far greater
understanding of convergence and the industries
that it spans, and that new skills will be required
The same could be said for headhunters.
If media and technology companies need new skills, search
firms will need the people with the knowledge to find them.
It raises the question of whether the search industry can
move fast enough to match the demands of this sector or
whether some business will be lost to an increasingly sophisticated
online recruitment industry.