Boutique Search Firms Step In Where Big Recruiters Falter

Big teams and diversified offerings boost the bottom line for the large recruitment providers. But there are growing dilemmas. That’s why more companies are turning to boutiques.

The biggest selling points for large search firms – the depth of their recruitment manpower and the diversity of their services – are the very elements that are causing many clients to turn to boutique recruiters. Craig Lapham, chief executive officer of the Lapham Group, a New York-based executive recruitment firm that specializes in insurance and diversified financial services, even goes as far as saying that many companies are seeking an alternative to the “challenges and dysfunction” that plague the bigger talent providers.

“A boutique firm simply through its smaller structure comes to any search engagement with a tremendous competitive advantage in terms of greater access to talent in the marketplace,” said Mr. Lapham. “A big search firm may use its large team of search professionals as an effective marketing tool, but when it comes time to actually conduct a specific client search engagement, the larger firm becomes encumbered with conflicts both internal and external.”

As the bigger search firms diversify their offerings, meanwhile, they raise the possibilities of potential ethical concerns. “Again, these multiple services help in marketing pitches and their recurring revenue streams smooth out P&Ls, particularly for publicly traded firms,” said Mr. Lapham. “But they also exacerbate conflicts and present dilemmas for any type of retained search being conducted. Is a major search firm going to poach talent from its non-search clients for which it’s providing ongoing HR related services?” That seems to be a pressing question on the minds of more and more clients.

A New Normal

As a result, situations that would have been unlikely in the past are all part of the new normal in executive recruitment. “Our firm in 2016 conducted a successful C-suite search for a Fortune 100 publicly traded insurance client and, once the finalist candidate was identified, the executive assessment was done by a division of one of our largest retained search competitors,” said Mr. Lapham. “We chuckled at the irony of that situation, but that is the reality of the search industry today.”

Mr. Lapham has been CEO of the Lapham Group since 1997. Under his leadership, the firm has conducted senior executive search engagements on a global basis for multiple Fortune 100 insurance clients and smaller emerging insurance/ financial services firms across both P&C and life insurance. This includes board of directorship and CEO search engagements, as well as executive searches across finance, risk management, legal, claims, actuarial, underwriting, technology/ digital and marketing/ distribution. Previously, he was an attorney with global insurer American International Group (AIG) within the corporation’s U.S. property & casualty business.

Like virtually every other industry, the insurance sector is being transformed by digital automation, data analytics and science, said Mr. Lapham. These innovations are driving changes across the underwriting, distribution and claims models of the industry’s insurance carriers. The impact is manifesting itself across all segments of the industry, he said, with the effects being most visible in the more consumer/ customer-centric lines of business like personal auto and certain segments of life insurance.

 Looking Outside

The quality of the senior-level talent pool in the insurance sector varies by line of business and functional expertise, Mr. Lapham said. The more traditional lines of business have greater depth of talent, but in the emerging P&L sectors, such as cyber-insurance, recruiters often have to seek candidates outside of the core insurance industry.

“We are currently conducting a president of global cyber insurance for client Chubb,” said Mr. Lapham, “and the search’s scope has gone well beyond the insurance industry and into fintech and even government to identify highly strategic global thought leaders in cyber risk.”

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But even from a purely functional perspective, there is a greater need to look outside the insurance sector. “We’re looking to broader diversified financial services and the larger SIFI banks where you may find a more sophisticated experience base than may exist in a traditional insurer,” said Mr. Lapham.

Deeper Understanding

As an example, he points to a recent chief risk officer search that his firm conducted for Allstate Corporation in which the right candidate required a wide-ranging risk management background covering market, investment, model and financial risk, including experience with sophisticated risk-related concepts such as economic capital and ALM.

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“Given this very broad and highly sophisticated experience base, a decision was made to expand our targeted search beyond the P&C and life insurance industry and into other segments of diversified financial services to include banking and investment management,” said Mr. Lapham. “Where historically a CRO search for an insurer may have focused solely on career insurance executives, likely with a classic actuarial background, the scope of our engagement became much broader into the risk management functions of the largest and most complex financial institutions globally.”

Mr. Lapham’s earlier days with AIG gave him valuable insight into the industry that he serves today. “My prior industry experience working for one of the top-tier global multiline insurance corporations does provide a sophisticated perspective and multinational network of C-suite relationships that bring significant value to a client engagement,” he said. “I also believe insurance to be the most complex segment of the diversified financial services industry and my prior industry experience allows me to hit the ground running on the most complex engagements.”

Replacing a Family Patriarch, a Decade On

“The insurance sector is experiencing meaningful disruption and transformation in business models,” said Craig Lapham, CEO of The Lapham Group, a C-suite leadership provider specializing in recruiting top talent for the global insurance and diversified financial services sector. “What happened at AIG over the past several years was too much focus was put on radical transformation. This caused AIG to take their eye off the ball,” he added.

AIG, of course, has another cross to bear and one that it has had trouble grappling with for years: How best to replace a family patriarch leader. “Recruiting for a successor after a family patriarch has been in charge for decades is always a challenge,” said Mr. Lapham, as the longstanding CEO and the company “are viewed as one” from both an internal and external perspective.

“AIG was Hank Greenberg and vice versa,” said Mr. Lapham. “Mr. Greenberg was so successful because he had encyclopedic knowledge of every facet of the business — across every line and across every global region,” he noted. This unique breadth and depth of leadership, he said, can create a vacuum at the top when that executive is no longer present.

“Often,” said Mr. Lapham, “an entire executive organizational structure must be reassessed and realigned in the wake of the longstanding CEOs departure.” AIG’s leadership transition, he said, “is not as simple as just replacing a CEO who has been in the seat for a couple of years. I believe AIG is still grappling with Mr. Greenberg’s departure a decade after he left.”

A Family Business

With that said, he observed, “I believe the ultimate value add to a client is my expertise in the access, identification and recruitment of premium senior executive talent versus my technical skills as an insurance attorney, underwriter, actuary, etc.”

Mr. Lapham left AIG to partner with his father in building an entrepreneurial, family owned business. The elder Mr. Lapham had 40-plus years of retained search industry experience, including running his own boutique and leading a large search practice with Peat Marwick & Mitchell, when father and son started the Lapham Group 20 years ago.

“My father was the classic founder entrepreneur: independently motivated, relentlessly positive, laser-like customer focus, and a deep conviction his business model was superior to the competition,” said Mr. Lapham. “Specifically, he felt an independently owned boutique search firm offered tremendous competitive advantages to his clients in terms of higher quality talent access without the layers of internal and external conflicts of the major search firms. It also offered the opportunity to build deep and longstanding relationships with clients in order to truly understand an organization’s culture and persuasively market a client opportunity to top-tier executive talent.”

The Road Ahead

Looking ahead, Mr. Lapham expects technology to play an ongoing role in how the insurance industry operates. Ongoing innovations pose big challenges as well as big opportunities. “Insurance touches every segment of our lives, from both a business/ professional and personal perspective,” he said. “While technology will disrupt certain legacy structures of the industry, it will also allow the nimble and strategic to create and deliver new and innovation solutions to mitigate risk.”

It is also a good idea, he said, to keep an eye on the continued influence of investors and their voracious appetite for profits. “In addition to continued advancements in technology, and depending on what happens with inflation and interest rate environment, you may see the continued influx of third party capital sources seeking greater returns,” said Mr. Lapham. “Whether these are hedge funds or other types of investment vehicles, the inflow of capital will put pressure on all segments of the industry, both primary and reinsurance, to remain relevant and competitive.”

Andrew W. Mitchell, Managing Editor

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Will Schatz, Managing Editor – Hunt Scanlon Media

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Robert HennessyShirley Ray - Lucas GroupChris BrownKeith McAllister - SRiCheyenneJ. James O'Malley Recent comment authors
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J. James O\'Malley

Could not agree more with Mr. Lapham’s comments.

Keith McAllister - SRiCheyenne

As a longtime exec search client and now a search firm partner, I can tell you there is no question that this is the era of the boutique. Larger firms, and they actually don’t have to be that large, struggle to compete with good boutiques on the combination of access to talent markets, domain expertise, and high-touch client service. There are good folks at big firms, they just have a structural challenge.

Chris Brown

Very nice overview of some the challenges larger firms are facing. In this day and age of social media noise, there’s very little substitute for efficiencies.

Shirley Ray - Lucas Group

Any firm large or small that is unable to foster a culture of collaboration among recruiters is not positioned to serve its clients well. Even though we have over 50 HR executive recruiters at Lucas Group, we have an extremely collaborative culture. Our goal is to put the best possible candidates in front of our clients while at the same time exposing our candidates to opportunities that support their continued success. We do that well. In fact, in 2016 over 65% of the placements within our HR executive search practice group were splits among us. That is why I wouldn’t… Read more »

Robert Hennessy

Good points Craig and some of these lessons are applicable across industries, including in the life-sciences space where we specialize. Having started in a retained search boutique over 30 years ago, I was heavily recruited into the large brand name search firms. I spent two years in one of the largest and oldest retained firms in the world and, while it helped me to break through in business development, I left after two years despite being on the fast track. I left because, in my office, I felt like I was the only one who knew how to fulfill a… Read more »

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