Executive Search: The disrupted vs. the disrupters

Today's 4Q earnings/2012 report by Heidrick & Struggles reveals what's been known for quite some time: Executive search is on a downward path -- or spiral if you prefer dramatic effect. What remains to be seen is where this downward trajectory eventually lands.

The executive search industry now comprises two groups: The disrupted or large publicly held firms that are trying to change and the disrupters, or smaller and independent firms that love to tweak the big way of doing things. The large publicly held firms, Heidrick and Korn Ferry International, continue to show why being public makes little sense while the privately held firms, Spencer Stuart and Russell Reynolds, go about their business quietly under the radar. To those close to the wider picture, the disruption is masked by across the board growth in the number of executive searches such as what Peter Felix at the Association of Executive Search Consultants likes to cite in expensive reports.

The big firm way is no longer as big as it once was. Nor is the executive search function as standard as it once was. The pie has shrunk, and in the overall picture of recruiting, executive search is declining at a pretty rapid pace with the growth of LinkedIn and more corporations pulling searches -- and recruiters -- in house. Major business media have reported at length on this trend starting with the Wall Street Journal and then Bloomberg Business Week.

One side note: As a large firm recruiter puts it, the movement to in-house recruiting is nothing new. Corporation A, let's use the Coca-Cola Company as an example, loves to publicly boast about how they're bringing the function in-house to reduce expenses. Then whoever gets the big title/position turns around and runs the expenses right back up only to be questioned later with, "why are we getting such bad or mediocre candidates?" Attention then shifts back to outsourced service provider and the cycle lathers, rinses and repeats.

The lone exception to the shrinking pie continues to be where brand value resides at the Top or CEO and board-level. Every major Fortune 500 company facing scrutiny has used one of the Big Five firms, and until a major company board publicly states they're not going to use an executive search firm then it's business as usual. (Note: Boards don't generally issue those types of statements.)

Granted the actual work is different now. A few years, Spencer Stuart started re-framing CEO turnover as "internal and external transition." This simply reflects how Fortune 500 CEOs have remained largely intact reversing an earlier decade's fascination with churning and burning the position. Boards continue to perpetuate the status quo despite growing investor pressure. The old days when a major company conducted a major CEO search in the dark are now officially over and have been for some time. Throw in all the other services that are growing by leaps and bounds, coaching, on-line assessments, culture shaping, succession planning, etc. and the mix gets pretty, well, mixed up pretty fast.

A CEO of a firm asked last year, "where do you think this industry ends up?" Who knows, hard to tell. Here's the only certainty that you can take to the bank: The most valuable service performed at the top of the house -- assessing, vetting and informing -- selection of C- and board-level leadership, will not only survive but will prosper in a different form. There's simply too much at stake for these all important decisions not to be done fully and completely with the help of objective third-party advice. Especially now with risk aversion at an all-time high and boards scared to death they're going to make a big public mistake.

The problem is that the value of executive search was sold out long ago in the name of money and profits, which are now dwindling thanks to disruptive change that only comes around once in a generation. Unfortunately or fortunately depending on your view, disruptive change is now the name of the game. The individuals and firms who adapt the best to this dynamic will lead the industry forward; the ones who don't will die or move on to other platforms. Everyone will ultimately get stronger, assuming you're a free market capitalist. If you're not, well, the executive leadership marketplace isn't for you.

Dell: Great deal, bad memo form

The Wall Street Journal served up a treat today by posting the Michael Dell deal announcement memo: http://blogs.wsj.com/deals/2013/02/05/michael-dell-to-staff-exciting-new-chapter/.

Read the first line..."this is a great deal for me and..." Aside from the obvious emphasis on self, more felicitous grammarians would instruct putting 'me' after the other party, which in this case was private equity firm, Silver Lake. But hey, when you're the founder, namesake and chief equity holder who just orchestrated a billion dollar deal that removes public scrutiny then you can say and do whatever you want.

Fortunately, or unfortunately based on your point of view, obsession with self dominates leadership ranks. Dell makes a good case for Me, maybe the best anyone could make in the same context. It's still bad form, however, not to recognize others first who helped make the deal possible. Funny how there was no mention of Microsoft, which kicked in a couple $$$billion. Should be interesting to see where this deal goes from here.

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