Tracy Wolstencroft, a former Goldman Sachs executive who retired in 2010, replaces interim CEO Jory Marino who exits the position after replacing Kevin Kelly (2006-2013), one of the longest serving CEOs in Heidrick & Struggles' history. Kelly assumed the top leadership reins from former Chairman and CEO Tom Friel (2002-2006), who along with Chairman Emeritus Gerry Roche and several other long-time partners, helped elevate the firm to the highest levels of Fortune 100 executive search, leadership succession and board-level recruiting. Heidrick is perhaps best known for high-level CEO placement and recently served as firm of record on the Microsoft CEO search, which was officially completed this week with the naming of an internal candidate as only the third chief executive in the software maker's history.
The board-level decision to name an outsider signals a major -- some say way overdue -- change in leadership for one of the industry's largest search firms, which has seen revenues and market share drop as executive search has changed, moving away from a highly transactional business to a more consultative and advisory-based professional service. Heidrick's primary publicly held competitor, Korn Ferry, has solidified its standing as a fully integrated search and leadership consulting firm while privately held Spencer Stuart and Egon Zehnder have reinforced their respective niches domestically and in Europe where Zehnder reigns supreme.
Naming an outsider as CEO also seems to re-confirm earlier attempts by Heidrick to change its ownership structure. At least two attempts to return to private status have been attempted over the past five years, according to sources familiar with the situation. An earlier effort to merge Heidrick & Struggles and Korn Ferry International was shelved when it became clear that the two disparate cultures could not be effectively combined. During this same period an exodus of top talent began migrating from to Korn Ferry and has since reached a plateau as the flight to quality during the last recession peaks.
The key question now is the one that has remained at the forefront for years: Will Heidrick continue to operate as an independent, publicly held firm, or will it explore strategic options, such as selling to or merging with another entity? Hiring a senior CEO with major mergers and acquisitions experience would at least perceptually signal change will continue to be explored.
Since becoming a public company in 1999, Heidrick & Struggles has struggled to gain footing between what one of the firm's partners once called a "sophisticated start-up company" and privately held partnership. The original impetus to go public was led by former CEO Pat Pittard who served as worldwide CEO from 1996-2001 and later resigned from the firm following the 2000-2002 recession, which produced Heidrick's first ever round of firm-wide layoffs.
In a closely held business filled with ironies about their own hiring and succession practices, few partners currently hold significant equity in the firm other than former top executives, such as Kelly who vacated the CEO position with stock holdings valued at more than $1.5 million at the time of his departure.
Where does Heidrick & Struggles go from here? Only time will tell. Executive search has always been highly cyclical, and the current environment is no different despite changing dynamics now driving the business. Where that cycle leads and how a venerable brand regains its footing will the subject of inquiry now that an inevitable succession move has been made. The "house that Roche built" will now have to be renovated in ways not previously undertaken or foreseen.
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