The Value of Retained Search Firms: Beyond the Limits of LinkedIn

Many casual observers of the retained executive search industry have been quick to sound its death knell, often citing two key factors: LinkedIn and in-house recruiting. LinkedIn, they say, makes recruiting—even at the executive level—a “do it yourself” activity and significantly devalues search firms.

At the same time, mid-size and Fortune 500 companies are establishing and beefing up their internal recruiting teams (even hiring experienced consultants from search firms). “We know ourselves and our needs better than anyone else,” they say, “so why not make our own decisions . . . and get the most value for the dollars we spend?”

On the surface, the rationale seems solid. And yet, after a predictable plunge during the 2009 economic crisis, retained executive search is flourishing—near its all-time highs in revenue, noted Peter Felix, president of AESC (Association of Executive Search Consultants), at a breakfast meeting in Chicago yesterday. AESC members—leading retained search consultants—are optimistic. This despite the perceived erosion in retained search business resulting from the rise of LinkedIn and growth of in-house recruiting teams.

To paraphrase Mark Twain, reports of the demise of recruiting and search firms are greatly exaggerated. What’s going on?

Charles Wardell, III

Charles Wardell

Several things, noted Witt/Kieffer CEO Charles Wardell, speaking at yesterday’s event. First, he said, “good management is very much in demand” and the need for U.S. and global organizations to find leaders who make a difference is high, to the point of desperation in some places and markets. LinkedIn can help firms and organizations find people, and in-house recruiters can interview and vet potential leaders, but retained search firms continue to bring much-needed objectivity and expertise to the recruitment of exceptional, high-profile leaders.

In-house recruiting teams are doing more and better work, acknowledged Wardell, as did his co-panelists, Spencer Stuart CEO Kevin Connelly and Boyden CEO Trina Gordon. Rather than viewing this trend as a threat, successful retained search firms are embracing it and building relationships with internal recruiting teams. (Our Elaina Genser discussed this phenomenon last year in the Financial Times, and recently wrote on best practices in hiring for internal recruiters in Leadership Excellence magazine.) Search firms must be comfortable in their skin and with their core abilities, in other words.

Retained Search: It’s About Quality
“It’s a quality issue, not a cost issue,” Wardell said. “In the internal world, in fact, sometimes the recruiting costs are greater than if a search firm was hired. So it’s about quality—getting quality leadership placements who work . . . and last.” Witt/Kieffer’s CEO placements, for example, have an average tenure of eight years (seven years for all other executives), roughly twice the norm. Tenure is important, and when the impact of having a CEO fully engaged for eight years is measured, the value of hiring a proven retained search firm is abundantly clear.

In-house recruiting is also cyclical, Wardell pointed out, in terms of how cost-effective and easily it’s done. “Internal recruiters have cost pressures, political challenges, and so on, and eventually reach out again to quality firms that they have worked well with in the past.”

As to the argument that internal recruiters understand their own needs better than outside firms? It’s valid, said Wardell. “It’s incumbent on us to really get into the culture of the firm and not skate past that. You need to figure out whether, for a given job, the candidate knows the culture, boss, and situation he or she is getting into. Are you putting the candidate into a job where he or she is really going to succeed? That means you have to sit with senior management and ask hard questions and get honest answers. We need to press them about their organization’s flaws.”

Retained search firms need to ask hard questions of candidates as well, he added, and find out whether their desires and expectations match those of the hiring organization.  “We need to be an honest consulting bridge for both sides.”

“Search is not going to go away,” he concluded, “and it’s going to go to firms that can satisfy clients better and differently than they have in the past.”

By Paul Thomas, Witt/Kieffer Senior Writer (@PaulWThomas)

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