Jan 17 2013
An article published yesterday in Bloomberg Businessweek about the growth of in-house recruiting and its impact on the executive search profession, as with a similar article published on October 9, 2012 in the Wall Street Journal, fails to put the situation in complete perspective and is highly selective in its use of statistics published by our association, the AESC.
The decision by some larger corporations to establish in-house executive recruiting functions is not new, although, with the advent of social media, it is gaining some momentum. In a survey which the AESC conducted last year, HR executives indicated that external executive search not only continues to be used at the mid to senior executive level, but at the most senior levels, it is rare that in-house recruiting would be used. Reasons for not using in-house recruitment for senior executive level searches included maintaining objectivity, global reach and confidentiality. Clients value the crucial consulting advice and comparative judgment that retained executive search provides. Metrics of speed and consultant workload at the executive level are obviously not comparable to those for lower level positions indicated in the Businessweek, as well as in the Wall Street Journal, article.
Taking a five year view of the global revenue trends reported by the AESC (see chart below), it is clear that from an all-time high in 2008, and then a dramatic fall of 32.5% in 2009 at the onset of the global economic downturn, the industry has staged a remarkable comeback. In 2010, revenues grew by 28.5%, in 2011 by 9% and in 2012, even though we expect a year-on-year revenue decline, the industry will still be close to its all-time high. The figures reported in the Businessweek article are a confusing mixture of overall revenue and new search assignments. Thus, if the overall number of searches conducted starts to fall, but search industry revenue in fact increases, it indicates that higher level, more critical searches are being performed. The revenue figures quoted in Businessweek show year-on-year declines from a strong 2011, but fail to indicate 2012 quarter-on-quarter figures, which show a much smaller decline. Given the uncertainties of 2012, some decline is hardly a surprise.
Although in-house search is inevitably eating into the lower end of the market by taking work that previously might have gone to some executive search firms, nevertheless, the overall market for executive search services is holding firm. Once global economic conditions stabilize, we expect to see even greater demand in response to the worldwide talent shortage—a shortage being driven by underlying demographic shifts in the developed economies and huge potential demand for executive talent from the emerging markets. At the same time, executive search firms are adjusting their offering to provide a broader global spread, enhanced cross-border capability and more leadership consulting services. The AESC itself has broadened its remit to embrace leadership consulting services offered by our members.
As the global economy begins to drag itself from the long term financial crisis, and as executive mobility increases, there is little doubt that the scarcity of top executive talent will bite even harder than in the past and that client organizations will need all the help they can get in maintaining their competitive talent positions.
The impression given in the article that the retained executive search profession is in decline is not substantiated by the facts.
About The Association of Executive Search Consultants
The Association of Executive Search Consultants (AESC) is the worldwide professional association for the retained executive search industry. The AESC promotes the highest professional standards in retained executive search consulting, broadens public understanding of the executive search process, and serves as an advocate for the interests of its member firms. For more information, or to download the AESC Code of Ethics and Professional Practice Guidelines, please visit www.aesc.org.
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As a senior-level executive, you can use this guide to:
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