An interesting and provocative article from the FT. I have long observed the big firms in the executive search sector with a feeling that their outmoded 'black book' methods, inflexibility, slight arrogance, off-limits issues and frequently poor service delivery were going to undermine them in the long term. It’s happening now. There is an increasing acceptance among clients that the easy decision to go with the big firm, is not always the wisest decision. Smaller firms are often faster, hungrier and more flexible in their approach. As such, they can often be extremely effective.
The conservative behaviour of customers of these firms feeds the problem. It stands to reason: if you are busy, and the phone is regularly ringing with new clients offering you mandates, and your bonus is directly linked to the amount of assignments that you run, then the quality of your work is likely to suffer. You take on too much work, corners get cut and clients get a raw deal, but they still come back to those big firms because 'nobody got fired for choosing IBM'.
The big firms have fed clients perceptions that they are the exclusive owners of the networks that contain the executives that their clients need. They used to consider this their intellectual property - many still do. The rise of the internet has made this information more freely available and this is fundamentally changing our sector. However, I don't see executive search being 'Uberised' as many, including Andrew Hill, predict. The human-touch is a critical element in determining 'fit' with clients, and in cajoling and encouraging executives through a process and in helping clients to make the right hiring decision. Good headhunters partner with clients and have their best interests at heart. They don't measure success in placements, they measure success by the value added by the hires they help to make.
One thing that cannot be argued with is Warren Buffet’s view that it’s difficult to overpay the right CEO. Making the right hire into this most critical of roles is often only achievable through a very complex search process. When it comes to CEOs, there is no such thing as a man – or woman - for all seasons. It’s not simply a matter of running through a ‘shopping list’ of the top CEOs in any given sector. Consideration has to be given to culture fit, scale of ambition, specific areas of strength, functional background and expertise, leadership style as well as personal factors such as family situation….etc. The ability to help hiring teams navigate this complex process, and end up with the right CEO in place, makes a good executive search partner one of the most important partners a Chairman can have.
A scarce product, whose worth is hard to assess and for which buyers will pay enormous, seemingly irrational prices. The market for highly paid chief executives looks a bit like the market for Modiglianis. And, like works of art, executives are mostly traded through go-betweens — high-end headhunters who source, vet and prepare candidates for senior corporate office. But the parallel, while tempting, is inexact. Chief executives are no oil paintings. Good ones may be rare but, as a breed, they are not as scarce or as valuable as they think. Similarly, the people who search for them are not quite as useful or expert as they pretend.