The executive search industry is in flux, and as a result search firms have been uncertain or wary about what their next move should be. To what extent will digitalization affect the industry? How best to price and stay competitive? Should one offer diversified services? These are just some of the landmines top recruiters today are attempting to navigate.
Jorg Stegemann, CEO of Kennedy Executive Search & Consulting, one of the top 25 networks of independent executive search firms, recently held a seminar in Budapest called ‘The Future of Recruitment.’ Although he had no crystal ball, Mr. Stegemann offered the group insight into the latest trends that are affecting the field and identified what he called “the eight hottest challenges” confronting recruitment firms today.
- New Pricing Models
Some clients have challenged the decades-old retainer-based payment model. Their preference: lower the risk and operate on a contingency basis. “In the past, retained search firms could say, ‘Pay me one third now, the next in 30 days, and the last in 60 days even if you have seen no candidates. Plus 20 percent administrative costs, of course,’” said Mr. Stegemann. Today, he said, “clients challenge this – and they should. They ask: ‘Work for a flat fee; link the second retainer to the invitation of at least two candidates; or add services such as onboarding.’”
Many feared that LinkedIn would spell doom for external recruiters. But they said the same when Monster.com came along, and even when the fax machine was invented. “All industries I know are impacted by digitalization,” said Mr. Stegemann. “Information is accessible to everyone, 24/ 7. What you do with the information is the question.”
LinkedIn, artificial intelligence and Big Data are just tools, he said. “Yes, they do replace some of the tasks that are done by humans today. But they will allow the remaining ones to work more efficiently. As long as you deal with people in recruitment, people must be in the selection process. That will continue.”
- In-House Recruiters
Internal recruiters will always better understand the company culture than an outside recruitment firm. There clearly are jobs that can be filled by internal recruiters.
But the executive search firm, on the other hand, can bring in another vision and may be less biased. “When it gets hairy or when an undercover approach is needed, that’s where we come in,” said Mr. Stegemann. “The times where we got a fee for transactional recruitments is over or will soon be.”
When internal and external recruiters work together in a complementary way and not in competition, he said, both serve their clients better.
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- Changed Candidate Behavior
Clients and candidates meet on eye level today. The old power balance — ‘I am the boss, you are my subordinate’ — is broken.
As a result, employer branding is vital today. “Candidates will look your company up on Glassdoor,” said Mr. Stegemann. “They will check you out. Yes, you personally, as their potential boss on LinkedIn and Facebook. If you want to attract the best talent, make sure you are the best employer. Treat your employees like you do your customers or they will go to your competition.”
- Changed Client Behavior: They Want Clones
Clients say they want to hire someone who is doing the same job at their direct competitor. “Is this how we will create the enterprise of tomorrow? Develop a more innovative brain pool?” asked Mr. Stegemann. “How will we remain competitive and sharp by hiring clones?”
He said he sees this trend across Europe and the U.S. “Fighting this means inviting that outsider candidate,” said Mr. Stegemann. “And often he or she will be the one who gets hired.”
- Stagnant Revenues In the Core Business
Executive search is a $13 billion business worldwide, according to industry metrics sources. This number is growing, but not in the traditional core business. Some of the big players generate up to 50 percent of their revenues with leadership consulting, a once non-core business.
“Diversification is the new black,” said Mr. Stegemann. “And we all want to wear it. Assessment, board advisory, coaching. If we want to move away from the purely transactional recruitment business to become true advisors, we have to embrace these businesses, and fast.”
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- Persistence In an Industry With Black Sheep
Barriers of entry are incredibly low in the search industry. To become a recruiter, all one needs is a business card and a phone. In most countries, no license is required. Not even your criminal record will be checked. To be a good search consultant, however, is a different story. Ethics, processes, questioning techniques, good judgment and experience are what matter.
“Every client and candidate I know has had at least one negative experience with an external recruiter,” said Mr. Stegemann. “We face the challenge of making a difference in an industry with a not always good reputation — of showing the long-term thinking and maturity to do this job the right way.”
Today, talent flows freely from country to country. In some parts of the world, Europe especially, it is common for a recruiter to board an airplane on a Monday morning and fly to his office in another country. Or work from a home-office abroad.
Recruiters must respond to this trend by offering both a deep understanding of the local market they serve while keeping the global marketplace in mind. “If we want to shape the world of labor tomorrow, we must understand its state of mind today,” said Mr. Stegemann. “The world is becoming smaller. Our mindset must become larger. Local is important. Global, too. If we understand what moves talent globally, we have the answer on how to overcome all the above challenges.”
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