14th August 2018

A Better Alternative to Retained Executive Search

The way we find Talent is changing.

The rapid growth of LinkedIn and the democratisation of candidate research has been one of the most disruptive forces in search and recruiting that we’ve seen. With far easier access to a large global pool of passive talent (the people not actively looking or too busy to be looking for their next role) you’d expect that executive search business would be withering on the vine.

Yet, retained executive search has remained relatively resilient and somewhat unchanged in the face of what could have been a revolution. But how long will this last?  We believe that the retained search industry will come under increasing pressure from four forces that are disrupting the existence of the traditional players.

Four Major Forces working against retained Executive Search:

  1. Cost: Starting with the obvious, there has been a gradual erosion of the fees clients want to pay over the last five years. What used to be a fee of 30%+ dropped to 25%, and in some cases 20%. We recently pitched against a well-known international firm, who were willing to complete a senior retained search at less than 18%! Many clients still remark to us how expensive they believe search is. Influenced by the growth in executive salaries, how does a client see value in a search fee of $150k+ for a functional leader in an ASX 200 size company?
  2. Capable internal TA teams: We’re now seeing more capable internal Talent Acquisition teams emerge, with experienced search staff setting up in-house capability. While they can lack independence (critical for some assignments) and are often juggling multiple assignments, these teams have been able to replicate search capability.  Therefore diminishing the value proposition of search firms. Working ‘along with’ rather than ‘instead of’ internal TA teams seems to be a growing trend.
  3. Inflexibility: A hallmark of the so called ‘leading’ international executive search firms has been their inflexibility around their process. Shrouded in mystique, unwavering in rigidity and snail-like in pace, many of these firms still cling to a process that may not suit the needs of their clients. Unbundling the search process and providing more agile, flexible solutions is now in demand. Being unwilling to provide what a customer wants doesn’t seem like smart business to us.
  4. Complacency: Hubris, arrogance, laziness……we could have used several words here. There is a shared view among many clients we talk with that the retained search process can be opaque and unresolved. Fees are often paid whether a placement is made or not, and an over reliance on a small cadre of known local candidates is at times substituted for a broad review of local and global markets. For example our success at connecting with previously unknown expats has given our clients access to interesting and talented candidates.

A better solution: Talent Pipelining and Talent Intelligence

We now believe that in many cases, we can best support our clients through a series of more flexible talent solutions. Shaped around their specific needs. At times, they don’t need an end to end executive search process. In effect, we’re changing our model to empower internal TA teams and give them more control. While we are still asked to run projects through to placement, we’re more frequently responding to the needs of a client including:

  • Mapping and testing a market and/or role before committing to a retained search.
  • Gaining deeper insight into targeted geographies, sectors or roles to gain talent market intelligence.
  • Building ready to activate talent pools for succession.
  • Using talent pipelining for multiple hire roles, leveraging value from a single project fee.
  • Augmenting their internal TA team with extra research and passive candidate engagement capability and capacity.

Using this approach to meet client needs

This requires an agile, research-dependent and value-sharing approach on the part of a service providing firm. In effect, it’s transferring (for a lower fee) the research insights and a pool of engaged, passive candidates, to the client earlier on. Which provides them with ownership of the data and allows them to engage and manage their future talent in a more proactive and personal way. We believe this can result in better selection decisions, with greater value for the client and candidate as they make earlier assessments of each other in the process. And where our clients do this well, it allows them to build their own talent pools, which reduces their future reliance on third parties like us.

Recently, we had the great pleasure in seeing one of Telstra’s new executive team appointments emerge from a Talent Intelligence project we completed for them earlier this year. We identified the candidate in a global scan of telecom executives and for no additional placement fee, beyond the fee for the initial project, they were able to place a globally recognised executive. This is a placement that would have likely incurred an additional retained search fee of more than $250k.

Market Maps, Talent Pools and Talent Intelligence

This year more than half of our search engagements have been Market Maps, Talent Pools and Talent Intelligent projects. We see the trend growing as the four forces disrupting retained search intensify. While we still assist clients in placing candidates into immediate openings, we believe that for many of our clients the shift to flexibility, value, speed and transparency has become a better alternative to traditional executive search.

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Paul Bethell

Paul Bethell

Paul Bethell is a Managing Partner in our Sydney office. A strong and dependable Kiwi, Paul has more than 25 years HR experience working in organisations across Australia, New Zealand, Asia and North America. He’s a bit of a specialist in talent acquisition, business integration, restructuring and change management.

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