12/06: 2006 AESC Annual HR Survey Results

Senior HR Executives Report Positive Outlook for Retained Executive Search

The growth in the retained executive search industry is set to continue and consultant credibility is seen as an overriding factor in choosing a search firm, according to the latest survey from the Association of Executive Search Consultants (AESC). The second of its kind, the survey was conducted with the help of 239 senior HR executives at major companies throughout the world who shared their opinions on the expectations and use of executive search.

One of the most striking results to come out of the research concerns the rise in the use of in-house search capabilities. In 2005, just 17% of respondents stated that their companies had an internal search department, but in 2006, this jumped to 56%. This increase is yet another indicator that businesses are allocating more resources to talent acquisition due to the senior executive talent shortage that is only expected to worsen. This could be good news for the search industry, as Peter Felix, President of the AESC explains: "Inevitably, if clients are conducting some searches themselves that might previously have been carried out by search firms, then in theory that would eat into the total volume of search work available for the industry. However, you have to consider the level at which the in-house functions are operating, and in effect this will push the retained executive search process up market. I personally think that could be a good thing as the work that is given to search firms will be high level and challenging, and that is what they are best at."

The knock-on effect of driving the market to higher levels will also allow search businesses to concentrate on their bread and butter executive work and not get distracted by the prospect of volume recruitment, says Felix. "It will act as a deterrent for search firms tempted to get involved with lower levels of work, which is an Achilles heel for the industry. Going into the volume market is all very well when the market is booming, albeit a distraction of resources from higher-end work. However, when things take a downturn, it is the volume work that turns off first, and if you've expanded to cater for this you'll be in trouble."

The survey also revealed that 71% of firms using executive search in 2005 would commission a similar or larger volume of searches in 2006, highlighting continued market growth, a trend supported by Felix who comments: "We will see continued growth in the market because of the overwhelming global trends including shortage of talent, executive empowerment and mobility, and the increasingly cross-border nature of business. The opening up of new markets around the world will also have an impact as they try to apply a Western market economy model, and finding the best talent is crucial in our knowledge-based society. I think there is huge potential in the future of retained executive search, given the positive trends in the world economy."

Even in light of the positive forecast, there is still work to be done on each side of the client-consultant equation if both parties want to make the most of the relationship. Felix thinks clients can sometimes be guilty of commoditising the service, and that this can detract from the consultative nature of the work. Search has more to offer than just a candidate, as he explains: "The point about retained executive search is that it is a form of management consultancy, and that brings with it a whole host of consulting services that need to be understood and appreciated by the client. Consultants can offer commentary, feedback, and advice on trends as disparate as talent pool assessment, compensation, and how attractive your recruitment proposition is, and all this is available pretty much for free. My impression is that to a certain extent, both sides have forgotten this."

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