Executive heads hunted by new tribes

Date: 05-03-2013
Source: The Financial Times

The obvious threats are the crowd and the cloud

In Jo Nesbo’s thriller Headhunters, “king of the heap” search consultant Roger Brown has to fund his extravagant lifestyle by stealing art from the walls of candidates’ homes while his colleagues are interviewing them.

Real-life headhunters are also diversifying. Heidrick & Struggles, seeking to offset falling revenue and volumes in its search business, recently bought Senn Delaney, a “culture-shaping” consultancy. Heidrick’s US rival Spencer Stuart offers “board counsel” and executive assessment alongside search. Egon Zehnder, which in the 1960s pioneered the business in Europe, also sells advice to family businesses and newly hired CEOs. I also detect a surge in self-justifying comments from search consultants, the sort that begin: “There will always be a role for face-to-face advice?.?.?.”

Sound the disintermediation klaxon! Technological tools, new rivals and structural change have swallowed travel agents, insurance brokers and brick-and-mortar retailers. Executive search is next.

The obvious threats are the crowd and the cloud, which Gary Hamel, the management writer, says could undermine “know what, know how and know who”, the core strengths of all professional services firms. “Know what” – the set of leadership skills consultants offer to teach executives – is now easily found on the internet. “Know how” – the knowledge companies buy in from outside – is available by tendering for online expertise. And you can trawl social networks for “know who”, for decades the foundation of executive search companies’ success.

LinkedIn looks potentially the biggest menace to the search firms. Its quarterly revenue has increased nearly sevenfold to $304m since 2010. The fastest growing part is “talent solutions” – the premium service sold to recruiters – which now accounts for more than half of turnover. An increasing number of million-dollar jobs are now said to change hands via LinkedIn without the help of intermediaries.

Some headhunters also fear the advance of management consultancies, already strategic allies of directors in the “war for talent”. In 2010, for instance, Bain & Company formalised the Bain Executive Network to introduce clients to “exceptionally talented business leaders” such as “prominent Bain alumni, Bain partners and principals”.

The defence offered by search firms sounds strong. They say senior executives, board members and shareholders will continue to look to them for in-depth intelligence about, and vetting of, high-level appointments. The likes of McKinsey may allow headhunters to advertise to their outgoing consultants, but if a consultancy started to poach executives from one client to supply another, it would quickly run into conflicts of interest. Headhunters also claim they don’t mind ceding candidate identification, their lowest-margin business, to networks.

For now, the talk is of co-operation rather than competition. Bain says it works with clients’ retained search firms, as well as directly with human resources officers. LinkedIn welcomes corporate recruiters, who may go direct to candidates, but it also signs up search firms and agencies. “We help bring the talent to the door,” says Ariel Eckstein, who runs LinkedIn in Europe, the Middle East and Africa and foresees a continuing role for the people who vet candidates found online.

Still, as new generations of directors take office, boards will get more comfortable with internet matchmaking, even for senior positions. They will cull superficial and superfluous relationships, maintaining links only with higher-calibre, specialised advisers – the search equivalents of bespoke travel agencies, risk-specific insurance brokers and city-centre boutiques.

Mr Hamel also identifies a deeper threat: that companies will realise the leadership model they’ve been buying simply isn’t working. It is already hard to measure the long-term worth of executives to companies, let alone how much of their success was down to skilled headhunting. But every gap in a managers’ experience or diversity, every mediocre performance by an expensively handpicked chief executive, calls into question the established process.

Headhunters would sooner turn to crime than admit the trophy hires they recommend rarely add as much value as promised. If that sad truth is ever exposed, they will deserve to have their own heads stuffed and mounted.

One Response to Executive heads hunted by new tribes

  1. LOL….. hilarious but informative

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