Welcome to the second part of the “10 Things You Should Know About Executive Search” series, in which we aim to educate on the benefits of an executive search model, the industry, and where it serves a real purpose to companies over a contingent model.
What drives the Executive Search business?
Like many other service industries, headhunters' success is aligned with the economy's situation. In the early 2000s, as an example, independent research conducted by Friedman, Fleischer & Lowe, San Francisco, into the relationship between search firm income and the economy found a 97% correlation between the health of the general economy and that of the Executive search industry.
New financial legislation has often led to increased business for search firms in the fields of legal, tax, compliance and auditing specialists. For example, the Sarbanes-Oxley Compliance Professionals Association (SOXCPA)-Oxley Act was introduced in the United States in 2002 to enforce better corporate governance following the collapse of Enron and other scandals. Therefore led to a significant increase in demand for board directors, CFOs, legal compliance officers and internal auditors.
The raise of In-house recruiting
Increased availability of information on executive-level candidates via the Internet has motivated many companies to build internal teams to recruit directly at that level.
The trend was especially evident in financial services and technology, where many firms do more direct recruiting at the Executive level and use search firms more selectively. In some cases, these companies have reduced their use of search firms to 30% or less in searches to fill positions in the $150,000 – $300,000 marker range.
However, in-house recruitment has several disadvantages:
* It is much harder to approach outside candidates, especially from competing companies.
* In-house recruiters are not typically subject matter experts in the field of the business; therefore, they need industry insights to understand the skill set that their business leaders require.
* In-house recruiters may lose touch with the marketplace, especially during downtimes when the business has no demand to recruit.
* In-house recruitment is ineffective at the board level:
"You cannot ask an in-house recruitment consultant to find the CEO."